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PSM (En) DH48FTC01 GW4-G6

Eastern Pharmaceuticals Ltd. faces a conflict between its Marketing and Purchasing departments regarding supplier relationships, particularly concerning an $88,000 packaging contract with Lucas Paper & Box Company. The lack of clarity in authority, operational inefficiencies, and poor communication have exacerbated the situation, leading to inter-department tension. Proposed solutions include scheduling meetings to address disagreements, establishing clear policies on responsibilities, and setting up monthly interdepartmental meetings to enhance collaboration.

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14 views2 pages

PSM (En) DH48FTC01 GW4-G6

Eastern Pharmaceuticals Ltd. faces a conflict between its Marketing and Purchasing departments regarding supplier relationships, particularly concerning an $88,000 packaging contract with Lucas Paper & Box Company. The lack of clarity in authority, operational inefficiencies, and poor communication have exacerbated the situation, leading to inter-department tension. Proposed solutions include scheduling meetings to address disagreements, establishing clear policies on responsibilities, and setting up monthly interdepartmental meetings to enhance collaboration.

Uploaded by

quangpham.31221020586
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Member Student ID Contribution (%)

Pham Trinh Xuan Kha 31221024753 100

Nguyen Ngoc Phuong Linh 31221024437 100

Pham Huynh Minh Quang 31221020586 100

Tran Ngoc Quynh Trang 31221021059 100

Case 4.2. Eastern Pharmaceuticals Ltd.

Case summary:

Eastern Pharmaceuticals is a pharmaceutical company which is located in Seattle and


has a revenue of approximately $150 million dollars from the sale of prescription
drugs and both prescription and non-prescription medication. The business model
heavily depends on providing drug samples to doctors, who then prescribe the
company’s products to patients.
In this case, there is a primary issue which is the conflict between the Marketing and
Purchasing department concerning the supplier relationships and procurement
responsibilities. This conflict emerged specifically around an $88,000 packaging
contract that Lucas Paper & Box Company has with Eastern.
The specific incident that caused this conflict to occur derives from a Marketing
employee, Shannon Bailey, who promised Lucas Paper & Box 100% of a contract
filling order while Andrew Baines from the Purchasing department had planned only
25% of the business to Lucas. This created inter-department tension as well as
supplier uncertainty.

Case problem:

- There is no clarity in the divisions of authority between the Marketing and


Purchasing department as it relates to supplier decisions. The Marketing department
has control over promotional budget, which are set at $34 million dollars and equal to
22% of sales. However, there are still questions regarding their authority to commit to
supplier’s items which require plant packaging.
- Operational efficiencies arising from Marketing’s decisions. The Marketing’s
decisions do not consider inventory stock levels, since they incur charges on samples
once shipped, not while in storage. This results in surplus resources and spaces being
wasted.
- Lack of coordination between departments. The need for quick turnaround of the
Marketing department often conflicts with the Purchasing department’s responsibility
to ensure the best value through competitive bidding and proper selection of suppliers.
- Lack of communication between departments. Marketing has started to disregard the
Purchasing department and in turn started to create and deal with other departments
and suppliers, which has led to further confusion and possibly compromised the
company practices.

Scenario: As Andrew Baines, what action would you take to solve the problems
in the purchasing-marketing relationship?

Since the root cause of Eastern's purchasing-marketing problem was due to poor
communication between these two departments, therefore, if I were Andrew Baines,
the first action I would take is scheduling a meeting with Shannon Bailey to discover
and tackle the current disagreements. Having a conference would help them have a
better understanding of each other's perspective. As stated in the case, there were
contradictory priorities between the purchasing and marketing departments. While
Andrew only wanted to offer Lucas 25 percent of the contract filling as his goal is to
optimize costs and rely the least on one supplier, Shannon preferred the long-term
procurement strategy without considering the risks. To address this, I would propose
that Eastern merely offer from 25 to 50 percent of the contract filling in order to
decrease the risk of depending on one vendor and test the efficiency of Lucas. This
percentage of the contract filling might be increased in the next year if Eastern
achieves better business performance according to the cooperation with Lucas.

As claimed by Matt Robert, Andrew's boss, final selection of sources for any
purchased items that had to be packaged by the plant had always been the duty of the
purchasing department. However, the marketing department still had significant
responsibility during this phase since they created the deal with the vendor. This led to
a vague border in the responsibilities of purchasing and marketing departments. Thus,
the second action to implement is having a clear policy statement that outlines the
responsibility scope of each department in terms of selecting suppliers, controlling
contracts and managing inventory to avoid unexpected conflicts.

Lasly, Eastern could set up monthly interdepartmental meetings to increase synergy


and observe the progress. These meetings would provide a platform for addressing
any emerging issues, ensuring alignment between departments, and fostering a more
collaborative decision-making process.

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