Cox Chemical, Inc.

SUBMITTED BY GROUP 10 (B2B – 1)

AMAN JAIN 024006
PARICHITA RAGHAV 024033
PULKIT DHANAVA 024036
RONIT GUHA ROY 024042
Important Facts

 Cox Chemical Products, Inc. involved in production of commodity chemicals, chemical

intermediaries and specialities

 Cox had an established business relationship with Puritan Chemicals primarily for procurement of
muriatic acid for its Tulsa plant

 Puritan was contractually single source of supply of muriatic acid for Cox for the year 2015

 Reasons for working with Puritan were price competitiveness of muriatic acid, proximity to Cox’s
Tulsa plant and Puritan being customer of various commodity chemicals
Key Issues
 June 2015 - Puritan increased price of muriatic acid from $97.5 per ton to $132.5 per ton
 Puritan was single source of supply of muriatic acid at competitive price since most of the other
suppliers were far from Tulsa plant
 Another supplier Lee Chemical Company, offered to supply the required product at a competitive
price of $111 per ton but through tank cars for 3000 tons per year on must-take basis initially, which
could have added infrastructure cost of $5 per ton
 Ambiguity with “Buyer’s requirement” clause where as per Puritan, they were meant to be exclusive
supplier of muriatic acid for Tulsa plant’s requirement but for Cox, it was only for requirement of
acid from Puritan rather than plant’s total requirement
 Later, through effective negotiations, Lee agreed to finalise offer price at $102.5 per ton through tank
trucks along with partial requirement contract of less than 3000 tons
 Also, Puritan later reduced offer price to $97.5 per ton for year 2016 on entire-requirement basis
Possible alternatives

 Option 1 – Signing contract with Lee Chemical company for supply of muriatic acid at $102.5 per
ton by tank trucks on “as-per-requirement basis”

 Option 2 – Signing exclusive contract with Puritan for supply of muriatic acid at $97.5 per ton on
“entire-requirement basis” as offered for year 2016

 Option 3 – Issuing tender to all potential suppliers to submit bids for supply of muriatic acid as per
plant’s technical requirement for long term, say 5 years
Evaluation of alternatives
Alternative
Option 1 - Contract with Lee
Chemical
Option 2 – Signing exclusive
contract with Puritan
Option 3 – Issuing tender to all
potential suppliers
Evaluation
Competitive offer at $102.5 per ton as Cox was in position to bear $10-15 per
ton extra from earlier purchase price of $97.5 per ton. Acid was tested and
technically compliant. Also available to be transported through tank trucks,
which was in line with unloading facilities at Tulsa plant
Purchase price offered was same as of earlier price of $97.5 per ton but with
exclusivity clause on “entire-requirement basis” which could restrict Cox to look
at other suppliers, if required
Though this could have helped in possible best price discovery through
competitive bidding process, it could have been time consuming
Recommendation

 Option 1 – Signing contract with Lee Chemical company for supply of muriatic acid at $102.5 per
ton by tank trucks on “as-per-requirement basis” as-

(i) the acid was technically compliant to plant’s requirement and unloading facilities

(ii) price was competitive and within the budget bandwidth of the Cox

(iii) Flexibility to switch to other supplier in case of any possible eventuality as there was no must-take
condition in final offer
Thank You!!!