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A Supplier Partnering Agreement at the University of Las Vegas

A Case Study
In partial fulfillment of the course requirements
For Supply Chain Management
Decision Sciences and Innovation Department
Ramon V. Del Rosario - College of Business
De La Salle University

by:
Felix, Kim E.
Limkaichong, Leonard S.
Luna, Perseus Anthony S.
Panopio, Arman Joseph N.
Sy, Kaye Marineth N.
Prof. Willy Cuason
Instructor

Table of Contents
I.

Summary of Findings

II.

Background Information

III.

Problem Statement

IV.

Analysis of Alternatives

V.

Detailed Recommendations

VI.

Answer to Case Questions

VII.

Learning

I.

Summary of Findings

Mr. Bob Ashby, who is a newly hired purchasing director of the University of Las Vegas
(ULV) is faced with a decision, whether or not to accept the offer of Nevada Office Supply
Company (NOSC).
Currently, ULV has around eight suppliers for their general office supplies, However,
general consensus in their department wants them to lessen the number of suppliers to around
3 with 2 of them being backups. This can increase efficiency by lessening the number of papers
that need to be filed and the number of trucks coming in and out. NOSC right now provides the
best value and already fulfills up to 50% of their office supply demand.
The partnership agreement is for NOSC to be the sole supplier of ULV for their office
supplies. In return they will get a discount of around 50-70% and will receive daily deliveries. In
addition, NOSC would also install software that would allow individual users to order from them
and have it delivered the next day. However, the terms of the agreement include that ULV would
recommend other educational entities in Las Vegas to the same partnership. They would also
be able to get a 2% rebate for combined purchases that exceed $1,000,000 a year. But,
according to Nevada law that if an entity enters into an agreement other entities may tie into
that, but NOSC doesnt let other institutions know about the 2% rebate its offering.
II. Background Information
Nevada Office Supply Company
The Nevada Office Supply Company has been supplying office materials to
educational institutions for over 15 years, it has a warehouse in Southern California but has
recently opened one in Las Vegas Valley since it was able to grow. It expects to increase sales
by around 20% due to the increase of institution and population growth in the Las Vegas Valley
area.
University of Las Vegas
University of Las Vegas recently hired a new purchasing manager, Mr. Bob
Ashby. ULV is a state university and is a heavy consumer of office supplies where they spend
between $1,000,000 - $1,500,000 a year. They have multiple suppliers for office supplies but
their main supplier is NOSC.

III. Problem Statement


The problem Mr. Bob Ashby is facing is whether or not he should accept the offer given
his 15-day time limit. Basically, the University of Las Vegas wants the best value for money
office supplies and sometimes the cheapest priced ones. They used to do this through
competitive bidding by having multiple suppliers associated with them.
Another problem Mr. Bob Ashby should consider is not just whether or not it will benefit
the company in terms of costs, but whether it is legally allowed to undergo in such a partnership
where competition is bypassed. He also has to consider whether it is an ethical move to take
part in this deal knowing that Nevada state law states that other educational institutions should
also get the same deal, but in reality they are potentially getting an extra 2% rebate not offered
to the others. Furthermore, the deal being brought upon Mr. Bob Ashby appears to be a bit
shady considering that NOSC does not want any details of the deal to be disclosed to other
organizations. They are seemingly trying to get ahead of competition by not giving them a
chance to compete.
IV. Analysis of Alternatives
There are four alternatives in which Mr. Ashby can choose. First is to agree to contract
the partnership agreement with NOSC. Second is to ignore or disagree the partnership
agreement and stick to its previous supplier setup. Third is to pursue their intention of finding
three suppliers, one of which will be the major and the other two will be the backup. Fourth will
be to negotiate with NOSC to contract with them but include a clause that they will source at two
backup suppliers for a list of reason which are stated into the contract.
V. Detailed Recommendation
Out of the four alternatives listed, negotiating and pursuing a contract with NOSC
including a clause that supplies can be also sourced to two backup suppliers for listed reason
will be included. The agreement with the NOSC will be very beneficial to both parties but
unfortuitous events can happen hence the ULV must protect itself in the contract. If the NOSC
will not agree to the contract, then that will be the time to inform the other suppliers that initiative
for partnership was introduced by their competitor to spur competition which will be beneficial to
ULV.
VI. Answer to Case Questions
1. What legal issues, if any, might be involved in NOSCs proposal?
The main legal issue this case presented is the elimination of the competitive
environment that firms and other organizations usually rely on. This could have legal
consequences because the government has anti monopoly laws and due processes to
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make sure the market is a fair and competitive one. As stated in the first paragraph, Mr.
Ashby was given this offer without benefit of competitive bidding and was only given 15
days to accept the offer., this meant that they wanted to bypass the bidding process and
instantly gain customers probably breaking laws in the process for it being an under the
table arrangement type of agreement. Furthermore, by the state law, if an educational
entity enters into an agreement then it means other institutions may also tie-into that
agreement without the need to seek further quotes or bids from other suppliers. What I
think this implies is if ULV gets a deal, other institutions should also get the same deal,
which not what was offered to ULV since they are getting a bit extra compared to the
others.
2. What are the ethical issues involved in NOSCs proposal?
The ethical issue here is that ULV is a government owned school. They have to
be careful by operating ethically and under the boundaries of the law. What NOSC is
offering is anticompetitive and seems to be trying to pressure ULV into making a hasty
decision by giving them such a short time to decide, 15 days. As a government owned
university, they have reason support other competitors in the state and create a healthy
industry since by partnering with NOSC, they are paving the way for other educational
entities into the same partnership effectively eliminating competition in that market and
creating a monopoly.
3. Is this a true partnering agreement? Discuss.
This is a true partnering agreement since it will benefit not only the ULV with the
discounts in the contract but also the supplier, NOSC, by continuous sales in their part.
Moreover, win - win situation for both parties will be observed since both of them will
benefit tremendously.
4. How should Mr. Ashby analyze the proposal?
Mr. Ashby should analyze the proposal by measuring the overall benefit of the
contract with NOSC throughout the term and then comparing it to the benefits factoring
not only the cost benefit but also the benefit of supplier relationship should they not
pursue the contract, or should they pursue their prior intention of pursuing one major
supplier and then two backup supplier. The proposal of NOSC is just an opportunity they
were presented and they must do their best to determine if it will be a good opportunity
for the company or a hoax.

VII. Learning
In order to get the best suppliers, one company must have 3 suppliers in hold - 1 major
and 2 backups. A bidding setup among 3 companies will give ULV at the care of Mr. Ashby to
have the buyer bargaining power in terms of cost. A great number of suppliers is good but is not
cost efficient, and in order to increase efficiency it is better to pool 3 suppliers and keep the list
of all suppliers as a backup in case of fortuitous events.
Also, every business decision has an effect due to its environmental factors such as
government rules and regulations.