r. Williams, the leather handbag buyer for an upscale menswear specialty retailer located in San Francisco, decides to review his vendor analysis report before making his forthcoming season’s purchases. The report shows that there are three relatively strong and three relatively weak suppliers among the top six resources in relation to the gross margin each generated. Mr.Williams realizes that some important aspects of his job as a buyer are to negotiate trade discounts, quantity discounts, cash discounts, dating, and transportation charges. Because any and/or all of these factors can increase the essential gross margin figure, he examines copies of past orders to determine the terms of sale on previous purchases. He discovers that some suppliers granted all his requests pertaining to discount and dating elements, certain vendors negotiated these factors only after an initial order was placed, and a considerable number allowed only the absolute minimum discount that prevailed in the market Because business conditions have been less than favorable, Mr. Williams feels that the success of the next season depends not only on his ability to select the most desirable items from his key resources but also to negotiate with those vendors who offer the most advantageous terms of sale, to help maintain or improve the gross margin performance. The first classification he shops in the market is workbags. He had and continues to have strong sales in one well-advertised international brand that is distributed and can be bought directly from the manufacturer or from a jobber (i.e., middleperson). Customarily, Mr. Williams places his order for these goods with the manufacturer because he is able to view the complete line of patterns and buy any quantity he needs. Additionally, he has developed a rapport with one of the salespeople who served him. This salesperson would rush special orders, would call Mr. Williams about special promotions, etc. Consequently, during market week, Mr. Williams visits the manufacturer’s showroom, shops the entire line, gets delivery dates, and inquires about the current terms of sale, which are: Trade discounts from list price: 30%, 20%. • Quantity discounts offered: none. • Cash discount: 2/10, n/30. • FOB: Factory/shipping charges are running 1.5%. When Mr. Williams returns to the store, he studies his open-to-buy for this category and decides to purchase: 75 units of Double Zip Workbag: List price $175 for each unit 50 units of Top Handle Workbag in Eco Leather: List price $200 for each unit 80 units of Computer Briefcase in premium leather: List price $225 for each unit He is interrupted by his assistant's calculations, who informs him that the salesperson of an out-of-town jobber would like to speak with him. This particular supplier has tried for several reasons to get the store as an account. In the past, Mr. Williams had used local jobbers, often for immediate shipment of various items when his stock would become “low” on fast-moving items, but he had not done business before with this particular firm. Mr. Williams invites the salesperson into his office and during their conversation, Mr. Williams senses the salesperson’s eagerness to open an account with him now. He deduces this because of all the concessions the salesperson is willing to offer the store. Because this jobber carries the same brand of silverware Mr. Williams has just seen at the manufacturer’s showroom, he asks the prices, terms, etc. They are: Trade discount from list price: 20%, l5%, 10% • Quantity discount: an additional 1% for orders over $10,000; 1.5% for orders over $15,000; and 2% for orders over $20,000. • Cash discount: 2/10–60X, • FOB store. Calculate Cost of Invoice based on terms of sales offered by (show your work): Manufacturer Jobber With which resource should Mr. Williams place his order—the manufacturer, the jobber, or both? Justify your choice mathematically and discuss your opinion (no less than 200 words).
Mr. Williams, the leather handbag buyer for an upscale menswear specialty retailer located in San Francisco, decides to review his vendor analysis report before making his forthcoming season’s purchases.
The report shows that there are three relatively strong and three relatively weak suppliers among the top six resources in relation to the gross margin each generated. Mr.Williams realizes that some important aspects of his job as a buyer are to negotiate trade discounts, quantity discounts, cash discounts, dating, and transportation charges. Because any and/or all of these factors can increase the essential gross margin figure, he examines copies of past orders to determine the terms of sale on previous purchases. He discovers that some suppliers granted all his requests pertaining to discount and dating elements, certain vendors negotiated these factors only after an initial order was placed, and a considerable number allowed only the absolute minimum discount that prevailed in the market
Because business conditions have been less than favorable, Mr. Williams feels that the success of the next season depends not only on his ability to select the most desirable items from his key resources but also to negotiate with those vendors who offer the most advantageous terms of sale, to help maintain or improve the gross margin performance.
The first classification he shops in the market is workbags. He had and continues to have strong sales in one well-advertised international brand that is distributed and can be bought directly from the manufacturer or from a jobber (i.e., middleperson).
Customarily, Mr. Williams places his order for these goods with the manufacturer because he is able to view the complete line of patterns and buy any quantity he needs.
Additionally, he has developed a rapport with one of the salespeople who served him. This salesperson would rush special orders, would call Mr. Williams about special promotions, etc. Consequently, during market week, Mr. Williams visits the manufacturer’s showroom, shops the entire line, gets delivery dates, and inquires about the current terms of sale, which are:
Trade discounts from list price: 30%, 20%.
• Quantity discounts offered: none.
• Cash discount: 2/10, n/30.
• FOB: Factory/shipping charges are running 1.5%.
When Mr. Williams returns to the store, he studies his open-to-buy for this category and decides to purchase:
- 75 units of Double Zip Workbag: List price $175 for each unit
- 50 units of Top Handle Workbag in Eco Leather: List price $200 for each unit
- 80 units of Computer Briefcase in premium leather: List price $225 for each unit
He is interrupted by his assistant's calculations, who informs him that the salesperson of an out-of-town jobber would like to speak with him. This particular supplier has tried for several reasons to get the store as an account. In the past, Mr. Williams had used local jobbers, often for immediate shipment of various items when his stock would become
“low” on fast-moving items, but he had not done business before with this particular firm.
Mr. Williams invites the salesperson into his office and during their conversation, Mr.
Williams senses the salesperson’s eagerness to open an account with him now. He deduces this because of all the concessions the salesperson is willing to offer the store.
Because this jobber carries the same brand of silverware Mr. Williams has just seen at the manufacturer’s showroom, he asks the prices, terms, etc. They are:
Trade discount from list price: 20%, l5%, 10%
• Quantity discount: an additional 1% for orders over $10,000; 1.5% for orders over $15,000; and 2% for orders over $20,000.
• Cash discount: 2/10–60X,
• FOB store.
- Calculate Cost of Invoice based on terms of sales offered by (show your work):
- Manufacturer
- Jobber
- With which resource should Mr. Williams place his order—the manufacturer, the jobber, or both?
- Justify your choice mathematically and discuss your opinion (no less than 200 words).
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