All key elements of the assignment are covered in a substantive way.IntroductionProblem identificationAnalysis

 ATTACHMENT PREVIEW Download attachmentNATIONWIDE TELEPHONEBackgroundNationwide Telephone has been a manufacturer of quality low-cost cordless 2.4-gigahertztelephones since 2001. The firm has based its business strategy on automation, fast deliveries, andreliable service. Nationwide is one of the first low-cost telephone manufacturers still producingand selling telephones in the United States. Competition, especially from the Far East, has madethis an increasingly difficult endeavor.The most important segment of Nationwide’s sales has been the promotional “Gift withPurchase” market. Magazine publishers currently compose Nationwide’s largest customer base.Positive growth has been forecasted in the promotional incentive market for the next five years.To meet market demand, Nationwide manufactures two models of telephones in a variety ofcolors.The firm’s plant is located in Nogales, Arizona. The plant was built near the majorsources of supply, which are in Mexico. Nationwide procures all its components from Mexicoexcept for the plastic items. The plastic components are purchased in the local domestic area.Nationwide has ruled out the use of a maquiladora,*due to the highly automated nature of itsproduction process. As a capital-intensive firm, Nationwide also concluded a maquiladora wasnot a feasible alternative because of the increased risks of having its equipment in a foreigncountry.Roger Stoga is the president and founder of the company. He has an engineering degreefrom Michigan Tech and an M.B.A. from Purdue University. He attributes Nationwide’s abilityto stay competitive to two factors: (1) automating its process and (2) procuring highly labor-intensive materials in Mexico.The plant employs only 200 people, of whom 140 are responsible for the actual assemblywork. With the help of automated assembly machines, Nationwide has been able to meet marketdemand and keep labor and manufacturing costs down.Supply ManagementSteven Young is the supply manager. He employs two supply analysts, Jan Newman and BillBush. Jan has been with the company for a little over a year and is a graduate of Arizona StateUniversity. She has a strong background in price analysis. Bill is the eldest and most experiencedmember of the Nationwide staff. He is expected to retire later this year. Jan purchases all theelectronics and wire harnesses, while Bill concentrates his efforts on the plastics and hardware.Supply Management SystemThe manufacturing process is highly dependent on timely deliveries from its suppliers. Localsourcing is used to assure prompt delivery and to keep supplier lead times short. Supply*Maquiladora plants are located in northern Mexico. Basically, foreign materials are importedduty free, processed (using low-cost labor), and then returned to the country of origin withoutcustoms duties being imposed in either Mexico or the country of origin.

View the Answermanagement focuses its efforts on maintaining a small supplier base.The driving force of the supply management system is to obtain low-cost, high-qualitymaterials as a means of staying competitive. As a standard procedure, supply managementprepares annual re-costing reports of its suppliers. Currently, requests for quotations are sent topotential suppliers to compare with the current supplier’s prices. The supply professionals are tosort through the various bids and choose the lowest one submitted to use as a basis for negotiatingfuture part pricing.Developing SituationOver the last six months, Roger has been noticing a drop in sales, while expenses have begun toincrease. A careful evaluation of production costs revealed a recent increase in the plasticcomponent prices. Since plastic components account for 40 percent of the telephone’s cost, therise in price significantly affected profit.Injection molding makes plastic components. Injection molding is a process whereby athermoplastic material, usually in pellet form, is heated to its melting point. The melted materialis then pushed into a mold via an injection molding machine and held in the closed mold while itis cooled into a solid shape. The solidified part is ejected from the mold and the process beginsagain.On further investigation, Roger noticed Nationwide is sole-sourced by one injectionmolder in the local area, ABC Plastics. Nationwide has been buying solely from ABC since itconsistently submitted the lowest bid. Quality and delivery have been generally good.Roger called Steve into his office to discuss the situation. Roger said to Steve, “As youare aware, our sales this quarter have been weak and expenses have been increasing. I have gonethrough our material price sheets and noticed plastic part prices have been steadily increasing.Why is that?” Steve replied, “Bill has made me aware of the problem, but he has not been able todetermine the cause of the price changes. He has stated that ‘ABC refuses to divulge any costinformation.’” Roger said firmly, “We have to understand what the problem is and get it fixednow!”Steve was pondering his options and alternatives to solve this problem. He knew if he didnothing to rectify this situation quickly, Nationwide would not be able to price its telephonescompetitively.Steve also knew that Jan had been successful in obtaining price reductions; therefore,Steve decided to ask Jan to work with Bill to develop an action plan to get the escalating plasticmaterial prices under control.1.What analytical tools can be used by the supply group to determine the right price?2.How could Nationwide’s supply department have prevented the price escalations?3.How does the competitive condition of the plastic component industry impact the useof price analysis?4.What kind of resistance might Jan encounter from Bill? How can Bill help facilitatethe pricing analysis process?

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