Eagle Industries Case Answers
EAGLE INDUSTRIES CASE
1. Why are office products frequently chosen as a lead commodity in strategic sourcing efforts?
Office products were chosen as the lead commodity in strategic sourcing efforts conducted by Smith and his team mainly because of the fact that there was not an appreciable difference in the product specifications when it came to differentiating different suppliers. It would almost be like comparing apples against apples. This would therefore provide a nice segway to try and understand the sourcing practices that were currently being employed. Also, office supplies are low value commodities which are used at every level in an organization, and there is a good chance that companies do not optimize these purchases. Hence, studying the purchasing practices of these commodities could provide insight into inefficiencies, and the results would certainly be encouraging in terms of percentage savings gained.
2. What observations can you develop about Eagle's SKU usage, prices they pay and contracts they currently use?
There has been a proliferation in the SKU consumption. This is evident from the fact that about 94 different types of staples and 104 different types of pencils had been purchased. There also isn’t a standardization in the prices being paid by the different purchasing units. Also the variance in prices is sometimes higher than 50%. About 37 different items have a price variance of greater than 30%. The #10 envelopes SKU is a case in point, since it has the highest variance in price, with the price being paid at location B almost 200% that of the price being paid at location A. This is evidenced by the data in exhibits 5 and 6. In terms of the contracts employed, the company is currently using two contract suppliers and one catalog supplier. The reason for the spread in price variance is mainly due to the fact that there had been no price comparison between the two suppliers. Additionally, the catalog supplier has been using a promotional
1. Why are office products frequently chosen as a lead commodity in strategic sourcing efforts?
Office products were chosen as the lead commodity in strategic sourcing efforts conducted by Smith and his team mainly because of the fact that there was not an appreciable difference in the product specifications when it came to differentiating different suppliers. It would almost be like comparing apples against apples. This would therefore provide a nice segway to try and understand the sourcing practices that were currently being employed. Also, office supplies are low value commodities which are used at every level in an organization, and there is a good chance that companies do not optimize these purchases. Hence, studying the purchasing practices of these commodities could provide insight into inefficiencies, and the results would certainly be encouraging in terms of percentage savings gained.
2. What observations can you develop about Eagle's SKU usage, prices they pay and contracts they currently use?
There has been a proliferation in the SKU consumption. This is evident from the fact that about 94 different types of staples and 104 different types of pencils had been purchased. There also isn’t a standardization in the prices being paid by the different purchasing units. Also the variance in prices is sometimes higher than 50%. About 37 different items have a price variance of greater than 30%. The #10 envelopes SKU is a case in point, since it has the highest variance in price, with the price being paid at location B almost 200% that of the price being paid at location A. This is evidenced by the data in exhibits 5 and 6. In terms of the contracts employed, the company is currently using two contract suppliers and one catalog supplier. The reason for the spread in price variance is mainly due to the fact that there had been no price comparison between the two suppliers. Additionally, the catalog supplier has been using a promotional
References: http://www.ism.ws/files/Pubs/Proceedings/DCHargraves.pdf