Sabor Corporation

Case 2-2: Sabor Inc.

• Situation:

• RS is a Vice president of supply chain management at Sabor Inc.
• RS had become concerned about the shortage of Maraconil.
• Three suppliers of Sabor Inc. advised RS to sign long-term contract.
• RS was trying to assess the advisability of such commitment.

• Sabor Inc.(brief description about company)

• Sabor produce high-quality consumer and industrialized air-conditioning.
• An extensive network of independent and company-owned installation and sales center serviced customers throughout the North American market.
• Total company sales last year was $ 800 million.

• Air filtration and Marconil

• For decade, Sabor Inc. had sold air humidification and air filtration units along with its prime units in air heating and cooling.
• Until three years ago, air filtration had accounted for about 7 percent of total corporate sales and had been sold primarily as add-ons to a new air cooling/heating system.
• With the advent of marconil-----→air filtration had started to increase significantly as a percentage of total sales.
• Marconil had a range of unique properties of high interest to a variety of industries.
• In the case of air filtration, marconil could be transformed into a thin, very light, and extremely fine meshlike sponge material capable of filtering extremely small particle.
• Because of sensitivity to air quality and increasing number of people with asthma and allergies-----→the new Sabor filter became popular(not only with new Sabor air system installation but also as retrofits in older air conditioning and heating systems)
• Marconil filters had to replace every six month, guaranteeing combined sales volume of filters for years to come, compared to electronic air cleaners that cost about three times as much to install and required monthly cleaning.
• When marconil combined with an ultraviolet light unit, a marconil air cleaning system was considered a huge leap forward in air treatment.
• Manufacturing cost marconil= 28% selling price.

• BASIC ISSUES

1. Differences between marketing forecast and sales of marconil as following:

                                  Marketing forecast           Real Sales

• First year        $ 1 million                           $ 11 million
• Second year   $ 15 million                         $ 29 million
• Third year       $ 40 million                         $ 72 million
•  Also the marketing department expected sales growth to level off over the next three years to a rate of 20 percent per year.

1. Strategy of sourcing ( Sabor perform multiple sourcing strategy)

There were three supplier for Sabor Inc.:

• Built Chemical

• Long time supplier of paints and adhesives to Sabor.
• Large, diversified, innovative chemical producer that held marconil patent.

• Warton Inc.

• Produced marconil under license from Built chemical.
• Manufactured a variety of chemical products in the textile and automotive fields.

• G.K. Specialties

• Smaller company than Built and Warton Inc.
• Produced marconil under license for its application in aerospace and the military.
• But which had some excess capacity that it sold on the open market.

                                 All of them sold marconil with the same prices, which had increased over the past                                                                                                                                                                                       three years. The actual volumes purchased by Sabor illustrates in the following graph: