Importance of material supply budget
Refer to the City of Granston Case 11-3 at the end of Chapter 11. Using the ‘Current Year Q-3’ data found in Exhibit 2 and Exhibit 3, create a project supply and materials budget based on the information in the case. Your budget must include a one page explanation on the importance of a materials supply budget and the impact of the budget on the supply organization.
This will be submitted in a MS Word Document, with title page. Your paper must be formatted according to APA style outlined in the approved APA style guide and should cite at least two scholarly sources in addition to the textbook.
City of Granston*
On November 25, Ted Barton, the new purchasing man- ager at the City of Granston in Canada, was considering a contract extension for two years for the supply of mineral aggregates (rock, sand, and gravel). The contract had to be signed within a week.
CITY OF GRANSTON
The City of Granston had an annual budget of $700 mil- lion and employed 9,000 people. There had been a steady population increase over the past two decades. The purchasing department consisted of three support staff, six buyers, and a manager. City budgets were usually adjusted annually to cover the cost of inflation.
THE AGGREGATE INDUSTRY
The city purchased about $3 million worth of aggregates for road construction and repairs and construction projects. The local mineral aggregate sector consisted of three
The scheduling group, for a number of years, had used a modified MRP system. When Art discussed the new pack- age idea with them, they told him that if the new product and the older one were to be packaged in the same package, a total package requirement of about 40,000 units would make sense and that the master production schedule could easily be adjusted to run the two products in conjunction.
Art also discussed the situation with the resin supplier, who indicated that his quote to Bert Wood had been based on the lot size of 30,000 packages, but that a 40,000 unit lot would fall into a new price bracket 5 percent lower than the originally quoted price.
Art wondered just what effect all of this new information would have on his original proposal. He knew that Bert Wood had been adamant about his $0.27 quote. Bert Wood had said, “I know I am classified as a minority supplier. But I don’t want to hide behind that fact. I want no special favors from any of my customers. Nor am I in a position to make special gifts to anyone else. I have had to borrow at what I consider to be ridiculously high interest rates to buy this company. Now I have to make it payoff. My $0.27 price is as low as I can go, as far as I can see.”
major extracting and processing companies—Lamoulin, Richmond, and Atlantic—and several smaller ones. Lamoulin and Atlantic owned the two dominant concrete production facilities.
The local aggregate industry was near capacity with major construction projects underway and increased demand in export markets.
AGGREGATE PURCHASING
A request for quotation had been issued in 2000 for a three-year agreement for the supply of aggregates, with prices firm for the first three years. If the parties agreed, a two-year option was available, with prices being subject to inflation.
Lamoulin and Richmond were the only two bidders and each received about half of the total contract with each bidder quoting for separate components of the total aggregates contract (see Exhibit 1).
*This case was prepared by Larry Berglund, CPP, MBA, and Collin Ashton, CPP, December 2003.
(INF 336 320)
INF 336. McGraw-Hill Create. VitalBook file.
The citation provided is a guideline. Please check each citation for accuracy before use.
……………….Answer Preview…………………
It is important for an organization to come up with a budget before starting a project. The budget is usually created by the organization finance department. It will be abnormal for a project to begin without a budget. This is based on the fact that the budget has a lot of benefits. One of the benefits of coming up with the material supply budget is that it sets the organization performance standards. Through budgeting, the organization is able to determine the quantity of materials needed to perform a given task. This will make the management to come up with performance standards that will ensure that the materials bought…………………
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