Business to Business Marketing

Charlestown Chemical Products, Inc

Muriatic acid Purchasing Scenario

Group 4-
Ashutosh Singh 29NMP18
Gaurav Sharma 29NMP30
Kishore 29NMP38
Pritam Kumari 29NMP42
Mohnish Singh 29NMP46
Neerja Malik 29NMP47
 Charlestown-Chemical
Company Background
Based in New Orleans, Louisiana
Chemical plant in Tulsa (Oklahoma)
Director of Purchasing Mr. William Todd
30 plants and 7000 employees
Financial report
Sales revenue US$ 4.5 billion 1974
PAT of US$ 197.5 million
74,000 employees
60 domestic and overseas plants
Product
Commodity chemical, chemical intermediaries and
specialties
700 products
40% of sales consists of commodity chemical
Muriatic Acid
20 Baume (31.45% HCL)
Stringent specification (35 APHA, Fe 1 ppm max,
HCL 31.45 32.56%, SO4 50 ppm max, As 0.2
ppm, Pb 1 ppm
Tulsa plant uses for purification of NaCl solution
fed to electrolytic cells
 Puritan Chemicals
- Shipment from Springfield (Missouri) ~635 km or Dallas (Texas) ~413 km
 Situation Analysis
Puritan the sole supplier of the muriatic acid to Charlestown Chemicals
Tulsa plant in Oklahoma has raised the price of muriatic acid supply
from $97.5 to $132.5 per ton effective July 1 1985.
Increase demand from Steel Manufactures.

Dilemma

Whether to continue with puritan or restructure the terms of the

contract ?

Include Lee as other preferred new source of supply?

Option to sign direct contract with National Chemical Corporation?

 Case Argument
Puritan Chemicals Lee Chemical Company (Jobber)
Reliable supplier and always Charlestown A jobber supposedly buying from National
Chemicals first choice Chemical Corporation
Price rescission to US$ 97.5 Initial hesitation about consistency in quality
Delivery with Tank Trucks Capacity might not be enough to fulfill the
Want to sign contract for 1986 entire requirement
requirement basis at US$ 97.5 per ton Different Delivery cost by
Increase in dollar volume purchase by $500000 Tank Car
in year 1986 Tank Truck
Points to be considered Points to be considered
Provision of price revision in contract High on price
Loose terms about requirement Must buy conditions dropped but still doubt
Need to develop an alternate source and not just about capacity
recognize it National Chemicals can be a prospective
Further negotiation for 1986 contract as vendor
Charlestown has backup offer for an eligible Lee Chemicals can be used to negotiate very
vendor low prices from Puritan and vice versa
Puritan is a customer
Puritan would be first choice if price and terms
are negotiated
 Scenario A Scenario B
Total
Total Expd
Possible alternative Quantity Cost($) Expd ($) Quantity Cost($) ($)

4000 97.5 390000 4000 97.5 390000

4000 132.5 530000 4000 132.5 530000

Proposed Solution Proposed Solution

Puritan Puritan

3500 132.5 463750 2000 132.5 265000

Lee Chem Lee Chem

500 102.5 51250 2000 102.5 205000

Scenario C Scenario D
47000
Total
Total Total
515000 Total 0
Quanti Cost($ Expd Cost($ Expd
ty ) ($) Quantity
Eff Rate) ($)
128.75 Eff Rate 117.5
39000 39000
4000 97.5 0 4000 97.5 0
53000 53000
4000 132.5 0 4000 132.5 0
P1-107.25
P2-117.975
Proposed Solution Proposed Solution P3-129.7725
Puritan Puritan
34125
500 132.5 66250 3500 97.5 0
Lee
 Decision analysis

Advantage with Puritan Advantage with Lee Advantage with Purtan

Large firm, Strong existing relationship. Alternate Supply source Not much Information Given

Easy handling-Tank Truck Tank Truck delivery but at higher cost

Other business transaction ($12.4 M). Additional

Quality guarantee/flexible contract
$500000 expected in coming year

Disadvantage with Puritan Disadvantage with Lee

Might drop other business transaction No source guarantee

Rate increase to continue further Higher rate

Higher Bargaining power By product acid . Limited volume supply

 RECOMMENDATIONs

It should sign a contract at current rescinded rate of Rs.97.5 per ton and
refrain from
exclusitivity clause.

Negotiate rate freeze or a minimum increase per quarter for the year
1986.

Puritan would be a main supplier but Lee can be developed as a backup

supplier. This will
help mitigate the risk of dependency on sole supplier.

Tank Car option ruled out as it would need further development of plant
facility.
 Recommendation
It should not sign a contract at currently mentioned terms

Negotiate price reduction with puritans and dont sign a 100% sourcing
contract.

Puritan would be a main supplier but Lee can be developed as a backup

supplier. This will help mitigate the risk of uncertain demand.

National Chemicals can be developed as a vendor (if no conflict exist

with Lee). This Is while we assume that both Puritans and Lee are
sourcing from it.

Tank Car option ruled out as it would need further development of plant
facility
THANK YOU