Produce an analysis, synthesis, and evaluation of the Arden Food inc.,.

Produce an analysis, synthesis, and evaluation of the Arden Food inc.,.

ARDEN FOODS, INC.

Bill Jones, purchase analyst in the corporate purchasing office at Arden Foods, was in the
Process of reviewing corrugated cartons purchases. He had gathered statistics on purchases
From each plant and it was apparent that one supplier, Sartex, Inc., had managed to
Increase its share of total carton business dramatically over the past 20 years.

COMPANY BACKGROUND
Primarily a meat packer and producer of quality foods, Arden Foods operated l3 major plants
Across the country, each of which was a profit center and autonomous within general
Corporate policy. Each plant had its own production, sales, and administrative staff and did
almost all of its own purchasing. Total sales last year were close to $2.5 billion.

CORPORATE PURCHASING
The corporate purchasing staff had traditionally been very small at Arden Foods, consisting
of a manager, a buyer, and two secretaries. This staff was largely occupied with statistical
Work and did some contract purchasing, only of brand items common to all plants. The
Corporate manager of purchasing reported to the vice president of finance. When the former
Manager retired a year ago, the new manager who took over believed a more aggressive
stance for corporate purchasing was appropriate. One of his first moves was to visit all
Plant purchasing agents for a duration of two days. The plant purchasing agents pointed
out that the statistics traditionally kept at head office were primarily of interest to the
finance people, but were not particularly useful to them. As a result, Bill Jones, a recent
college graduate who had specialized in purchasing and materials management, was
"borrowed" by corporate purchasing from the largest plant's purchasing office. His job was to
See if he could not only help develop more meaningful statistics, but also to investigate
if corporate purchasing could provide better services to the plant locations.

CORRUGATED CARTON PURCHASES
Bill Jones believed, and his manager agreed, that corrugated cartons represented a
good sample area for him to start working on. Every plant purchased them and last
Year's total volume of purchases had been about $8.5 million. From the statistics and in talking
with buyers and purchasing agents, Bill Jones Found out that historically a large share of the
carton business had always gone to Sartex, Inc. Sartex was a large, well-known packaging
producer with plants from coast to coast. There was no obligation on the part of any plant
purchasing agent to favor Sartex. Actually, most plants had at least two suppliers and in some
cases three or four. It was simply that over the years Sartex had demonstrated they were
tops in service, quality, and competitiveness. The purchasing agent in Arden's largest plant who
had hired Bill originally, Explained the situation this way: As the Sartex share of Arden business
grew, a special relationship between us developed. Increases in the cost of liner board, wages,
or other expenses were not automatically passed on, but justifiable increases were negotiated
between us on an annual basis. There is a very good reason why Sartex has so much of my
business. They deserve it! In the last four years Sartex's share had increased 5 percent each
year and was about 80% of the total current corrugated business available from all Arden
Plants. Bill Jones forecast that if this trend continued, Sartex might become a single source.
Bill Jones knew that each plant purchasing agent believed strongly in having full control over his
or her corrugated purchases. As one explained: Corrugated is one product we have to have
flexibility in and we must be able to deal directly with the local Sartex plant producing it. It is a
short notice business and sometimes they have to turn cartwheels to accommodate the last
minute changes so common in our Product line. Moreover, every plant has its own special
products and requirements. The Fact that all large corrugated producers are themselves
decentralized with plants all over the country reinforces the need to be able to do corrugated
business locally. When Bill Jones had started this assignment, he had hoped that something
obvious would present itself, allowing him to make some useful suggestions for improvements.
Now it appeared that all plant purchasing agents were quite satisfied with the status quo,
and that Arden Foods was lucky to have such a good source in Sartex. He, therefore,
wondered how this information could be useful to corporate purchasing in the plants. Was
there an opportunity here for Arden Foods, or was his first assignment a bust and should he
turn to something else?