Richardson Case

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ISQA 458
Unifine Richardson Case

The problem facing Unifine Richardson is that Harrington Honey, its main honey supplier will be out of Chinese honey inventory by May 17, 2002 because of CFIA inspection issues. For now, Unifine will have to look for alternative sources for honey until the Chinese suppliers figure out a way to detect and reject contaminated honey. Its current cost for 50-50 blend of Chinese and Canadian honey is $1.08 Canadian dollars per pound. Harrington Honey has proposed three main options: a) 100% pure Canadian honey, which costs $1.75/lb; b) 100% U.S. honey at $1.10/lb in U.S. dollar ($1.79 Canadian dollar); or c) 50-50 Canadian-Argentinean honey for $1.42/lb. As a result of the supply shortage, prices for non-Chinese honey have gone up significantly. There are also concerns of product availability regardless of price. Unifine purchases one million pounds of honey a year. The average price for honey during the past year is $.91 per pound. With the current price, it will cost them $1.08 millions annually. However, if they were to buy the 100% Canadian honey, it’s going to cost them $1.75 millions. Likewise, it will cost them $1.79 millions for 100% U.S. Honey. On the other hand, using a 50-50 Canadian-Argentinean honey will only cost them $1.42 millions. These prices are a significant increase from what Unifine used to pay for its honey. Based on the given facts, it would be wise for Unified to go with the 100% Canadian honey for now. The reason being--it’s a little bit cheaper than the 100% U.S., and also because using a 50-50 Canadian-Argentinean would risky, for it might be recalled by CFIA if found to be noncompliant. In addition, the Canadian-Argentinean blend does not taste as good as the pure Canadian, and their largest customer would not like it. If they chose to use the pure Canadian honey, their customer would have to pay an additional $.67 cents per pound--this is a 62% increase in price....
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