What explanation should mike give his boss

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Reference no: EM132163413

Mike is a purchasing manager. His boss is a tough negotiator who got Nike Distribution to cut its shipping fees a few months ago. Nike supplies the company with a key material and charges a fixed shipping fee for each delivery plus a per ton wholesale price. Nike agreed not to raise its wholesale price and to cut the fixed shipping fee by 25%. Mike has been ordering under the new contract for several months. Today he got the following email from his boss:

I was just going over the Nike account. I was expecting that under the new contract our shipping costs would be down 25% compared to last year. Instead, they are only down about 14%. We’ve bought about the same amount of material from them. Why aren’t we getting the full 25% savings?

What explanation should Mike give his boss?

Reference no: EM132163413

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