Issue:

The core issue Unifine Richardson (UR) faces is their sole honey supplier, Harrington
Honey (HH), will run out of Chinese honey in a little over a month because the Canadian
Food Inspection Agency (CFIA) recently found traces of chloramphenicol (a banned
antibiotic associated with causing a sometimes-fatal blood disorder) and rejected the
contaminated honey. Until China finds a way to detect contaminated honey, Unifine
Richardson cannot sell any of its current Chinese-Canadian blend. Because of the CFIAs
findings, the global supply of honey will decrease by 20%, thus causing an increase in
price. Harrington Honey will not be able to maintain the honey stream.
The price of honey, globally, has already been on a steady incline (Exhibit 2) and the
shortage will further intensify this trend. Another issue UR is facing is that there is also an
uneven relationship between the two companies. Harrington Honey is well aware of this
and is using this to its advantage by not offering better choices to UR. Additionally, 80%
of URs honey operations are tied to one major customer, and this customer has tough
standards. As stated earlier, Unifine Richardson has approximately one month of honey
inventory left and it has to make a decision based on the available options presented by
Harrington Honey.

Analysis:
Unifine Richardson buys about one million pounds of honey annually. The world supply of
honey has decreased by about 20%. Currently, the company pays $1.08 per pound for the
Chinese-Canadian blend honey. Harrington Honey provided UR with three alternative
sources of honey:
1. Canadian-Argentinean blend
a. Cost: $1.42 million (a 31% cost increase).
b. Customers may reject because flavor is significantly different from current
honey blend.
c. Argentina is worlds third-largest honey supplier.
2. 100% Canadian honey
a. Cost: $1.75 million (a 62% cost increase).
3. 100% American honey
a. Cost: $1.79 million (a 66% cost increase).
b. Worlds second-largest honey supplier.
These options all pose very significant cost increases for Unifine Richardson. Considering
the strict timeframe that UR is under, it will not be possible to establish a new relationship
with another supplier; however, UR does have the leverage with HH to negotiate on the
prices they are currently being offered. HH suggested UR consider a long-term contract
to lock down the price, which suggests UR is a high volume customer that HH does not
want to lose.

Recommendation:

Based on the immediate options available, we would not recommend going with the
50/50 honey blend. There is a question about the taste of the Argentinean honey. UR
could face expensive recalls; U.S.-imposed dumping fees, loss of reputation and a failure
to meet customer expectations.
The 100% U.S. honey is also not a viable option because it is the most expensive honey,
and there could be additional issues such as unpredictable delivery, transportation
delays, shipping costs, etc.
The Canadian honey is the best immediately available option, considering the limited
timeframe the purchasing manager has to make a decision. Because UR is located in
Ontario, perhaps there will be a reduction in fees or transportation costs.
Concurrently, Pincombe should also contact his finance partner at UR for analysis on price
alternatives it could offer its largest customer, based on the current prices HH quoted
them. Based on these findings, finance could recommend Alternative 6 (alternative
shown in appendix).
Considering that it might take 15 months to eliminate the CFIA issue of chloramphenicol
traces in the beehives, UR should contact HH and advise that they will consider
continuing business and signing a contract with them if they will negotiate on price. UR
should suggest that HH offer a 20% discount on price (based on data provided by the
finance department) and they will sign a contract with them. If they cannot come to an
acceptable agreement, UR should advise HH that they will continue to purchase from
them in the immediate future, but will be looking for alternative suppliers.
Additionally, a dual-supply strategy should be considered so that the company can use a
hedging tactic to minimize the cost. Unifine Richardson only used one supply source,
Harrington Honey. Depending so heavily on one supplier left the company vulnerable to
risk. The best supply chains identify structural shifts, sometimes before they occur, by
capturing the latest data, filtering out noise, and tracking key patterns. They then
relocate facilities, change sources of supplies, and, if possible, outsource manufacturing
(Lee, 2004). The company needs to look for alternative suppliers that acquire their honey
from Mexico. The source location will not have a significant impact in their operations and
UR will keep its delivery on time.
It is advisable that the UR purchasing manager contact its large customer to explain the
current price increase, and understand what their needs are. The honey is primarily used
as a dipping sauce for chicken wings. How critical is this dipping sauce to this customer to
justify the 60% total increase? If the customer wants to maintain the honey purchases, or
decides to cancel, UR needs to know ASAP. This customer represents 80% of their honey
sales and it is possible that they might want replace the honey for a substitute product.
For this customer, the honey could be a noncritical item, and might be replaced with
salad dressings, which UR has the ability to offer. By creating alignment and exchanging
information and knowledge freely with vendors and customers, (Lee, 2004) UR could
possibly avoid huge losses.
Provided in the appendix is the information summary that UR should provide to their
customer to assist them in making a decision on which honey they would like to use as an

alternative. UR should be upfront with the customer on the negotiation they are trying to
obtain from HH and advise that UR will be taking a 15% reduction in profits in order to
help absorb some of the cost to keep them as a customer. UR can also advise that its
client could perhaps make a percentage increase in its chicken pieces or perhaps charge
a nominal fee of say $0.25 for sauce to help offset the cost. By empowering his largest
client to make a strategic decision that greatly affects both of them, he will gain respect
and perhaps more loyalty. Also, UR will now be able to place an order and contract with
HH for the correct products (based on input from his largest client) and not be stuck with
perhaps a product that its client does not want and risk losing them.
As a long-term objective, UR should work on obtaining a more sustainable supply chain to
prevent future disruption in supply and profit declines.

The Triple-A Supply Chain. Lee, Hau L. Harvard Business Review. Oct 2004, Vol. 82 Issue 10, p102-112.

APPENDIX:

SCOR MODEL

Large Customer 80%

FARMERS

Harrington
Honey

Unified
Richardson

Others

International
Brokers
In house