Reference no: EM13983576

Tanglin Polymers Case Study

Tanglin polymers, headquartered in Hong Kong, is a large concern producing a variety of petroleum-based products used by a wide range of industrial consumers. It has over 30 manufacturing plants and refineries, located in Singapore, Indonesia, Vietnam, China, Australia, and New Zealand whose purchasing procedures have never been fully coordinated. This reflected a belief on the part of top management in the virtues of delegation and decentralisation. Managers of each operation were encouraged to operate as separate business units in most matters. Early in 2006, when it began to appear that the company would face increasing difficulty in securing raw materials, Mr. Patrick Ang, the CEO, created a new position to handle purchasing. Chan Kee Tong, a UCD MSc graduate with several years' experience in accounting control systems and optimisation techniques, was hired for this new position as Manager of Resource Procurement. Patrick Ang, consistent with his managerial style, gave Chan Kee Tong wide latitude in organising the job. To assist him,
Patrick Ang assigned Clara Ng as Chan Kee Tong's assistant. Clara Ng had never attended college, but had served the company for a number of years in a variety of capacities and knew most of the plant executives personally. Chan Kee Tong's appointment was announced through the usual formal channels, including a notice in the company newsletter.

One of Chan Kee Tong's first decisions was to begin centralising the company's purchasing procedures. As a first step he decided that each of the managers in the individual plants who was responsible for purchasing would be required to clear with the head office all purchase orders made in excess of $ HK 800,000. He felt that if he was to be successful in coordinating purchasing efforts for the company he would first have to gather accurate data on the range and cost of procurement efforts across the individual business units. As he explained it to Patrick Ang, this was the first step in implementing a computerised materials control system that would ultimately allow centralised purchasing. Individual plant managers were required to prepare contracts two weeks in advance and obtain approval prior to making any purchases for over $HK 800,000. The CEO presented Chan Kee Tong's proposals to the board of directors who approved the plan.

Although the company made purchases throughout the year, the beginning of its peak-buying season was only one month away at the time this new plan was adopted. Chan Kee Tong prepared a memo to be sent to the 30 managers with procurement responsibility. The text follows:

To: Purchasing Manager

From: Mr. Chan Kee Tong
Manager of Resource Procurement
Subject: Change of Purchasing Procedure

The board of directors has recently approved a change in purchasing procedures. Effective this date all procurement efforts in excess of $HK 800,000 will require approval of this office. Contracts should be submitted for approval two weeks prior to the date on which they are signed.

I am sure you will appreciate that this step is necessary to co-ordinate the purchasing requirement of the company in these times when we are facing increasing difficulty in procuring essential supplies. This procedure will provide the central office in Hong Kong with the information necessary to ensure that each business unit receives the optimum supply of materials. Withinthe next six to nine months we hope to have these requests computerised. This will permit us to order in larger quantities and to minimise price variations. In this way the interests of each business unit and the firm as a whole will be served.

c.c.: Manager, Accounting Services

Chan Kee Tong showed the memo to Clara Ng and invited her comments. She thought the letter was excellent, but suggested that since Chan Kee Tong had met only a few of the managers responsible for purchasing that he might like to visit them and take up the matter personally. Chan Kee Tong dismissed the idea because, as he said, it was critical that the new computer system to support the effort be brought on line as soon as possible. He indicated that he wanted Clara Ng to handle any enquiries about the memo while he worked with the systems people and the accounting department.

During the following weeks replies came in from all but a few locations. The following reply was typical:

To: Mr. Chan Kee Tong
Manager of resource procurement
From: Plant Manager
Subject: Resource Procurement

Your recent communication in regard to notifying the head office before making purchases in excess of @HK 800,000 has been received and implemented. The suggestion seems to be one which will, in the long run, result in economies of scale.

Chan Kee Tong focused his efforts on completing arrangements for the new control system (a $HK 5,000,000 contract for an information system). During the next two months, the head office received no notice from any unit that contracts were being negotiated. Executives in other departments who made frequent trips to the plants reported that operations were normal. Clara Ng indicated that she had no information to suggest that anything was remiss. Chan Kee Tong was very confused and wondered why so few approval requests were being sent to his office.

1. Why do you think so few requests were received? Explain your answer.

2. What would you have done differently?

3. What advice would you give Chan Kee Tong about how to now proceed with the project?