Sabor Internaional Case Study
Introduction In this case study, we review Sabor’s current position with regards to its supply source of Macronil, the main component for its air filtration units. We evaluate this using the Karljic matrix and his 4-phase methodology (Kraljic, 1983) as our theoretical framework and analyze the options available to Sabor Inc. using the case information and data provided. We then conclude with our goal of offering viable recommendations to Sabor, given the constraints, to better Sabor’s purchasing position in this situation.
Current State
Sabor has been informed by all 3 of its suppliers of a potential supply shortages in the market for Macronil, a critical component for Sabor’s air filtration units.
Sabor’s products are air heating and cooling systems, however, there is a growing demand for Macronil filters, not only with new installations of these systems, but as retrofits as well. Macronil filters are not only more technologically advanced than its next best substitute, which is the electronic air cleaner, but is also cheaper to install and require less frequent maintenance.
Currently, Sabor’s requirements are met with quarterly, semi-annual or annual contracts. However, Sabor’s suppliers have forewarned that they will no longer guarantee supplies based on the current supply practice, in the event of a market-wide shortage of the product.
Sabor’s suppliers have all proposed long term contracts as a solution but Ray Soles, Sabor’s VP for Supply Chain, is not keen to deviate from current practices. Ray has heard rumors that a much lower-cost substitute could possibly be developed in a few years’ time and suspects that his suppliers wanted to tie Sabor down with long term contracts as a result.
Problem Statement
We note 2 key issues with regard to Sabor’s current purchasing situation. Firstly, Sabor is highly dependent in terms of knowledge and capacity, on its vendors for a strategic component.
• Knowledge: Macronil is patented
Current State
Sabor has been informed by all 3 of its suppliers of a potential supply shortages in the market for Macronil, a critical component for Sabor’s air filtration units.
Sabor’s products are air heating and cooling systems, however, there is a growing demand for Macronil filters, not only with new installations of these systems, but as retrofits as well. Macronil filters are not only more technologically advanced than its next best substitute, which is the electronic air cleaner, but is also cheaper to install and require less frequent maintenance.
Currently, Sabor’s requirements are met with quarterly, semi-annual or annual contracts. However, Sabor’s suppliers have forewarned that they will no longer guarantee supplies based on the current supply practice, in the event of a market-wide shortage of the product.
Sabor’s suppliers have all proposed long term contracts as a solution but Ray Soles, Sabor’s VP for Supply Chain, is not keen to deviate from current practices. Ray has heard rumors that a much lower-cost substitute could possibly be developed in a few years’ time and suspects that his suppliers wanted to tie Sabor down with long term contracts as a result.
Problem Statement
We note 2 key issues with regard to Sabor’s current purchasing situation. Firstly, Sabor is highly dependent in terms of knowledge and capacity, on its vendors for a strategic component.
• Knowledge: Macronil is patented
References: Kraljic, P. (1983). Purchasing must become supply management. Harvard Business Review, 109-117.