SWITCHING THE SOURCE AGREEMENT FOR CORAL DANDRUFF SHAMPOO
In December, Shirley had reviewed the performance of the company that produce Coral Dandruff Shampoo Twinney Inc. After several requests from Coral to improve delivery terms, Twinney had indicated that it would not alter the terms originally agreed upon. Many of Coral s concerns were directly related to the location of Twinney s manufacturing plant 600 miles to the east. Consequently, in early January, Coral announced that it was accepting bids on the future production of the product. A product specification document was sent to manufacturers that were known to have the capability to produce similar products. Twinney was notified prior to the announcement and was asked to submit a bid along with the others.
TWINNEY INCORPORATED
Under the current sourcing agreement, Coral had to order full skids when purchasing its private label dandruff shampoo from Twinney. Each skid held 4,000 units. Although the shampoo was considered an excellent product, volume for the regular, fragranced and trail size products average only about 20,000 unites each annually Shirley knew that the inventory carrying cost at Coral was around 2 a month, and felt that the company had too much money tied up in such a low volume product Furthermore, the three to four week lead time required when 2 l P a g e