Answer the multiple-choice questions from what you learned this week. You have the possibility to justify each answer and explain why you provided that answer.

Question 2

ElectricGear Inc., a leading manufacturer of consumer
electronics, is preparing to launch its latest smartphone model and is seeking
a reliable supplier for a new custom battery component. This battery is a
critical part of the smartphone, affecting both battery life and performance,
which are key selling points for ElectricGear’s new product.

ElectricGear’s demand for the battery component is expected
to be high initially, with potential fluctuations due to market response and
competition. Additionally, due to the rapid pace of technological advancement
in the consumer electronics sector, the battery specifications may change as
new features are added to the phone during the development phase. This could
lead to design modifications, making the project somewhat unpredictable.

PowerCell Corp., a specialized battery manufacturer, is
interested in securing the contract with ElectricGear. However, PowerCell is
aware of the risks involved:

·        
The price of lithium, a
key raw material for the battery, has shown volatility over recent months.
PowerCell is concerned that an increase in raw material costs could
significantly impact its profit margins if these costs aren’t factored into the
contract.

·        
As ElectricGear
finalizes the phone’s features, ElectricCell may need to make adjustments to
the battery specifications, which could increase production complexity and lead
to unanticipated costs.

·        
While ElectricGear
expects high demand, it acknowledges that actual sales may vary based on market
competition, meaning production volumes could fluctuate.

Based on
this information, answer the following questions:

Put yourself in the supplier’s shoes. Given the
characteristics of the supply, if you were PowerCell (the supplier), what form
of contract would you reasonably propose? 

A. fixed price

B. unit price

C. time and materials

D. cost plus

E. Cost plus with GMP

Put yourself in the buyer’s shoes. Given the characteristics
of the supply, if you were ElectricGear (the buyer), what form of contract
would you reasonably propose??

A. fixed price

B. unit price

C. time and materials

D. cost plus

E. Cost plus with GMP

Assuming the two proposed contract forms are different
between the buyer and the supplier, what form of contract might TechGear and
PowerCell find an agreement on?

A. fixed price

B. unit price

C. time and materials

D. cost plus

E. Cost plus with GMP

Question 3:

Briefly
justify your answers

Question 4:

AutoParts Ltd., a large automotive manufacturer, has a
long-term partnership with MetalWorks, a steel supplier that provides critical
components for AutoParts’ assembly line. The two companies have been in a
relationship for over five years, governed by a time and materials
(T&M) contract. Under this contract, AutoParts reimburses
MetalWorks for the labor and material costs associated with production, plus an
agreed-upon fee for profit.

Initially, the relationship between AutoParts and MetalWorks
was collaborative, with open communication and mutual trust. However, over
time, AutoParts has noticed delays in deliveries and inconsistent quality in
the steel components supplied by MetalWorks. This has led to production
slowdowns and increased rework costs for AutoParts, affecting their
manufacturing schedule.

AutoParts depends heavily on MetalWorks for specialized
steel components (over 80% of the demand for this category is bought from this
supplier), which limits their ability to easily switch suppliers. Additionally,
MetalWorks has invested in equipment specifically for AutoParts’ orders,
meaning they are also reliant on this relationship for a significant portion of
their business.

The T&M contract structure has led to concerns over cost
control. MetalWorks is reimbursed for costs incurred, so they have little
incentive to optimize or reduce expenses. AutoParts suspects that this may be
contributing to the quality and delivery issues, as MetalWorks is not under
pressure to improve efficiency or quality.

AutoParts has previously tried to address these issues by
discussing clearer quality standards and offering performance bonuses for
on-time, high-quality deliveries. However, these measures have not resolved the
underlying issues, and AutoParts is considering additional approaches.

Based on this information, identify the true
statements regarding the challenges in the relationship between AutoParts
and MetalWorks. Check all that apply.

a.) The T&M contract
may not incentivize MetalWorks to control costs or improve efficiency, as
AutoParts covers all material and labor expenses.

b.) Switching to a
fixed-price contract could immediately solve the quality and delivery issues.

c.) Adding operational collaboration elements, such as joint
planning sessions and regular performance reviews, could help AutoParts and
MetalWorks align on quality and delivery expectations.

d.) A cost-plus fee
contract would be a better alternative to T&M for this relationship.

e.) Online training from AutoParts’ quality engineers would
help MetalWorks improve their processes and meet the buyer’s quality standards.

Question 5.

Briefly justify your answers