Organizational Profitability

Organizational Profitability

INF 336 Project Procurement Management

Organizational Profitability

The Carmichael Corporation is an American subsidiary of an international corporation headquartered in the United Kingdom. They specialize in veterinary products and feed additives worldwide, however their largest competitor is Brisson Corporation. What the two corporations have in common is the supplement product called Stimgro, which is a stimulant and metabolizer seed coating. At the Carmichael Corporation, Stimgro sells for an estimated price of $360, which is double the cost of manufacturing the product, however when Brisson purchased equipment to manufacture their own Stimgro product, Carmichael will raise the cost of their product. Knowing this, there are a few options that ensure profitability. Last year, the company made over $1.2 million, but could lose profit by 13% if they remain with their UK provider, who delivers two ingredients necessary for production. This calls for a competitive cost structure to assist in managing operating decisions.

As stated earlier, Carmichael receives vital ingredients from their UK provider; MS-7 among other ingredients. One option is stockpiling their inventory of these specific ingredients, thus saving money in the long run. However, several issues come to mind when exploring such an option, and researching whether the ingredient can be efficiently stored, how it should be stored, and possible expiration dates are some things that should be considered when choosing this decision.

Another option would be following the footsteps of their competition by creating their own ingredient needed for Stimgro. This option would be costly, considering the equipment purchases, materials required and overhead costs to produce MS-7. Also, one must consider the long-term usage of machinery and maintenance for the equipment. Although this option worked for Brisson, this may not be worth the risk for Carmichael.

Knowing Brisson is successful with creating their own ingredients, I would recommend Carmichael search for other distributors whom are closer regionally. Also, they can reach out to Brisson to ascertain if they can use them as a supplier for the MS-7 for a reasonable price. Doing so would provide a competitive advantage for both Carmichael and Brisson.

Reference

Flynn, A. E. Johnson, P. F., Leenders, M. R. (2015). Purchasing and Supply Management. San

Diego, CA.  Bridgepoint Education, Inc.