This paper presents an extensive analysis of B&W, an organization that has been acquired recently by Boz/SABIC. The aim of the analysis is to determine the current position of the company and to propose solutions to the problems that the company may have. The following are the specific objectives of the analysis:

To provide a brief summary of B&W’s current position and explore the risks that the company is likely to face after acquisition
To determine how prioritization in the functions and processes of purchasing will help B&W
To determine how people working for the suppliers of B&W have been perceiving the company and how they can consider it as a potential customer
To propose strategies that the new managers for B&W can adopt in order to build new relationships with people working for the suppliers
To propose recommendations for improvement of governance and processes at B&W
To explain how B&W can apply costing methods to the products that they make for Boz/SABIC
To given recommendations on strategies that B&W can adopt in order to improve its working capital
To explain who B&W should talk to about how it can contribute to other parts of SABIC
To develop an action plan for B&W

2 The Current position and Risks

2.1 Management Summary

SABIC is a European company that deals with innovative plastics. The company’s headquarters are in Bergen Op Zoom (Boz) Netherlands. The company has a Global Application Technology Centre (GApT) in Boz that plays the role of innovating new plastic products. SABIC operates in different countries in Europe. Boy Litjens is currently the CEO of SABIC Europe. Mosaed Al Ohali is the COO of SABIC Europe. SABIC has recently acquired another company called Barnes and Wallace (B&W) through Boz, which has been one of its suppliers for a long time. B&W has previously been managed by Albert Barnes and John Wallace. Albert’s uncle, Tom, and John were the original founders of the company. Tom retired in 1999 and Albert inherited his position. Before the acquisition, Albert was responsible for supply chain management while John was responsible for managing finance and administration department. John retired in 2009. B&W has a production department that is headed by a production manager. After the acquisition, B&W is now headed by Aaban Maroun and Lyzan Bazzi.

2.2 Assessment of the strengths and weaknesses of B&W

Aaban and Lyzan conducted a thorough analysis of B&W after acquisition and realized that there were several strengths and weaknesses that were inherent in the management. One of the key strengths that may have lured Boz/SABIC to acquire B&W is that the latter has been one of the key suppliers of Boz/SABIC for a long time. Secondly, B&W had an experienced and skilled pool of workers, which comprised of application development experts, material scientists and engineers at the time of acquisition. The pool of workers enabled B&W to come up with new innovative products. Thirdly, B$W had existed in the market for a long time and had gained considerable market share. The company had managed to lure and maintain customers who were loyal. Further, SABIC had developed new innovative products and registered patents that enhanced its competitive advantage. SABIC could benefit from the patents and enhance its competitive position as well

Despite having the aforementioned strengths, Aaban found that B&W had several weaknesses at the time of acquisition. Frstly, B&W did not have a well established and effective supply chain department. Albert carried out most roles alone in the supply chain management. For instance, he conducted all major deals with suppliers alone. Importantly, Albert did not maintain good books of accounts and there were not records of purchases. This is evident since Aaban found that records of purchases were almost non-existence, except invoices. Also, there was no specific purchasing process. For instance, the suppliers were only assured of receiving an invoice after making sales to B&W. Lack of a well established and effective supply chain management may lead to misuse and misallocation of material resources, which can significantly affect an organization’s performance. Secondly, the lack of an effective supply chain management has led B&W to have problems in managing its stock, leading to liquidity problems. The company is unable to make cash purchases for supplies and is unable to settle credit from suppliers in time

Thirdly, B&W was not in good terms with customers. This is evident since the company lost three major customers during the last one year. As well, the company did not treat its customers well. For instance, Aaban learned that B&W had invented new lightweight components and six months ago Albert refused to disclose about it to BoZ because he wanted to earn more profit from products sold to Boz. Also, Aaban realized that Albert applied inflated the cost of production in order to earn more profist from the customers. For instance, he applied overheads twice for some of the products sold to Boz. The inflexible attitude of B&W to customers is likely the cause of the poor relationship with the customers. Fourth, B&W did not have a code of ethics. This implied that the actions and practices of the workers and managers were not guided by ethical standards. Also, this implies that the managers could engage in any unethical practice, such as harassing the workers and other stakeholders without significant limitation. This is evident in the manner Albert mistreated suppliers.

In addition, B&W had a bad relationship with suppliers at the time of acquisition. Despite failing to disclose truthful information to the customers, Albert insisted that suppliers maintain books of account and disclose information to him. He pressed the suppliers so that they could sell products to him at the lowest price possible. Aaban found that Albert had stolen an idea from one of the suppliers. The workers at W&B explained that they maintained key suppliers through trying to develop close relationships with them. Otherwise, the company would have lost them.

As well, B&W did not have an effective human resource department. This is evident since the credit clerk was working part time despite being employed to work full time. Despite having skilled and experienced workers, B&W did not take full advantage of their potential, which could easily de-motivate them. This is evident since after developing new and innovative products, B&W did not sell them to the customers, such as in the case of light-weight components that were invented by the company and not sold to the customers. Lastly, most processes in B&W were carried out manually and usage of electronic equipments and systems was low.

The above analysis indicates that despite having several strengths that may have lured Boz/SABIC to acquire it, B&W had a myriad of weaknesses. The weaknesses can have a negative impact on the performance of B&W if they are not addressed well. Thus, there is a need for the new managers for B&W to explore the risks that are associated with B&W currently.

2.3 The current Risks of B&W

The weaknesses noted in the previous section imply that SABIC/B&W is exposed to various risks. The risks are likely to have a negative impact on the performance of SABIC/B&W in the short- and long-term if they are not addressed properly and promptly, despite having some competencies. The current section explores the risks that SABIC/B&W is exposed to.

2.3.1 Supplier relationship risk

The analysis of the weaknesses of SABIC/B&W proved that it has a supplier relationship risk. As Briscoe, Schuler and Tarique (2013) explain, an organization’s overall performance is highly influenced by its relationship with stakeholders. There are several benefits of good relationship with suppliers, such as gaining good reputation and image in the society, gaining ability to maintain suppliers and increasing the probability of securing credit from suppliers. As well, good relationship with suppliers motivates them to provide a firm with quality and innovative products when needed. For instance, motivated suppliers are likely to inform an organization when a new innovative product immerges. However, a poor relationship with the suppliers implies losing such benefits. In an extreme situation, an organization may end up losing suppliers. Currently, B&W is at the verge of losing important suppliers. During the analysis, Aaban learned that the suppliers were being bullied by Albert. In addition, the company had a bad reputation of non-payment of suppliers. In fact, Aaban noted that the company faces a threat of getting sued due to failure to pay customers. Suppliers who may go to that extent are likely to stop offering products to SABIC/B&W. Other suppliers are also likely to shy away. This is evident since when Aaban asked to meet some of the suppliers, they stated that they are too busy to meet him. This implies that the risk of losing suppliers for SABIC/B&W is very high.

2.3.2 Liquidity Ratios Risk

B&W faces liquidity ratios risk. As Gooderham and Grøogaard (2013) note, liquidity ratios are metrics used to asses the ability of an organization to settle its liabilities in time. Three are three liquidity ratios, namely, operating cash flow ratio, quick ratio and current ratio. The ratios measure the ability of a firm to settle long-term as well as current liabilities when the agreed time for payment is due. The asses a firm’s cash levels and its ability to turn other assets into cash in case of need. When the overall liquidity ratio margin is low, it means that an organization may have a low level of liquid cash or it may experience difficulties in turning other assets into cash in order to settle pending liabilities. On the other hand, a high margin means that an organization may easily raise cash to settle pending liabilities. Aaban noted that SABIC/B&W does not have a good stock turn. The company has been maintaining too much stock and this has significantly reduced its working capital. The company is unable to easily raise cash to pay suppliers as agreed and this explains why it is at the verge of getting sued. In other words, B&W has a high liquidity ratios risk. If the problem persists, lack of adequate working capital will hamper its performance, in addition to losing suppliers.

2.3.3 Supply Chain Ineffectiveness Risk

SABIC/B&W is facing a supply chain ineffectiveness risk. Business environment has become increasingly competitive today. For any organization to achieve and maintain a competitive edge, it must have a good supply chain management (Stevenson, 2011). A good supply chain management implies that different roles in the supply chain are carried out by knowledgeable and skilled individuals. The personnel involved should keep good records of all transactions, purchases and stock of materials, work in progress and finished products. Further, a good relationship should be maintained with suppliers to ensure that they provide quality products in time. Ultimately, this enhances customer convenience (Stevenson, 2011). Also, an optimal amount of stock should be kept to avoid shortage or keeping too much stock. If a supply chain management lacks the aforementioned aspects, it becomes ineffective and it may fail an organization. Failure to have an effective supply chain leads to problems such as misallocation of resources, increased cost associated with stock and customer inconveniencies (Stevenson, 2011). Ultimately, an organization’s performance if affected negatively. In extreme cases, this leads to total organizational failure. The current supply chain management for SABIC/B&W faces the risk of failing. As noted earlier, transactions are not well recorded since Albert did not keep books of accounts. Also, there is poor management of stock, which has already caused problems to the company. Too much stock is likely to increase the cost associated with stock holding and hence, reduce the organization’s profitability. Such problems may lead to failure of SABIC/B&W. Therefore, the risk associated with ineffectiveness of the company’s supply chain is very high.

2.3.4 Risk of losing Employees

SABIC/B&W is likely to encounter employee relationship risk. As McFarlin and Sweeney (2014) notes, employees are very essential to a firm since they have a direct influence on its performance. The quality of an organizations products and/or services is directly influenced by the input of workers. Having skilled and motivated workers is one of the key competencies that enhance an organization’s competitive edge. On the other hand, workers who are not skilled may not provide quality products and services or their production level may be low (McFarlin & Sweeney, 2014). The presence of ethical code of conduct within an organization is also essential. An ethical code of conduct consists of ethical principles that guide relationships and practices that people within an organization engage in. One of the most important contents of the ethical code of conduct is that it provides direction on how managers should treat employees. Managers are required to treat employees well and not to engage in practices or activities that may be perceived as mistreating of the workers. B&W has talented, innovative, skilled and experienced workers, and this has been one of the competencies that have enabled it to maintain its current competitive position in the market. This is evident since the workers have recently innovated lightweight plastic products. Despite being self-motivated, the workers lack intrinsic motivation. Intrinsic motivation occurs where a worker feels that he has been appreciated for his or her input, even without getting material rewards. After developing new lightweight products, the products were kept in stores and not sold to customers, against the wish of the workers. The workers may feel that their output was not appreciated. Such occurrences may lead to dissatisfaction of the workers, leading to a higher turnover rate. Further, lack of ethical code of conduct in the organization may give a leeway for the managers to mistreat the workers. In case such practices are tolerated, SABIC/B&W may lose the innovative and skilled workers, which may ultimately have a negative impact on its ability to innovate new products and produce quality products.

2.3.5 Risks associated with External Environment

SABIC/B&W is likely to encounter risks that are associated with its external environment. The practices and activities carried out by a firm are usually influenced by various factors of the external environment, such as economic factors, political factors, laws and regulations, technological factors, social factors and environmental factors. Such factors usually affect the practices and activities of the whole industry and thus, one organization may not have ability to control them (Subba, 2010). Some times, these factors expose firms to various risks. SABIC/B&W operates in the global market and thus, it is exposed to risks that are in the global market. For instance, the company is exposed to economic risks such as inflation, changes in exchange rates and financial crisis that may hit economies. A problem such as the recent global financial crisis that peaked in 2008 had a devastating effect on economies of most European countries. Ultimately, the sales of most companies reduced considerably as a result of reduction in purchasing power of consumers (Subba, 2010). Such an issue may also affect SABIC/B&W. As well, the company is exposed to the risk posed by laws and regulations that and set in the environment where it operates. For instance, the company must is required to adhere to the working time regulations set by the European commission.

2.3.6 Risk of Losing Customers

SABIC/B&W is likely to face customer relationship risk. Customers are vital to any business organization. They are the reason why firms produce products and services. For an organization to succeed in any industry or achieve competitive edge, it must focus on meeting the needs of customers in an efficient and effective way (Gooderham & Grøogaard, 2013). Products and services should be produced and delivered to the customers in an effective manner, without having a negative impact on the customers. Also, a firm should focus on creating and maintaining customer loyalty throughout. One of the important factors that influence customer loyalty is honesty. If customers find that a certain firm that sells products or services to them is not honest, they are likely to shift to other firms offering similar products or substitutes, especially in cases where their bargaining power is high (Gooderham & Grøogaard, 2013). B&W has not been honest to the customers. This is evident since the company has been giving untrue financial information to Boz, and there is likelihood that it has been doing the same to other customers. Also, the company has been having an inflexible attitude, which has resulted in losing three key customers. The company may lose other customers who may feel that it has not been honest to them and has not been providing them with quality product and services. In this regard, SABIC/B&W faces a high risk of losing customers due to poor relationship with them.

3 How prioritization within the process and function of Purchasing will help B&W

Prioritization is a strategy that involves meeting the most pressing need first, followed by other needs with regard to how pressing they are (Ramsey, 2011). The least pressing need is met last. The purchasing department for B&W has been encountering problems that can partly be addressed through effective prioritization. This can be achieved through assessing customer needs and then determine the items to be purchased and ranking them in terms of urgency. The most urgent items can be purchased first followed by other items. The company can carry out the prioritization process in the following ways:

3.1 Utilizing the available working capital effectively

SABIC/B&W can achieve more effectiveness through making priorities for purchases using the available working capital. As noted earlier, the company faces the problem of available working capital, which may present problems in meeting needs of different customers. For instance, the available working capital may not be able to purchase materials or items needed to process orders placed by five different customers. Assuming that the available working capital is only capable of purchasing materials for processing two orders at a time, the company can still utilize it to process the five orders in case they are not needed at the same time. For instance, the first order may be needed in 10 days, the second order in 20 days, the third order in 35 days, the fourth order in 50 days and the fifth order in 65 days. The company can use the available working capital to process the first two orders. After completing the first order and getting the payment, the company can then start processing the third order. After completing and receiving payment for the second order, the company can proceed with processing the fourth order and apply the same strategy to succeeding orders. That way, the company will still operate efficiently despite lacking adequate working capital to operate. However, this kind of prioritization can only be effectively implemented of the customers settle payments as soon as the orders are completed and sold to them.

3.2 Risk Evasion

Prioritization will help SABIC/B&W to partly counter the risk that is associated with ineffective supply chain. As noted earlier, the ineffectiveness of the purchasing department of the organization posed a major risk to the organization. The company has been losing customers and it is at the verge of being sued by the suppliers. Prioritization will imply that the company will use available working capital efficiently and will be able to settle payments of items to suppliers without undue delays. Also, prioritization will eliminate the existing problem of inflexibility in the purchasing department and hence, the company will be able to meet the demands of the customers without undue delays. That way, the company will partly evade the risks of losing suppliers and customers and collapsing.

3.3 Enhancing the efficiency and effectiveness of the supply chain functions and processes

Prioritization will help to streamline and enhance the efficiency and effectiveness of the supply chain processes and functions at SABIC/B&W. As Ramsey (2011) explains, prioritization is one of the strategies that enable firms to attain effectiveness and efficiency in the supply chain management. This is due to the fact that prioritization enhances the ability to use resources effectively and to prevent misallocation of resources. An organization pays more attention to the most important items that are needed urgently than less important items that are not needed urgently. The cash that could be used to purchase items that are not needed urgently is preserved for items that are needed urgently. That way, the cost associated with keeping too much inventory is reduced. As mentioned earlier, effectiveness and efficiency will also help in meeting the demands and needs of both customers and suppliers.

3.4 Enhancing competitive Edge

Prioritization will enable SABIC/B&W to improve its competitiveness over the competitors in various ways. Firstly, meeting the needs and demands of customers in an efficient manner enhances an organization’s reputation and makes it attractive to potential customers (Ramsey, 2011). Thus, SABIC/B&W is likely going to attract more customers, enhance their loyalty. Importantly, the existing customers are going to remain loyal to the company. The competitive edge of an organization also improves when it adopts strategies that help to effectively reduce operating costs and other costs. This is due to the fact that its net profitability increases, which is the goal of every organization (Ramsey, 2011). The costs associated with inventory, such as inventory holding costs for SABIC/B&W will be reduced if an effective strategy for prioritization is implemented.

4 How the employees working for B&W suppliers can consider B&W to be a potential customer

Albert, one of the former leaders of B&W, did not propagate a good relationship with employees working for the company’s suppliers. When Aaban was analyzing the suppliers of the company, he found that Albert was infamous for pressing the suppliers to show their books of accounts to him, yet he did not do the same to them. He squeezed the employees working for the suppliers as much as possible so that they could reduce prices for the supplies. He hardly listened to them and only wanted them to follow his way or else, they quit. Albert went to the extent of stealing an idea from one supplier and used it without compensating the supplier. Such issues led to a severe relationship between the workers of the suppliers and Albert. This might have led to a negative perception of the company by the workers of the suppliers and made them consider terminating the business relationship they had with B&W. In fact, it is clear for the case that it is only the intervention of workers at B&W that led the suppliers to remain loyal to that company. From the analysis made by Aaban, it is also apparent that Albert did not maintain a good personal and economic relationship with the workers of the suppliers. He did not care whether the suppliers were dissatisfied with the manner he treated them or not. This may have led the workers of the suppliers to perceive B&W as an organization that takes advantage of the low bargaining power of the suppliers through exploiting them. The situation was worsened by the fact that B&W failed to make payments in time as agreed with the workers of the supplying companies.

Despite this, the workers of the suppliers can still consider B&W to be a potential customer if the new managers restore business and personal relationship with them. If they do so, the negative perception of B&W by the workers of suppliers as a company that takes advantage of the low bargaining power of the buyers to exploit them would be eliminated. The workers of the supplying companies would start perceiving B&W as a co-partner, rather than a partner with higher power. Ultimately, there would be a corroborative relationship between the workers of the supplying companies and the workers of B&W. They will all focus on the ultimate goal of meeting the needs of customers. B&W would be in a better position to receive credit from the suppliers and discounts from the workers of the suppliers since they will view the company as a valuable customer.

5 How to build good relationship with people at B&W suppliers

Aaban and Lyzan can lead in building a good relationship with workers for suppliers of B&W, despite the current situation. Fortunately, there is already a good relationship between workers of the supplying companies and engineers, development experts and material scientists of B&W. Also, the workers of the supplying companies understand that Albert was the key cause of the poor relationship with them. Despite this, the workers of the supplying companies have had a bad taste of the Albert and they are not sure whether the new managers will take the same trend. This is evident since when Aaban requested to meet people from one of the supplying organizations, they stated that they were too busy to meet him. As such, Aaban and Lyzan have a burden to prove to the workers of the supplying companies that they are different from Albert and they intend to build good relationships with them. Aaban and Lyzan can adopt various strategies in order to develop good relationships with the workers of the suppliers.

Firstly, they can send written documents to the people working in the supplying organizations and inform them that B&W is under new management and there is an intention of building a good relationship with them. After this, they can request to meet the people working for the supplying companies and gather their opinions towards B&W. Aaban and Lyzan can then give promise for relationship improvement and ask t

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