Lamp Shade Imports (Scenario)
The ABC Lamp Company is an SME that designs and manufactures high quality lamps that are sold in high-end furniture stores across Canada and the United States. ABC imports lamp shades from Asia where costs are lower than in North America. ABC has received a large order from a hotel chain that wants to purchase 5,000 lamps in the next three months, and ABC will need to import corresponding lamp shades. ABC recently ended a relationship with a Chinese supplier due to the poor quality of shades that were shipped. ABC managers are seeking a new Asian supplier that can fill the hotel lamp order.
-In order to eliminate the need for the Asian supplier to borrow money, what could ABC do?
A) renegotiate with the hotel chain to try to get them to accept a smaller order size of lamps
B) advise the shade manufacturer that it is okay to use lower-cost lamp shade material
C) ask the hotel chain if they are willing to extend the manufacturing time specified in their purchase agreement
D) make incremental payments to the supplier as lamp shades are shipped to ABC

Question

Quizplus · Accepted Answer

Making incremental payments to the supplier as lamp shades are shipped to ABC can help the Asian supplier avoid borrowing money, as they will receive payments for each shipment. This also allows ABC to monitor the quality of the lamp shades and ensure that they meet their standards before making the next payment. Renegotiating with the hotel chain or using lower-cost materials may compromise the quality of the final product and damage ABC's reputation, while extending the manufacturing time may not be feasible if the hotel chain has a tight deadline.