I. Basic Problem
The basic problem for the TOMRA GROUP is determining the difficult decision of whether or not to continue conducting business with their current supplier relations or to move towards manufacturing of their basic mechanical parts (white nylon cylinders, tiny steel cylinders, steel plates, and nylon bumpers) needed for their production.
II. Support for Basic Problem
TOMRA GROUP has an inefficient business strategy and slow development. They minimized the capital investments and entirely depended on its suppliers, which cause some challenges on developing their business and even would have risks to lose their market because they could not control ...view middle of the document...
After evaluating each supplier, Supplier A would be selected based on high marks received on the following attributes: long-term relationship, proximity, reliability, quality standards, and the utilization of state of the art equipment in their facilities. TORMA GROUP would be able to sole source from Supplier A thus leveraging a lower cost for the basic mechanical products which will drive down the cost of materials and improving ROE figures. By selecting Supplier A, TOMRA GROUP would be paying a higher cost per package ($200 NOK/pkg) for a high quality product. Ordering approximately 1000 packages a year would result in a total cost of $200,000 NOK.
2. The second recommendation would continue to use the current Vendor Evaluation Form (Exhibit 6) to rate each supplier. After evaluating each supplier, Supplier B would be selected based on high marks on lower price per package, good emergency performance and high quality standards. Selecting Supplier B would result in TOMRA GROUP paying a cheaper rate per package ($150 NOK) for not only a high quality product, but also benefitting from a supplier that can support TOMRA during emergency and special orders. Ordering approximately 1000 packages per year would result in a total cost of $150,000 NOK. This decision would result in better ROE results, thus improving profits.
3. The third recommendation would continue to use the current Vendor Evaluation Form (Exhibit 6) to rate each supplier. After evaluating each supplier, Supplier C would be selected based on high marks on lowest price per package, flexibility, plant investments and lead times. The low cost approach of Supplier C at $75 NOK per package would reduce TOMRA GROUP’s cost for direct materials. Ordering approximately 1000 packages per year would result in a total cost of $75,000 NOK. The decision to move forward with Supplier C would result in the best ROE results which would help maximize profits.
4. Another alternative to consider is to implement a revised version of the Supplier Evaluation Form (Exhibit 9) and using this updated form to help aid in determining suppliers for products. As seen in Exhibit 9, improvements include additional attributes, individual supplier ratings and scores, and an improved “bottom line” that calculates rating averages and total supplier scores. Implementing this new evaluation form, Supplier C was selected based on the new attributes which provides a deeper supplier analysis. Again, the low cost approach of Supplier C at $75 NOK per package would help to reduce TOMRA GROUP’s cost for direct materials. Ordering approximately 1000 packages per year would result in a total cost of $75,000 NOK. In the future, this new evaluation form would be able to assist in selecting suppliers for products.
IV. Best Recommendation
Our best recommendation is for TOMRA GROUP to invest in creating a new manufacturing plant to produce the basic mechanical parts that are being procured from...