sono-imperial foods · eric foy, daulton seibert, & alexander cooper. outline introduction/case...

Sono-Imperial Foods

Eric Foy, Daulton Seibert, & Alexander Cooper

OutlineIntroduction/Case Summary

Case Questions & Solutions

Calculations

Conclusion

Q & A Session

Sono-Imperial Foods● Are a major Consumer Package Goods (CPG) manufacturer

● They moved their supplier of water bottle containers overseas to China for an 18%

per unit cost savings

● Sono-Imperial Foods competitive strategy is identification of cost savings related

to procurement inputs

● Savings is a top priority for senior leadership

● Located in Baltimore Metropolitan Area

● Savings is a crucial factor



Calculations

Conclusion

Q & A Session

Question 1:Identify and discuss the most significant risk factors and additional costs associated

with Sono-Imperial procuring bottles from China.

Quality

Lead Time

Time Zone Difference

International Law & Customs

Quality● Packaging development was there for the first run

● Third party inspector

○ Only used for the initial order

● Have on site consultant to check quality

● 4 week ocean transit could lead to quality defects

Lead Time● Annual Demand: 1,200,000 Bottles

● Start-up lead time of 12 weeks

○ Routine orders will take 8 weeks from order placement to delivery

○ Ocean transit for 4 weeks

● Must have safety stock on hand to hedge against delivery delays

Time Zone Difference● Shanghai is 12 hours ahead of time

○ Real-time Communication would be difficult

○ Overlapping Shifts

● Ordering issues

● Quality issues

International Customs & Laws● General requirements for internal control of enterprises

Question 2:Identify and discuss how the cultural differences contribute to the costs of managing

an international supplier.

Language/Communication

Negotiation/Expectations

Language/Communication● Language Barriers

○ Hiring specialized bilingual employees may require a pay increase

○ May reduce costs in long term if/when a supplier issue arises

■ Quicker problem resolution due to smoother communication

● Improved Morale

○ By removing the language barrier, the supplier-manufacturer relationship will be stronger

○ A less stressful work environment when both supplier and manufacturer are in sync

Negotiation/Expectations● Chinese value face to face interaction

○ Consensus is reached through group consensus

● Appreciate the time it takes to develop business relationship

● More important to develop strong relationship during first few visits

○ Foreign companies must send top executive to negotiate

■ Insulting to do otherwise

● Negotiations tend to last longer

● Must adapt from United States style of negotiation to Chinese

Question 3:Provide specific recommendations for how Sono-Imperial can improve performance of

this supplier relationship.

Hire employees with international expertise

Overlapping Shifts

Supplier Agreement

Hire Employees With International Expertise● Have employees with the same cultural background or that are able to

communicate in Chinese

● Would allow the supplier to have a better connection with our company

Overlapping Shifts● Having employees work shifts that overlap with the timezone of our supplier

○ Allows better communication with supplier

○ If there is an urgent need the employee would be able to respond right away

○ Makes the relationship stronger

Supplier Agreement● Develop a contract with the supplier

○ YOY cost reductions when certain price points are reached

○ Helps both companies to prosper by giving the supplier more business and us lower costs

Other Factors to ConsiderDomestic Supplier

Political Environments

Domestic SupplierHave a domestic supplier handle peak demand periods with the following

expectations:

● High Quality

● On Time Delivery

● Being able to meet high demand quickly

Political Environments● Changes in the political state of any country leads can lead to economic

uncertainty

○ Changes in leadership

○ Regulations and restrictions



Calculations

Conclusion

Q & A Session

Calculations



Calculations

Conclusion

Q & A Session

ConclusionWe feel the best solution is to put 2/3rds of demand onto our international supplier.

The remaining 1/3rd of our demand will be to our domestic supplier during the peak

summer months. Once our international supplier is proven a reliable source, we will

slowly increase our business with them.



Conclusion

Q & A Session

sono-imperial foods · eric foy, daulton seibert, & alexander cooper. outline introduction/case...

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