Unifine Richardson

Unifine Richardson

Summary:

Unifine Richardson is a manufacturing company who produces a variety of food products to restaurants, caterers, chain stores, artisans, and industrial food manufacturers. Unifine Richardon's main honey supplier, Herrington Honey, purchases unpasteurized honey from a variety of farmers and international brokers, pasteurizes the honey and sells it in bulk to manufacturer's and distributor's. Unifine Richarson purchases approximately one million pounds of honey annually, representing three to five percent of the firm's total expenditures. Unifine Richardson transforms the bulk honey into smaller packages, each customized to customer specifications. Eighty-eight percent of Unifine's sales are to a large retailer for their dipping sauces, and a key performance indicator for Unifine is product consistency. Rob Pincome who is the purchasing manager at Unifine Richarson has received information from Harrington Honey regarding new reports from the Canadian Food Inspection Agency of traces of chloramphenicol in Chinese honey. This is particularly concerning for Rob as almost all of Unifine's honey purchases are a 50/50 blend of Chinese and Canadian honey. Chloramphenicol was an antibiotic that had been approved for human use in Canada, but only as a last resort drug treatment for patients facing life threatening diseases or bacterial infections. Chloramphenicol has been banned for use in food-producing animals as in some cases it was found to be associated with aplastic anemia. Recently, the CFIA had modified the importation regulations for pre-packaged and bulk honey from Greece, China and Argentina. Because of China's lack of controls over veterinary drugs, a ban on all animal products from China was issued. As a result, its honey exports would be rejected in Canada and Europe until more reliable testing measures for the banned substance were available. Until reliable measures for testing are developed Harrington Honey has decided to discontinue the use of Chinese honey all together leaving Rob Pincome one month's worth of inventory and in a significant bind for the supply of honey. Alternatively he has three options:

Options:

Blend: Cost: Markup: Selling Price:

50/50 Chinese Canadian $1.08/lb. 15% $1.242

100 Canadian $1.75/lb. 15% $2.013

100 American $1.74/lb. 15% $2.001

50/50 Canadian- Argentinean $1.42/lb. 15% $1.633

*Proposed 100 Canadian Blend at 12% Markup = $1.96

As per the above table, the options available to Rob Pincome are to alternatively use a 100% Canadian Blend, 100% American Blend or a 50/50 Canadian-Argentinean Blend. Because Rob's largest customer, who is known for having tough standards, would undoubtedly want the closest substitution in order to preserve the taste of the honey compared to the current blend, Rob has to consider other factors