To: The President, Zest Industries
From:Deidre Collins, buyer-expediter for Global Heat Exchangers Inc. Subject: Change in the Pricing of the Titanium Sheet Metal from our Supplier Titania for the Japanese Account I would like to bring to your attention an error that was brought to the attention of myself via fax today by our supplier Titania Ltd. When we put together the final estimate for the Japanese Account I was using the most current catalogue and information provided by Titania Ltd to me as the resource to base the Titanium Sheet Metal Units on. This was an error on my part as well because I did not take the time to confirm that the pricing was indeed still the same. Unfortunately, I received this fax from Titania Ltd. today stating that the Titanium Sheet Metal Units have actually increased in the cost to us by a rate of almost an additional 25%. I am at a loss to how this information was not obtained or provided accurately to or by us until it was too late and the formal estimate has been signed. This is what I would propose we do about this matter. I would like us to honor the formal estimate we provided to the Japanese customer. We will absorb the loss of revenue and look at gaining it back by obtaining future business in Japan. We can also spread the revenue across many of our sales so it will not be noticeable by our customers. I have also taken the steps to contact the supplier to see if they will absorb the additional costs being we were not advised within enough time to change our estimate to reflect the increase in costs. If they are not amicable to the idea, I am looking at the possibility of bringing to their attention our long standing business we have provided over the years to them as our go to Titanium supplier and see if at the bare minimum they will split the loss with us. I am also going to work with Charlie in Purchasing to be a team environment to utilize each other’s relationships and contacts with suppliers to get the best value for our money and it will provide us both viewing the task at hand to ensure an oversight like this does not occur again in the future. I have attached a report to provide you with other resources, analysis, alternatives and various recommendations. I look forward to hearing from you on this matter soon. Sincerely,
Buyer-expeditor for Global Heat Exchanges Inc. (GHE)
ITEM SO WHAT?
Why is there such a lengthy process to create an estimate for a customized product at GHE? The process goes in a circular fashion and travels through the same departments at different stages of the estimation process, could they not do some stages simultaneously to elicit a faster estimate to the client? Deidre and Charlie work in the purchasing department and they are each responsible for the procurement of different parts. Do they communicate with each other regarding the suppliers they utilize to look for additional suppliers in an untapped area or could they maximize profit by combining common products or even products that may differ but come from the same supplier and could be bundled. Information does not always reach GHE’s purchasing department from suppliers within the required 30 days because they have their systems that the information has to go through at their own facilities. This can result in inaccurate quoting of the project price to GHE’s clients if they are not notified in time that there is a significant price change prior to GHE quoting the customer. Should purchasing not always be checking the cost of the highest priced materials needed for projects? The Japanese account accepted the estimate that GHE sent to them based on the current price they had from their supplier on Titanium sheet metal. Why didn’t anyone double check the price of the Titanium sheet metal from the supplier before the estimate went to the client when they know that prices can change and they sometimes are delayed in receiving the change. Will GHE...
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