Examine the considerations in the positioning of aluminium in this matrix.
Supply Chain Management
Aluminum is widely used in the production of two-piece cans in the drinks and beverage industry. Your company, Allcan Manufacturing, is a major producer of two-piece cans, accounting for 25% of the world’s consumption.
Other key information:
– Aluminum accounts for 50% of the cost of a 2-piece can.
– Two-piece can-makers buy their aluminum from an ‘aluminum converter”. The role of a converter is to process aluminum into sheet form for use by can-makers.
– In the case of Allcan Manufacturing, the company self-contracts the aluminum via LME exchange. The nominated converter takes delivery of the raw aluminum and processes it into sheets before delivering to Allcan’s manufacturing sites around the world. Processing cost payable to the converter is being negotiated by Allcan’s group procurement.
– The company is adamant that the operating budget is kept.
– Aluminium is also traded by investors through financial instruments. This resulted in high volatility in its pricing.
(a) The management has been debating which quadrant should aluminium be placed in the Kraljic portfolio matrix. Examine the considerations in the positioning of aluminium in this matrix.
(b) Formulate the appropriate supply management strategies that the company can employ, taking into consideration your answer to part (a).
(c) Analyse the most effective purchasing contract for this commodity. Justify your answer.
