Chapter 23: Purchasing
Name:
Directions: Compare and contrast the deals offered by suppliers X, Y, and Z and decide
with which you would do business. Provide a rationale for your selection by reviewing the
criteria buyers use in selecting supply sources. The product is men’s cotton/poly blend shirts to
which you will add your own private label.
Vendor X (present vendor)
Vendor X has been your source of supply for the past ten years and is located in the
United States. Resource file data indicates that Vendor X has recently been bought out by a
large corporation, and since then deliveries have been 1-2 weeks late, which is why you are
looking for a new vendor. You have been paying $5.85 per shirt with F.O.B. factory freight
prepaid and dating terms of 3/10, net 45.
Vendor Y
Vendor Y is potential new source of supply and is located abroad (China). A visit to the
manufacturing facility revealed that Vendor Y has the production capabilities to deliver the
quantities needed at significantly lower prices than Vendor X and Vendor Z. Deliveries will
take longer, so purchasing must be done earlier. Vendor Y offers F.O.B. destination charges
reversed and ROG dating of 2/10, net 30. The price of one shirt less the quantity discount
(which you would qualify for) is $2.75. Tariffs will be $.25 per shirt, and shipping costs have
been projected to be $.50 per shirt, based on shipping by boat. Hidden costs include frequent
trips abroad to monitor the manufacturing process for quality-control purposes.
Vendor Z
Vendor Z is a potential new source of supply (domestic). It has the capacity for a JIT
(Just-in-time) inventory system, whereby it will make frequent deliveries based on current
needs. It has its own delivery trucks and an excellent reputation for servicing its customers. Its
production facilities are smaller than Vendor X and Vendor Y, but worker productivity
appears to be higher. Vendor Z offers F.O.B. destination (no charge for shipping) and dating
terms of 2/10, net 30. The price per shirt with the quantity discount is $6.50.
Note: All three vendors offer UPC labeling and will take care of your private labeling
and packaging requirements but will not agree to consignment or memorandum buying
arrangements.