4.6 Working with Suppliers Practice Questions

Text 2 — Tarrock Cycles Ltd

Tarrock Cycles Ltd assembles electric bicycles in a workshop in Carlisle, using batch production. It employs 42 staff and sells its bicycles to 180 independent bicycle shops across the UK, promising to deliver every order to a shop within 14 days.

The frames and motors used in the bicycles are bought from suppliers in Asia. Batteries, tyres and saddles are bought from suppliers in the Midlands. Deliveries of frames from Asia have twice arrived late and some frames arrived damaged, which held up assembly for several days.

The owner, Mairead Quigley, is reviewing the business's frame supplier. The table below shows the two suppliers she is considering.

	Supplier A (Asia)	Supplier B (UK)
Price per frame	£68	£95
Time from order to delivery	11 weeks	5 days
Frames Tarrock Cycles Ltd needs each year	9 000	9 000

Tremarra Upholstery Ltd

Tremarra Upholstery Ltd makes sofas and armchairs to order in Stoke-on-Trent and employs 14 people. Customers are promised delivery within six weeks of ordering.

The business buys wooden frames, foam and fabric from several suppliers. Its frame supplier has delivered late five times in the last six months, and twice the workshop had no frames to work on for two days. Several customers have complained that their sofas arrived late.

Tremarra Upholstery Ltd has won a contract to re-cover the seating in a hotel and needs to buy 2 000 metres of fabric. It has received quotes from two suppliers.

Table 1 Supplier quotes for 2 000 metres of fabric

	Supplier A	Supplier B
Price per metre	£0.85	£0.92
Delivery charge for the order	£120	£0

Hepwick Pottery Ltd

Hepwick Pottery Ltd (HP Ltd) makes handmade ceramic plates and bowls in Derbyshire and sells them to restaurants and hotels across the UK. Every order is made to the customer's own design. HP Ltd uses about 20 tonnes of clay a month.

HP Ltd buys all its clay from Ribeira Clayworks, a supplier in Portugal. Ribeira Clayworks' clay is the cheapest HP Ltd has found, but orders must be at least 20 tonnes and take three weeks to arrive. HP Ltd rents a storage unit for the clay at £900 a month, which it can end with one month's notice. Last year two Ribeira Clayworks deliveries arrived late: HP Ltd missed a deadline and a hotel chain cancelled a £40 000 order.

Cresswick Clays is a new supplier 15 miles from the factory. It will deliver any quantity within 48 hours but charges more per tonne. The managing director, Fatima, must decide whether to change supplier.

Table 1 HP Ltd's clay suppliers

	Ribeira Clayworks	Cresswick Clays
Price per tonne	£420	£483
Minimum order quantity	20 tonnes	1 tonne
Time from order to delivery	3 weeks	48 hours
Late deliveries last year	2	0

Korvell Technology plc

Korvell Technology plc assembles laptop computers at a factory in Poland and sells them online in 14 countries. It assembled 640 000 laptops last year.

Screens, batteries and keyboards are bought from six suppliers in Asia. Components travel by sea and take five weeks to arrive, so Korvell holds six weeks of components in a warehouse that costs £1.8 million a year to rent and heat. Components can become out of date, because Korvell changes its laptop models every nine months.

Last winter one supplier failed to deliver batteries on time. Assembly stopped for nine days, 12 000 customer orders were delayed and Korvell paid £400 000 in refunds. Its average score on review websites fell from 4.4 to 3.6 out of 5.

The operations director is considering replacing the six suppliers in Asia with one supplier in the Czech Republic that makes all three components. Components would arrive by lorry in two days, so Korvell could hold one week of components instead of six. However, buying from this supplier would add £3.2 million a year to Korvell's component costs.

Tannoch Foods plc

Tannoch Foods plc makes chilled ready meals for supermarket chains in the UK and Ireland, producing 2 million meals a week at three factories. Chilled meals have a short shelf life, so they must reach supermarket shelves within 24 hours of leaving the factory.

In 2022 Tannoch Foods plc spent £14 million on a new distribution centre near Birmingham and 60 refrigerated lorries fitted with tracking technology. Supermarket buyers can now see on screen when a delivery will arrive, and the temperature of the load is recorded throughout the journey. Supermarkets charge a penalty of £250 for every delivery that arrives late or at the wrong temperature, and review supply contracts every two years.

Tannoch Foods plc has won a contract to supply a supermarket chain in Scotland. It is considering two options for the extra deliveries:

• Option 1: buy 12 more refrigerated lorries with tracking technology, for £2.4 million.
• Option 2: pay a haulage company £310 per delivery. The haulage company's lorries do not have tracking technology.

Table 1 Tannoch Foods plc's deliveries

	2021	2023
Deliveries made	40 000	48 000
Deliveries arriving late	4 800	3 600