Q1: Why are office products frequently chosen as a lead commodity in strategic sourcing efforts?
Ans1: One goal of strategic sourcing efforts is to look for opportunities for cost savings. Office products and supplies are commodity items with little differentiation among suppliers and their products. Since office products and supplies can be easily substituted with different suppliers they are frequently chosen as a lead commodity in strategic sourcing efforts.
Q2: What observations can you develop about Eagle's SKU usage, prices they pay and contracts they currently use?
Ans2: Eagle employees purchased a broad range of office supplies product and a large number of different items per category of office products (for example from Supplier A, Chicago Headquarter locations sourced 2,460 SKU’s). Eagle paid large differences in price (>30% for contract items) for identical products from same supplier. The price difference between suppliers for non-contract identical items was >50%. The purchasing agreements between contracts suppliers were never compared, thus the pricing and terms of the contract varied greatly. Eagle’s catalog supplier issued bi-weekly catalogs with deeply discounted specials and gave gift incentives to administrative staff for purchasing minimum quantities. Price comparison between Catalog and contract suppliers showed that non-discounted items from Catalog supplier were premium priced compared to contract supplier but the discounted items were priced below the contract supplier’s pricing. 87% of Eagle’s $3.8M office-supply spending in 2003 by its 15,000 employees was made through three suppliers - Two contract suppliers and one catalog supplier.
Q3: Discuss potential implementation barriers?
Ans3: Eagle Industries has 300 administrative employees that manually process the purchase orders. In addition, the Catalog Supplier bi-weekly offers gift incentives for purchasing minimum quantities from them which the administrative staff considers...