Unifine Richardson is a food manufacturer with 110 employees. The company's sole supplier of honey announced that effective immediately it was no longer able to supply Chinese honey. The Canadian Food Inspection Agency had rejected the importation of Chinese honey due to recently found traces of an antibiotic chemical. China had provided 20% of the world's honey supply. Faced with escalating prices, issues with customer preferences, and possible product recalls
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. The main advantages and disadvantages of each honey choice are as follows: Continue with Chinese-Canadian honey |Cost - $1.08 per...