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CASE STUDY: GOODHAIR INC.

Goodhair Inc. is a manufacturer of hair care products,including shampoos, conditioners, and hair gels. The company,located in Khobar, bottles the shampoos and other various hairproducts in their manufacturing plant, but sources the content froma number of chemical suppliers. The company has historicallycompeted on cost and has used competitive bidding to selectsuppliers and award yearlong contracts. The Director of Sourcing,Akbar Shah, has managed the competitive bid process for the past 10years, having moved up the ranks from purchasing. He wasparticularly proud that the company was cost-competitive in itsmarket segment.

One recent day the president of the company, Fadi Adnan,called for a meeting with Mr. Akbar Shah. Akbar Shah could tellfrom the tone of Fadi Adnan’s message that the meeting would beaccompanied by less- than-stellar news. As Akbar Shah took theinfamous ride up the wood-paneled elevator with green marble floorsto the top of their office building, he contemplated what he couldhave possibly done wrong. He had followed the same type of supplierbidding process for years and the company was doing wellfinancially. He was anxious to hear what Fadi Adnan had tosay.

Akbar Shah entered Fadi Adnan’s vast office, a roomhighlighted by ceiling-to-floor windows. He could see Mr. FadiAdnan sitting at the end of the long, dark wooden table, with eachone of his two aides accompanying him on each side. The man on theright was Bader Sadek and the woman on the left was Mariam Ghadeer;neither were taken lightly within the company. Akbar Shah couldalways tell when it was going to be a bad day.

‘‘Darn hippies,’’ Fadi Adnan rumbled. ‘‘Bader Sadek and MariamGhadeer have some troubling news. This swing towards animal rightsand ‘quality goods’ is about to cost me a lot of money,’’ FadiAdnan continued, making mocking ‘‘bunny ears’’ with his bulbousindex and middle fingers. ‘‘Apparently market trends are changingagain and not for the better.’’ Fadi Adnan continued to explainthat there was going to be a change in the competitive strategy ofthe firm. The competition in the hair care market had become fierceand there was greater focus on quality. Specifically, the recenttrend in animal rights and natural, organic products meant ensuringthat the shampoo content did not go through animal testing and thatit was ensured to be hypoallergenic. The current products wereproduced to compete for price and did not agree with the newdemands. Fadi Adnan wanted to see products on the retail shelf withthis quality standard as soon as possible. ‘‘Do it,’’ Fadi Adnancontinued and sat back down. This concluded the meeting. LuckilyMr. Akbar Shah had an easy exit as he had only gotten one foot inthe door before his task was demanded.

Akbar Shah was rather pleased with his new detail as he caredgreatly for nature and had always refrained from purchasing his owncompany’s products due to their lack of consideration for both theindividual and the environment. However, Akbar Shah was nowconfronted with a problem. His current suppliers offered the lowestcost in the business and would likely not be able to provide theneeded quality assurances. His expertise had been in procuring theleast expensive ingredients available and he did not know where tobegin changing his sourcing practices.

CASE QUESTIONS

1. Identify the steps that Akbar Shah should take to solve hisproblem.

2. Should Akbar Shah ask for the required changes from thecurrent suppliers? If they do not comply, should he solicit newsuppliers? How might he do this?

3. Should Akbar Shah go through competitive bids in thefuture? If so, should he do it for all purchased products or justsome products?

4. What are the differences when looking for suppliers to meetcost standards versus quality standards?