SABIC Practitioner Corporate award – Integrative assignment

Order Description

Introduction

This assignment requires you to answer gr! the following questions. Your assignment must
be approximately 6000 words in length.

This assignment tests your ability to undertake an in-depth analysis of a business situation
and develop both proposals and opportunities reflecting the sales and supply market
conditions ofa fictitious business.

The integrative assignment is a significant piece of work that is intended to develop your
understanding of markets and business strategies as a whole. Whilst this case is focussed on
a fictitious organisation, it is typical that as professional buyers in the real world, you will be
faced with incomplete information or at best historic detail when you are required to develop
business opportunities. This case therefore requires you to carry out research and
demonstrate an understanding of the market within which this organisation would operate,
undertake a range ofanalyses and make some presumptions in the development and refining
of proposals relating to both the business as a whole and the purchases it must make.

The business situation

SABlC’s strategic business unit, Innovative Plastics, has its main European office in Bergen Op
Zoom (The Netherlands).

The Bergen op Zoom Global Application Technology Centre (GApT), opened in 1978. The
mission of the GApT is to support the growth of the Innovative Plastics product portfolio
through advanced application and process development, and dedicated customer support
around the world. The GApT invents, validates, and translates applications and processes. A
virtual laboratory connects with SABlC’s application technology centres around the globe to
share and translate knowledge worldwide.

Within the Bergen op Zoom (BoZ) centre is an expansion of Innovative Plastics’ existing Fluid
Engineering Centre of Excellence. It aims to help customers use lightweight, high-
performance thermoplastics to replace heavy and increasingly costly copper, aluminium,
steel, and glass in thermal and photovoltaic solar panels. The centre is equipped with leading
edge design, moulding, and testing equipment, and is staffed by engineers, materials
scientists, and application development experts, to help customers utilise the latest in
advanced thermoplastic technologies for the mass production of solar panels. Innovative
Plastics’ goal is to be a major contributor in making solar energy for heating and electricity a
practical and continuously more affordable option.

All of the above information relates to the situation within GApT at SABIC Europe. Now for

the fiction:

To secure its supply chain the directors working at Bergen op Zoom (Bo2) have worked with

colleagues in the SABIC Head Office to complete the takeover of a UK company, Barnes and

Wallace Ltd (B&W), previously one of its suppliers and the owner of a patented process which

is now owned by SABIC through BoZ. The process developed by B&W will now be used

worldwide to great advantage by BoZ/SABIC. B&W has previously been run by Albert Barnes,

a no nonsense New Yorker who moved to the UK when his Uncle Tom, the original founder

with John Wallace, retired in 1999. John looked after finance and administration and he

retired in 2009. Albert has now sold the business to BoZ/SABIC and has moved to the West

Coast of the USA.

You are Aaban Maroun and your colleague Lyzan Bazzi is now running B&W and he has

discovered to his horror that the Purchasing function he has inherited is almost non-existent

and that Albert made all the major deals with “his” suppliers himself. B&W has always been

a good quality supplier to BoZ/SABIC and has a great team of engineers, materials scientists,

and application development experts. Previously, Albert was very resistant to opening his

books to 1302 and was known as a fierce negotiator.

You have been moved on secondment to B&W as Purchasing Manager. At the end of your

first week you meet with Lyzan and report that you have discovered the following:

1. Albert was as hard on suppliers as it was possible to be, he insisted on open books
from them (though he would never do it for us!) and on squeezing every last cent out
of them. You spoke to the MD of a key supplier who said, “Albert squeezed and
squeezed us, but it did n’t get him any more than he was prepared to pay for. We could
have done a lot more for him but he would never listen and l know for a fact that he
stole an idea from another supplier”

2. The records of purchasing activity are almost non-existent, other than invoices

3. The engineers, materials scientists, and application development experts at B&W feel
that Purchasing is a paper pushing department and one of them has indicated that, “it
is only my very close relationships with key people in the top 10 suppliers that have
kept the show on the road”. There is no code of ethics at B&Wl

4. Your researches tell you that it is obvious that Albert was hiding cost from Bo2/SABIC
by applying the overheads twice to some things he sold BoZ.

5. B&W has lost three other major customers in the last year, probably due to its
inflexible attitude and there are some state of the art assets not being “sweated” at
all down there in the factory.

6. People all over the business are placing low value orders with 16,000 different
suppliers worldwide; this apparently was their way of getting around Albert’s control
mechanism. The items being purchased are literally everything needed to run the
business and usually the first document received is the invoice. All ofthe items appear
to be treated in the same way by this group of maverick buyers!

7. You have met some very motivated people in engineering and production at B&W,
who said that they wanted to offer Bo2/SABIC a new range of lightweight components to replace the existing designs 6 months ago. Albert however, refused to disclose

this
to Bo2 and said that he could, “milk Bo2‘ for a considerable amount more before
needing to offer anything new”. The new designs have however been patented and
according to Jenny Prince the design team leader, ”they are ready to roll”

8. The stores and re-ordering is managed by the Production Manager and his team. Stock
turn is not good, this is impacting working capital and there is also the threat of legal
action from three B&W important suppliers over non-payment. You asked to meet
people from one of these organisations but they said they were “too busy”.

9. The credit control clerk is part time.

10. There is little use of electronic processes within B&W

Questions

Lyzan is meeting Boy Litjens (CEO SABIC Europe) and l/Eosaed Al Ohali (COO SABIC Europe)

next week and he has asked you to draft a report on B&W to present to them covering the

following points:

a. A brief summary of the current position and any risks for SABIC/B&W as you see them

b. How will prioritisation within the process and function of Purchasing help B&W?

c. How may people working for B&W’s suppliers view B&W as a potential customer?
Examine the situation as it was and as it could be.

d. How you will develop better relationships with the people at B&W’s suppliers?

e. Recommendations for improvements to process and governance within B&W

f. A brief explanation of how costing methods can be/should be applied by B&W to the
things that they make for BoZ/SABIC

g. What can be done to improve the working capital situation at B&W?

h. Who does B&W need to talk to about what it can do for other parts of SABIC?

i. Provide a time phased plan for action at B&W

Learning outcomes to be tested

Completing this assignment successfully will mean that you have:

Understood the concept ofworking capital and assessed issues relating to the financial
viability of an organisation

Evaluated the risks that SABIC/B&W may face in the current situation

Proposed solutions to problems relating to:

o Supplier relationships

o Governance and control
o Cost control

0 Working capital

o Customer relationships
o Supplier relationships

o Prioritisation

Applied material from the Corporate Award programme to the areas of:

o Risk analysis

o Relationships with people from suppliers

0 Cost analysis

0 Ratio analysis

0 Collaborative relationships

0 Profit generation

0 Effective processes

0 Electronic processes

Prioritised action in an appropriate sequence
NB: You are required to use the CIPS informal report format for the report you are

preparing. This is:

Title

Objectives

Management Summary

Sections with headings

Conclusions

Recommendations

Appendices (not included within the 6500 word count

Learning objectives

Completing this assignment successfully will mean that you have:

°   Understood the concept of working capital and assessed issues relating to the financial viability of an organisation
°   Evaluated the risks that SABIC/B&W may face in the current situation
°   Proposed solutions to problems relating to:
o  Supplier relationships
o  Governance and control
o  Cost control
o  Working capital
o  Customer relationships
o  Supplier relationships
o  Prioritisation
°   Applied material from the Corporate Award programme to the areas of:
o  Risk analysis
o  Relationships with people from suppliers
o  Cost analysis
o  Ratio analysis
o  Collaborative relationships
o  Profit generation
o  Effective processes
o  Electronic processes
°   Prioritised action in an appropriate sequence

SABIC Practitioner Corporate award  –   Integrative  assignment  –   marking scheme

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Candidates are required to use the CIPS informal report format for the report you are preparing. This is:

°  Title
°  Objectives
°  Management Summary
°  Sections with headings
°  Conclusions
°  Recommendations
°  Appendices  (not included within the 6500 word count)

SABIC Practitioner Corporate award  –   Integrative  assignment  –   marking scheme

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Marking scheme

Marking Scheme –   Your assignment will be marked against the following criteria

Marking Criteria  Maximum marks
available
Fundamental elements
•  Achievement of Learning Objectives
•  Quality of analysis and discussion
•  Completeness of answer in context, where context is given
•  Innovative content where appropriate
40
Use of Programme Content
•  Knowledge and application of programme content
•  Evidence of wider reading
20
Conclusions and recommendations
•  Use of analysis to support discussion/conclusions/recommendations
•  Recognition of applicability of ideas to employer or context set
•  Presentation of a balanced viewpoint
30
Presentation of assignment
•  Logically structured discussion
•  Appropriate use of diagrams, tables and graphs to support the case made
•  Acknowledged information sources
•  Word limit within 10% of the limit, excluding appendices
10
Total  100

SABIC Practitioner Corporate award  –   Integrative  assignment  –   marking scheme

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This table analyses the areas from the findings by Aaban   against the areas in the report required by  Lyzan .

Point number  from first week’s report
1   2   3   4   5   6   7   8   9   10
Point number Lyzan
wishes to be
addressed
A
B
C
D
E
F
G
H
I

No  Point for the report  Specimen answer
A     The text of the points one to  nine   in the case study  forms the basis of this answer and the
candidates should summarise the initial situation from that text –   not by copying it, and identify
the risks (to  B&W and  BoZ ) which include:

1.   Albert’s way of dealing with suppliers could put continuity of supply at risk for
BoZ /SABIC
2.   We don’t know what B&W has spent on what without a lot of work
3.   W e don’t know what B&W is committed to pay for –  this is an exposure
4.   Purchasing is not valued;  contracts may not be up to date and appropriate  –  or non -existing, or even on Sup plier’s terms!
5.   Some people  may have an inappropriate relationship with the people from  supplier(s)
6.   We treat many of the items is the same way and we have maverick buyers
7.   We are losing customers  are we ( B&W) viable?
8.   Low value spend is out of control
SABIC Practitioner Corporate award  –   Integrative  assignment  –   marking scheme

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No  Point for the report  Specimen answer
9.   We are not making the most of our good people –  they will leave
10.  We are delivering old solutions to the market
11.  We have working capital problems –  can we pay our way?
12.  B&W  have been missing out with some suppliers who are not contributing everything
they can. This means that BoZ /SABIC may have been doing the same

Note that the current situation and its risks are require, solutions to the risks are not required.
Other appropriate risks are acceptable

B     Candidates could include the following in their answers

1.   A major feature within “prioritisation” will be conducting a Supply Postioning  Analysis .
Candidates should indicate that this analysis will allow them to determine the most
costly and most risky items that B& W need to procure to provide the goods and services
that meet their customers’   needs . The context of the report does not require a long
academic  explanation of the Supply Positioning Model, however the candidate should
apply the model to  differentiate the four quadrants and refer to the text which indicates
that the 16000 items bought by the maverick buyers “all appear to be treated in the
same way” .
2.   Prioritisation should also be explicitly linked to the risk axis and differentiating purchases
in relation t o  the possibility of  them  stopping work within B&W
3.   Better answers must recognise the low cost high exposure type items

Answers providing examples of purchases which may fall into the four quadrants of the model,
where provided, should attract higher marks.

Other valid points acceptable

SABIC Practitioner Corporate award  –   Integrative  assignment  –   marking scheme

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No  Point for the report  Specimen answer
C    This element of the question requires candidates to make an assessment using the Supplier
Preferencing model. Again a long explanation of the model is not required and candidates
should apply the model to the  situation as described in the case study. An explanation of the
“the situation as it was and as it could be”  is required.

Whilst it can be argued that in the situation “as was” people  working for suppliers could see
B&W in any of the four quadrants it is probable that (and the clues are there in the text) that
people working for suppliers would see them in the bottom half of the model. Candidates
should refer to the activities of Albert in making him and B&W as unattractive :

°  He squeezed and squeezed suppliers
°  He insisted on open book costing
°  He wouldn’t listen
°  B&W didn’t pay on time
°  An idea was stolen

This unattractiveness means that B&W is missing opportunities.

People from some suppliers might have seen B&W as more attractive as   they worked for
organisations like BoZ/SABIC

In the situation “as is” it can again be argued that people working for suppliers could see B&W
in any of the four quadrants, however if a different approach is adopted then B&W may be
seen as dev elopment or core . Candidates should reflect that to bring about this change they
will need to take action to raise their (B&W’s) attractiveness as a customer and actions
including, but not necessarily limited to the following could be undertaken at B&W:

°  P aying the amounts owed immediately
°  Paying on time in future
SABIC Practitioner Corporate award  –   Integrative  assignment  –   marking scheme

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No  Point for the report  Specimen answer
°  Setting up joint project teams to look at issues
°  Supplier development activities
°  Respecting the IPR of suppliers
°  Going for cost transparency and not simply open book costing
°  Early supplier involvment
°  Greater involvement with other SABIC requirements

Other relevant points are acceptable to both halves of the question.

D    Candidates could include the following in their answers. Supplier Relationship Management
(SRM) should be mentioned, however specific actions are required to be extracted from the
text in the case and glib or generic SRM proposals should receive less marks than tackling
specific issues.   Candidates should also  pick up the reference in this point to “people working
for suppliers” and not just “suppliers”

1.   S upply positioning to understand our purchases   –   this was part of the answer to point
“B” and should only be referred to here  –  not gone in to detail
2.   Supplier  Preferencing to understand how they see us –   this was part of the answer to
point “ C” and should only be referred to here  –   not gone in to detail
3.   Set relationships depending upon that   –  use of the relationship spectrum
4.   Solve payment problems with suppliers  who are potentially suing B&W
5.   Make presentation and go to key  people from  key  suppliers to say that the bad old days
are gone and there is a new regime
6.   Differentiate relationships depending upon S upply  P ositioning
7.   Consider supplier development
8.   Work collaboratively with people from suppliers
9.   Check the relationships of the engineering people  –  introduce code of ethics both
internally and with people from suppliers
10.  Look at electronic processes with our suppliers and  BoZ
SABIC Practitioner Corporate award  –   Integrative  assignment  –   marking scheme

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No  Point for the report  Specimen answer
11.  Ask suppliers if they will take any of our stocks back
12.  We have been missing out with some suppliers who are not contributing everything they
can
13.  Focus on the top ten suppliers  –   build upon relationships of the engineer, assuming
these are not corrupt
14.  Make sure everyone understands how to live “trust” in relationships , particularly with key
organisations –   in the past Albert “stole” ideas!

Other valid points acceptable
E     Candidates could include the following in their answers:

1.   Introduce a code of ethics at  B&W based upon the CIPS or  SABIC  codes
2.   Share the code of ethics with people working for Suppliers
3.   Introduce separation of duties
4.   Move the management of the stores and inventory away from the production manager
to a specialist person
5.   Set on temps or others to construct a record of the purchasing activity from the invoices
6.   Set up proper purchasing procedures and processes
7.   Set up a simple computer system –  short term
8.   Set up an integrated computer system –   long term
9.   Do cash flow forecasting
10.  Limit the activities of the engineers and technical  specialists  to their specialisms and to
discussion technical matters with technical people working for supplying organisations
11.  Know how much is being spent of “low value” purchases –  purchasing cards
12.  Value analysis/value engineering  might be a possibility

Other valid points acceptable

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No  Point for the report  Specimen answer
F    Candidates could include the following in their answers , which should discuss an appropriate
costing mechanism and also the overcharging alluded to in the case.

1.   Candidates can “briefly” explain activity based costing,  marginal costing, break-even
analysis   a nd/or total absorption costing.  Definitions could include the following, however
an explanation of one approach is adequate:
a.   Activity based costing is a method of measuring the cost and performance of
activities and c ost objects.  It assigns cost to activities based upon their use of
resources and assigns cost to cost objects based upon their use of activities.
ABC recognises the casual relationship of cost drivers to activities
b.   Marginal costing is t he accounting syste m in which variable costs are charged to
cost units and fixed costs of period are written off in full against the aggregate
contribution. Its special value is in recogni sing cost behaviour and hence
assisting in decision -making”
c.   Breakeven analysis is used  to determine the point at which revenue received
equals the costs associated with receiving the revenue. Break-even analysis
calculates what is known as a margin of safety, the amount that revenues exceed
the break-even point. This is the amount that revenues can fall while still staying
above the break-even point.
d.   Total Absorption costing  is a method for accumulating  fixed  and  variable   costs
associated with the production process and apportioning them to individual
products. Thus, a product may absorb a broad range of costs

2.   Candidates should explain that overhead costs can be applied as “overheads” at more
than one step in the process   either via labour or materials as well as “overheads”  and it
appears  that Albert was doing this, therefore the cost   of the items made by  B&W should
fall.
3.   An ethical dilemma might be raised by better candidates who will discuss whether prices
should be lowered for  customers other than BoZ/SABIC
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No  Point for the report  Specimen answer
G     Candidates could include the following in their answers

1.   A description of what “working capital” is and why too much working capital is a bad
thing in a business
2.   Appointing a full time experienced  credit controller –   even for a short period
3.   Factoring the debts
4.   Selling stock back to suppliers
5.   Selling stock to other organisations
6.   Using the stock in other parts of SABIC
7.   Introducing control on who orders stock and how much  is ordered
8.   Ensuring suppliers are paid on time
9.   Undertaking ratio analysis
a.   Measuring stock turn
b.   Using the debtor days ratio
c.   Using the creditor days ratio
10.  Move the management of the stores and inventory away from the production manager
11.  Use specialists  to manage inventory
12.  Evaluate the impact of not overcharging on overheads
13.  Stop “people all over the business” ordering low value items
14.  Training for everyone to  understand the impact of working capital on the business

Other valid points acceptable
H    Candidates could include the following in their answers

1.   They need to talk to people in the divisions about the new designs and benefits they
bring
2.   They need to talk to buyers at BoZ about the overcharge  to build trust
3.   They need to talk to buyers about the other potential sales they could make to
BoZ /SABIC
4.   They need to talk to Boz/SABIC buyers about the risks given the current supplier
SABIC Practitioner Corporate award  –   Integrative  assignment  –   marking scheme

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No  Point for the report  Specimen answer
relationship situation and perhaps ask for help   in mending the relationship(s)
5.   They need to talk to systems people about using “e” and computer systems –   can they
hook into BoZ s systems?

Better answers might refer to Ansoff’s matrix, although candidates have not been introduced to
this on the programme so far.

Other valid points acceptable

I     Candidates could include the following in their answers,  higher marks where a gantt chart is
provided.

Again here there is no absolute right or wrong  answer.

1.   Early actions could include:
a.   A cash injection from BoZ /SABIC  to pay suppliers and secure supplies
b.   Credit control  put in place
c.   Supply Positioning and then talking to key suppliers
d.   Rules on spending  introduced
e.   Letter to suppliers about new rules on spending
f.   Setting up team with Jenny
g.   Parachuting some purchasing people in
h.   Identifying key  B&W customers and securing them
i.   Securing BoZ   supply chains through B&W
j.   Setting up basic processes

2.   Intermediate actions could include
a.   Launching new products
b.   Sales campaign
c.   Systems and recording  –   simple
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No  Point for the report  Specimen answer
d.   Supplier and customer presentations
e.   Value analysis/value engineering
f.   Control of working capital and cash flow forecasting
g.   Payback cash to BoZ   relating to the overcharge
h.   Start eProcesses

3.   Long term actions could include:
a.   Integrated  computer system
b.   Consider site move/sale
c.   JIT/lean processes

Other valid points acceptable .