Charlestown Chemical Products, Inc.

Muriatic acid purchasing case
B2B (Section A) Group : (11DM-005) Abhinav Mishra (11DM-007) Parvez Agaskar (11DM-014) Akhil Gupta (11DM-042) Nidhish Gupta (11DM-045) Hemank Chandak

45% HCL) .30 plants and 7000 employees Business .PAT of US$ 30 million Muriatic Acid .700 products . SO4 50 ppm max.56%.Stringent specification (35 APHA. chemical intermediaries and specialties .Chemical plant in Tulsa (Oklahoma) . HCL 31.Charlestown Chemical Products. Fe 1 ppm max. William Product .Director of Purchasing Todd Mr.Based in New Orleans.40% of sales consists of commodity chemical .20° Baume (31. Pb 1 ppm . Inc Company Background .2 ppm. As 0.Sales revenue US$ 600 million in 1974 .45 – 32.Commodity chemical. Louisiana .Tulsa plant uses for purification of NaCl solution fed to electrolytic cells .US and international market .

PAT of US$ 197.Sales revenue US$ 4.193 million .Buyer can object the price increase by written notice .118 million to US$ 4.If a bonafide offer from alternate US based source is produced which the seller cannot meet then both are free from contract .Charlestown purchases amounting to US$ 2.Mr.09 million to US$ 6.Lot of business since past 4 years (between 1970 to 1974) . Todd negotiated a contract with Puritan for 1974 for a price of US$ 48.74.Puritan purchases amounting to US$ 4.000 employees .Need to purchase as Charlestown discontinued in house production in Nov 1973 .75 per Ton .60 domestic and overseas plants Procurement of Muriatic Acid .Buyers requirement of 4.495 .000 tons and can be exceeded with consent of Seller .5 billion 1974 .Shipment from Springfield (Missouri) ~635 km or Dallas (Texas) ~413 km in Tank Trucks .Puritan Chemicals Company Background .Price can be revised on quarterly basis and written notice within 15 days of quarter .5 million Charlestown Chemical – Puritan Relationship .

Todd had following concerns regarding offer: Points to be considered for sourcing : .50 to be delivered by Tank Car on terms of 3.Mr. Tank Car 3. 1975 Jun 22nd.25 per ton effective from July 1.50 per ton plus switching problem required for other liquid inputs .If Tank Cars are used for transport then the modification required would cost US$ 2.Nearest supplier quoted US$ 75 which was competitive if acid was transported by Barge .Effect on business from Puritan Loose term “buyer’s requirements”* Mr. Meeting with Puritan: . Puritan revised price from US$ 48.000 tons as min quantity Lee also submitted trial sample which cleared the quality test* On Jun 17th. Todd had to reject this hike and he had to get a backup* offer as a replacement to Puritan 1. Lee Chemical offered price of US$ 55. Mr. Quality 2.Tank Cars schedule was inflexible Mr. Todd invites offer from Lee Chemical Company (jobber* for Muriatic acid) . Todd mention about alternate option .Charlestown always looked for long term and settled relationship . Must take condition First shipment with in 4 days of signing contract* On Jun 21st.High transportation cost for Acid .75 to US$ 66.Case Background On Jun 15th.

Must take condition of 3000 tons 3. Puritan revokes the price revision Plant Manager suggestion to drop Jobber : 1.Case Problem On Jun . Lee reduces offer price to US$ 52. Mr. Todd raised quality and consistency concerns as producer was still unknown and delivery by tank Car Counter price of US$ 47. Now Todd has to weigh both the suppliers as he could not reject Lee forefront & also a long term solution.50 per ton only with no change in terms and proposal for tank truck order for testing purpose which arrived on 28th June Mr.50 per ton along with problems of terms 23rd Lee’s Sample found to be good on Aug 10. Credit for Puritan price rescission given to Lee’s offer and giving them edge for 1976 negotiations On July 1st . Puritan is more reliable 2. To test the Tank truck sample 2. Lee’s supply won’t be sufficient .75. Puritan wanted contract to be signed on “entire requirement basis”* for the year 1976 with in 3 days of offer at US$48. Todd memo to plant manager: 1.

Louis.75 per ton – Tank Truck : $US 51.5 million in 1976 Points to be considered • Provision of price revision in contract • Loose terms about requirement • Need to develop an alternate source and not just recognize it • Further negotiation for 1976 contract as Charlestown has backup offer for an eligible vendor • Puritan is a customer • Puritan would be first choice if price and terms are negotiated • • • • Lee Chemical Company (Jobber) A jobber supposedly buying from National Chemical Corporation (St.75 • Delivery with Tank Trucks • Want to sign contract for 1976 “entire requirement basis” at US$ 48.Case Argument Puritan Chemicals • Reliable supplier and always Charlestown Chemicals first choice • Price rescission to US$ 48.25 per ton Points to be considered • High on price • Must buy conditions dropped but still doubt about capacity • National Chemicals can be a prospective vendor • Lee Chemicals can be used to negotiate very low prices from Puritan and vice versa .75 per ton • Increase in dollar volume purchase by US$ 0. ~635 Km) Initial hesitation about consistency in quality* Capacity might not be enough to fulfill the requirement Delivery by – Tank Car : $US 48.

If it is Lee’s source then direct purchase from source would reduce cost .National Chemicals can be developed as a vendor (if no conflict exist with Lee) .What Charlestown Chemicals can do? .Make Puritan drop prices using Lee’s offer and sign a contract (100% sourcing from Puritan) .Negotiate good pricing from Lee for Tank trucks which could match with Puritan and part purchase from Lee (Signing of contracts with both respectively) .Purchase from Lee would be a rare case unless Puritan fails to meet the prices which would be a rare case but it is possible if terms with Puritan could not be agreed upon .Tank Car option ruled out as it would need further development of plant facility .Puritan would be a main supplier but Lee is used just to develop a backup .It should not sign contract at currently mentioned terms .Then it will be a competition between Puritan and National Chemicals .


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