Answer for Question 1
Based on the case study, the proper strategy which able to overcome the current problems from OnTarget company is using centralized authority. According to Robert Monczka, the centralized authority exists when the decision-making process is the responsibility of a single person. The single person will be duty bound by the top management of the company and will be accountable for proper performance of any purchasing activities. (Monczka, 2005) Centralized authority able to help OnTarget reduce the cost by working with Extel is because centralized authority helps OnTarget centralized control. Centralized control able to help OnTarget to overcome the problem of which the three different operating units was buying the same products from Extel without any coordinating among themselves and hence the different operating units was purchase the same products with different prices. By centralized control, OnTarget able to analyze and calculate the actual total stock requirement from each of the three units and make an order together. This can help different operating units on OnTarget to purchase the material with the same prices and lower price because they are able to receive the volume discount. In conclusion, the centralized control able to help OnTarget to reduce cost because it helps them to get a better price of materials and avoid the problem of differents units purchase the materials with higher price than others.
Second reasons which adopting centralized authority to overcome the problem is because centralized authority able to help OnTarget to lower administrative costs. The different operating units of OnTarget currently was order their materials separately and without any coordination. This make the OnTarget have to make 3 times of order, 3 times of purchase, 3 times of delivery, 3 times of payment making and 3 times of recordkeeping. These administrative activities costs can be large amount in long term and which is unfavorable for...
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