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XYZ Corporation is a mid-sized manufacturing firm located in Mississauga, Ontario

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XYZ Corporation is a mid-sized manufacturing firm located in Mississauga, Ontario. The company produces a range of plastic containers that includes its flagship product range, Silverseal. The Silverseal brand includes a range of plastic food storage containers, designed to be sold to retailers and grocery stores for home use. The containers are sold in 3 and 6 packs, in three different sizes: 0.25L, 0.5L, and 1L. They are typically marketed to consumers for food storage in the refrigerator or freezer. Currently, XYZ Corporation has achieved a 9 percent annual sales growth over the past five years. Within the manufacturing plant, the company is running three shifts at full capacity, although the plastic molding equipment is running at only 58 percent of its optimal production capacity. Production levels fluctuate frequently, and XYZ Corporation adjusts its labour schedule around their forecasted sales demands. The sales manager is concerned about sluggish sales over the past six months and is aware that manufacturing targets are based on the recent sales forecasts. Having an excess of product is of concern with XYZ Corporation management. Therefore, increasing production is not a strategy considered to help boost quarterly sales targets. Instead, XYZ Corporation is considering offering a discount to their suppliers, as well as adopting a new marketing strategy that will offer consumers coupons to buy one Silverseal product and receive a 3 pack of 1L containers free.
XYZ Corporation does not receive as many orders for the 1L Silverseal container from its suppliers as they do for other container sizes. As a result, XYZ Corporation has decided to discontinue the 1L product and focus on manufacturing efforts on the more popular sizes. This will enable the manufacturing plant to replace the 1L molds with 0.25L and .05L components. This is may help alleviate the low 58 percent rate of production because there will be more equipment to handle the production of the two remaining product lines. Managers believe this will increase their production levels. The coupon strategy is designed to help move some of the obsolete 1L product from their inventory, in addition to retaining consumer loyalty with the smaller sized products. The manufacturer will implement the sales and production strategies over the next fiscal year.What is promising for XYZ Corporation is a recent order from Chinexcom, an exporting agent that sells to China. The agreement stipulates that XYZ Corporation will ship 25,000 cases of the entire Silverseal line to Chinexcom. This could not have come at a better time, because the order will be placed in time to meet XYZ Corporation's quarterly sales target. To expedite the sale, Chinexcom has been offered a significant discount. Chinexcom has agreed to send payment within seven business days, and pay by letter of credit from a reputable Australian bank.
Meanwhile, back at the retail store XYZ Corporation has a reliable supplier relationship with a large retail chain, OrangeMart (OM). The head of purchasing at OM acquired 4000 cases of containers this quarter at a 4 percent discount from XYZ Corporation but has sold only 1800 over the last two quarters. She decided that OM's in regions outside of Auckland would also benefit from the discounted price, and has sold 1800 to them. In addition, she has sold 400 cases to a wholesaler at cost, with a negotiated deal to buy them back at a 3 percent premium within 90 days if OM needed the supply. This has helped the other OM's throughout the country, as well as solved any inventory issues with the Auckland OM. The plan is for the Auckland OM to discount 1000 cases for a special in-store promotion.Soon after the deal with XYZ Corporation had been negotiated, Chinexcom contacted the head of OM's purchasing department. They offered a significant 7 percent discount on 5000 cases of assorted Silverseal products. The deal was far too good to be ignored and OM accepted the deal. The sales department contacted XYZ Corporation and cancelled their next three orders. OM received the Chinexcom products over a month late.Unfortunately, the purchasing manager was unaware of the situation on the ground in the local OM. The shelves holding the Silverseal line had an ample supply of the 1L six-packs, but no other size was on the shelf. Worse yet, XYZ Corporation's competitors were stocked next to the Silverseal line and had a full line of product sizes and quantities per pack.What's the problem?XYZ Corporation is under the assumption that they have a sales crisis. Forecasted demands are higher than their current rate of sales. They have decided to help resolve this by adjusting their product line and adapting their production line to manufacture more products that sell faster. Offering coupons would help boost sales and consumer loyalty. The purchasing department at OM believes they have addressed a potential inventory crisis, are secure in the amount of supply they have acquired, and have perhaps even boosted their bottom line through the recent acquisition of the cheaper Silverseal product from Chinexcom.
Case Study Discussion Questions
2) What form of partnership would help improve both OM and XYZ Corporation's supply chains? (2.5 Marks)