Q3) Which supplier should COLIN choose for the Bristol project?

Which co-operation model

should COLIN adopt for this project?

Looking at advantages and disadvantages of both suppliers we can notice that in ALICE’s case:

Representatives from Kmart and ALICE had been meeting to explore the possibility of Kmart
purchasing its private-label products directly from ALICE. If this happened, that would mean
that Colin would suffer a loss because it would be losing Kmart as a customer. Shawn said that
“In the past, another of COLIN’s customers had gone to COLIN’s supplier to buy private-label
products directly; however, two years later, the same customer had returned to COLIN”. Even if
the customer would come back after two or so years Colin’s profits will be affected for the same
two or more years. Shawn also mentioned that “If customers compared only the unit cost, then
going directly to the manufacturer plants would lead to savings; however, if they considered
the total cost and service efficiency, COLIN was the more reasonable choice for private-label
products”. But since cost efficiency is one of the most important factors that companies
consider, service efficiency can sometimes be ranked lower when companies are trying to cut
costs. Achieving the development agreement with Kmart on the Bristol project was a milestone
hence COLIN should not be in the middle of the Kmart and ALICE agreement since it might
jeopardize its relationship with Kmart.

In BUREY Corporation’s case:

BUREY has a world-class operating facility and can provide large quantities of high-quality
products within a short time. For Colin a major problem in the past has been time. In the
previous year, COLIN had developed 12 projects, and seven projects had been delayed which
shows that Colin needs to work with a supplier that can work within time constraints and
BUREY promises to do that. BUREY has always maintained a high service level while working
with Colin. BUREY also has a substantial manufacturing capacity and maintains consistent high-
quality performance.

When a new product needed to be developed, COLIN’s R&D team created the design internally,
then the sourcing leader sent the design drawings to the OEM suppliers for their production
price quotation. In general, COLIN selected the supplier based on factors such as cost, quality,
speed of delivery, and service.

BUREY although is weaker in R&D if compared to ALICE but if COLIN considers the Original
Equipment Manufacturing Model (OEM) which has the main advantage that the designer
retains total creative control over the design then Colin could successfully launch the Bristol
Project. COLIN has its own industrial design and R&D group, and has 20 years’ experience in
garment steamer product development which proves that a weaker R&D at BUREY will not
affect the project. The Bristol product was designed to use dual heater plates but a single
heater system, which avoided incurring a large cost and maintained a constant steam under low
temperatures. COLIN has a patent on this new technology. Since COLIN has a patent over this
new technology, it would be better if COLIN has the creative control over this product which
can be done by selecting the OEM model.

BUREY would be a more suitable option since it will not delay the project and COLIN would not
be depending upon ALICE’s patent.

Q4) If you were Shawn, how would you evaluate the current decision-making situation? What
is your final decision? Why?

If I were Shawn, I would make the following decisions:

“The Bristol was targeted at a unit price of US$109,1 which made it a mid-priced product,
although its function would be superior to similarly priced products offered by COLIN’s
competitors. If the Bristol could be launched according to plan, it would lead to estimated
sales of $20 million, which was very high for the first year of a product’s launch.”

The Bristol project estimates that there would be 20 million sales in the first year of its
launch, in order to achieve that COLIN needs to take these final decisions:

 They should not use the existing ALICE’s patent to reduce over dependency.
 Given BUREY’s superior manufacturing, Colin can go ahead with own patent and OEM
option with BUREY
 Partner with OEM for design phase to use Colin’s R&D capabilities and partner’s design
capabilities
 Appointment of dedicated project manager to reduce lead time and avoid delay.
 Hiring engineers, that don’t lack design experience.
 Colin cannot go with ODM (cannot control the detail design, and the risk of quality
problems will increase)