Platinum Box is a Canadian company that when started in 1985 specialized in graphic design. In1992 with sales of $5,000,000 and 20 employees the decision was made to have Platinum expand it’s operation to include fold down boxes. By 2005 Platinum’s sales had expanded to $20,000,000 with 75 employees. Jim Hicza, the President of Platinum has announced that the company will be expanding into the United States. This is expected to double Platinums sales in just 3 years. In order to expand it has been decided Platinum will be required to purchase 5 more presses.
Jared John Hicza, Procurement Manager for Platinum Box has been asked to source a supplier for the presses. Their findings have come up with three potential press suppliers that would meet their needs. Jared will have to provide information to make a recommendation on if Platinum should purchase the new Press’s required from their current supplier (JabaKing, in which they have done business and developed relationships with for over a decade, or to source out another supplier. Jared findings will recommend they continue their partnership with their current supplier, JabaKing.
Jared has based his recommendations on an analysis of each supplier including: •Environmental and Root Cause Analysis •Alternatives and Options (Including Total Cost of Ownership Analysis •Implementation •Monitor and control Issue Provide a recommendation of which supplier to proceed with purchasing five new presses with and what financing method to use in purchase in order to succeed in Platinums expansion into the United States. Analysis Strategic reasoning and capacity: •Platinum plans on expanding into the US market •Plans on being a full capacity within 2 years
•Projects sales to double within the next 3 years •Current capacity allows for 280,000,000 boxes per year (250days x 16hrs/day=4000 hrs/year. 4000hrs x 7000 sheets/hr = 28,000,000 sheets x 2 boxes/sheet = 56,000,000 x 5 presses = 280,000,000) •Requirements to accomplish the above include purchase or five new presses(280,000,000 x 2= 560,000,000) Market •Current supplier is supportive of unionizing all print shops locally •There have been struggles to get support from other local suppliers given their strong relationships with other printing companies •Variety of suppliers outside of Canada is available
Considerations for comparison: •Quality •Performance/Operating Costs •Environmental issues •Labor Issues •Warranty/Lifespan •Word of mouth vs. experience •Location •Design •Downtime and maintenance cost implications Each will be rated, poor, good, better, best Quality Merakuri-High quality, 150cm stock capability-Best JabaKing-Good quality, 125cm stock capability-Good Pnutype-High quality, 125cm stock capability-Better Performance/Operating Costs Merakuri- Performance:10,000 sheets/hr output. Capacity: .05/sheet x 10,000 sheets/yr x 16hrs/day x 250 days/yr = $2,000,000/yr-Good JabaKing-Performance :7,000 sheets/hr output Capacity: . 07/sheet x 7,000 sheets/yr x 16hrs/day x 250 days/yr = $1,960,000/yr-Good Pnutype-Performance: 7,500 sheets/hr output. Capacity: . 04/sheet x 7,500 sheets/yr x 16hrs/day x 250 days/yr = $1,200,000/yr-Best Environmental Issues Merakuri-No information provided on this company at this time- Good JabaKing-no information provided on this company at this time- Good Pnutype-Technology being used is known for being environmentally sound-Best
Labour Issues Merakuri-Unknown. Could follow different labour rules based from being located in South Korea- Good JabaKing-Is unionized providing insight that employee’s treatment will be monitored. However Unions can strike causing delays in services and higher costs related to being unionized-Better Pnutype-Non-Unionized, however would have to adhere to labour laws being located within the US-Better Warranty/Lifespan Merakuri-Next day service on major issues from distributor, Full warranty on parts for 3 yrs.
Few presses make it past 12 years-Poor JabaKing-3 year warranty on parts and labour to install parts. JabaKings presses outlive their given lifespans. -Better Pnutype-Warranty on equipement for 5 years for parts and labour to install parts. Lifespan is unknown as the press technology is relatively new. Suggested lifespan is 10 years-Best Word of Mouth Vs. Experience Merakuri-Word of mouth says Merakuri has the highest quality. They have offered a trip to their facility in South Korea for demonstration.
Few presses make it past their 12yr life expectancy-Good JabaKing-Relationship with this supplier have shown their quality is good, not great, however experience has shown their presses live past their life expectancy-Better Pnutype-Word of mouth suggests systems run strong, too early to tell if presses live long-Good Location Merakuri-Location Korea, support and leadtime may be effected due to being located overseas. They do have a distribution in Regina for support-Good JabaKing-is within close proximity this is favorable for JabaKing-Best Pnutype-There is no local support from Pnutype, location is in the US-Poor Design
Merakuri-There should be no design issue in this case and Merakuri is well established within the industry- Better JabaKing-With Platinums experience there have been no outstanding issues with the design technology-Best Pnutype-The design on this press is relatively new and could become dependent on this new technology-Good Downtime Merakuri-3days per year of downtime on average 3days x 16hrs/day x 75 staff x $25/hr wage= $90,000/yr x 10years = $900,000 Maintenance $35,000/year x 10 years = $350,000 Total cost implications = $1,250,000 over 10 years-Better
JabaKing-4 days per year of downtime on average 4days x 16hrs/day x 75 staff x $25/hr wage = $120,000/yr x 10 years = $1,200,000 Maintenance $20,000/year x 10 years = $200,000 Total cost implications = $1,400,000 over 10 years-Good Pnutype—No current data over the last 2 years on any downtime, no maintenance budget numbers to be found due to no downtime on presses Total cost implications = 0 base on this only assumptions can be made to be fair An average of total cost implications was taken and split in a third for Pnutype $1,250,000+$1,400,000= $2,650,000/3=$883,333 over 10 years-Best
Poor 0 pointsGood 1pointBetter 2 pointsBest 3 PointsTotal Merakuri152112 JabaKing043216 Pnutype122418 Total Cost of Ownership Analysis (Appendices A, B, C) A total cost of ownership analysis shows Pnutype has a much lower TCO but this is slightly skewed based on little information on the maintenance and downtime data. Pnutype has only been producing these presses for 2 years, the 2 years have shown no costs for these. The costs can come back to be much higher, it might be wise to pre-negotiate a maintenance program with Pnutype if they are the supplier chosen.
Alternative/Options Option #1-Select Merakuri or Pnutype as new suppliers Pros: •Quality is higher than JabaKing •Good Warranty •Lower Costs for Pnutype •Non-Unionized-no risk of strike •Higher quality output Cons: •Location may cause issue for lead times and support •Unknown if Pnutype can deliver and support product •Unknown life expectancy for Pnutype •Pnutype TCO does not show potential full cost •No relationship with Merakuri or Pnutype Option #2 Purchase from Jabaking Pros: •Strong relationship •Known quality •Warranty is strong •Known Design
•Second highest Good, Better, Best analysis score •Second lowest TCO analysis •No need for plant visit- capacity and quality already proven •Supporting local companies Cons: •Unionized, can go on strike and increase the costs •Repair costs are higher •No financing options Recommendations Based on the analysis I recommend Option #2 Remain with JabaKing Although they scored lower in the overall analysis score and had a higher TCO, the TCO was based off of Pnutype not having full data on their maintenance and Downtime information. JabaKing is based on all information.
This will also allow for Platinum to show their loyalty and foster an even stronger relationship. Implementation and Monitoring Who: P-Procurement, B-Board, When: I-Immediate, S-Short Run, M-Medium Run, L-Long term RecommendationActivityWho PrimaryWho SupportWhen 1Present findings to boardP I 2Select JabaKing as supplierBS 3Secure Financing with Labor Union BankBP-Provide any information and analysis neededS-M 4Negotiate terms with JabaKing including possible discount on future Press requirementsPB-will need approvalS-M 5On-going follow-up with supplierPB-any feedback to improvement or changes neededI-L
For the success of the implementation and monitoring of this analysis it is imperative the five presses be delivered and in working order within the next 6 months. Conclusion The tight timeframe in which Platinum has to get the new presses up and running, the best decision is to work with the current supplier, knowing the support they provide and the quality of their presses as well as the maintenance. This is the lowest risk option.