Supplier relationships

1. Case Study supplier relationships: Lucid v. Black Box. Respond to questions 1 through 4.

Case Study Lucid v. Black BoxLucid is an up-and-coming Chilean distributor of home entertainment technology. Black Box is a well-known television manufacturer headquartered in the United Kingdom. Black Box was interested in reaching out into the South American market to enhance its Supplier relationships and found Lucid to be sufficiently well connected to reach customers throughout the continent.

In January of 2008, Lucid signed an exclusive three-year contract to establish a distribution network for Black Box High Res flat screen televisions throughout South American using Black Box’s logo. The contract included the following provisions:Lucid has the exclusive right to sell Black Box’s High Res televisions and any updates to the High Res product line.Lucid must establish a distribution network within the agreed region.

Lucid must order 4,300 High Res televisions or £1,000,000.00 worth of product before January 1, 2011.If Lucid fails to meet these conditions, Black Box has the right to rely on other distributors within South America.

If either party is in breach of this contract, the nonbreaching party may terminate this agreement after three months’ notice.

In August 2008, Lucid placed an order for 1,000 High Res television sets, but the shipment was delayed for several months with no explanation from Black Box. Lucid was frustrated because Black Box’s delay in shipment caused Lucid to be late in supplying the televisions to the retailers with whom Lucid had contracted.

As a result, some of these retailers terminated their agreement with Lucid before the shipment finally arrived, leaving Lucid with a surplus of High Res televisions and in need of new retailers.

In June 2009, Lucid placed an order for 1,000 High Res television sets, which arrived shortly thereafter. Lucid discovered that a few retailers had High Res televisions with Black Box logos in stock, despite that they were not contracting with Lucid.

Lucid believed that Black Box must have contracted directly with these retailers, or perhaps relied on other distributors in violation of the exclusive contract. Either way, Lucid was frustrated that Black Box was competing with them in their agreed-upon distribution region

.In November 2009, Black Box released a new television, the 3-D Flat Screen, and began marketing this in South America. Lucid wrote an angry letter to Black Box because Lucid believed they had the exclusive right to market updates to the High Res product line. Black Box replied that the 3-D Flat Screen was in a distinct product category different from the High Res line, so the contract did not apply.

In June 2010, Lucid was still far from reaching the minimum order requirement in the contract, but felt this was due to the actions of Black Box. Then Black Box sent Lucid a termination letter that stated Lucid had failed to establish a distribution network to their satisfaction. Fed up with Black Box’s poor communication and feeling as though they had been treated unfairly, Lucid executives met with their legal advisors and asked what their options were.

The attorneys for Lucid say there are four options available:

Lucid can litigate, arbitrate, mediate, or negotiate with Black Box to resolve this dispute.

Case Questions on Supplier relationships

What are the sources of conflict between Lucid and Black Box?

Which dispute resolution procedure should Lucid use? Why?

If Lucid decides to negotiate with Black Box, what kind of negotiation tactics should be employed?How can Lucid and Black Box improve their supply chain relationship?

2. Research articles/videos on any aspect of the topic of ‘ Supplier Negotiations, contracts, dispute resolution, etc.’ Write a 1/2- 1 page summary and include your sources/sites.

3. Supply Chain Project Module 11:

SUPPLY CHAIN RELATIONSHIP MANAGEMENT Submit a draft report including at least, the following topics for your company:

How does your company develop supplier relationships?

What is the company’s Vendor/Supplier Code of Ethics? (include pdf)What is the company’s social compliance policy?

What does your company do to develop diverse supplier relationships?

What is the supplier audit process?  Labor and Human Rights policy?

Discuss the training your company provides to suppliers to build the relationship and better service from that supplier.VISUAL: SUPPLIER SCORECARD, CODE OF ETHICS, DIVERSITY STATEMENT, CERTS