Culminating Assignment on Sourcing Flooring Products from Asian Countries by Touchtone Canada Ltd., Edmonton

Culminating Assignment on sourcing Flooring Products from Asian countries by Touchtone Canada Ltd., Edmonton

Submitted to:                                    Submitted by:

Gaetan Demers                                 Amanpreet Shergill

Executive Summary

Issues Identification

Operating Environment

Root Cause

Alternative

Recommendation

Implementation Plan

Monitor and Control

References

Executive Summary:

Touchtone Canada Ltd. (TTC) is the largest flooring solution company in the Edmonton, with over 4,000,000 square feet of stocked flooring. Company imports the flooring products from around the world and sell it to customers in Edmonton and surrounding areas. Company is the largest supplier and seller of flooring products in Edmonton and has got all ranges of product form Low end to high end products, which also includes Luxurious premium segment tiles.e.g. Versace, Tonino Lamborghini etc. There are 4 types of flooring products which are in demand, i.e. hardwood, laminates, tiles and carpet. As per recent trends the growth in construction industry is very slow and in Alberta it depends upon the oil market. The recent statement given by the Edmonton construction association that “as per increased competition and tough times in oil patch means some Alberta contractors will likely go bankrupt over the next few months”. So, the current construction market condition is not good for the company. TTC can’t market there premium and regular product in present situation because contractors now prefer low budget flooring products without compromise on quality and that’s a biggest challenge for TTC. Over the past five years, the industry suffered from weak economic growth brought on by the rapid decrease in commodity prices, a staple of the Canadian economy. Over the coming years, the continued fear of a housing bubble, combined with pervasively high household debt levels, is anticipated to hurt consumer spending on new housing market (ref. https://www.ibisworld.ca/industry-trends/market-research-ports/construction/homebuilders.html)

At present the company is purchasing the material from different manufacturers from US and Europe. The main customer of TTC are home builder, commercial project contractors, general contractors, design-build firms and single-family construction management companies acting as general contractors and builders and apart from these they also have other customers like Low-income single-family housing construction, Additions, alterations, reconstruction, maintenance and repair work of single-family homes contractors, Managing residential remodelling contractors, Handyman construction for residential buildings and Providing home improvement services (e.g. adding on, remodelling and renovating)

Constructionforecasts.ca release a report on Alberta construction industry, highlights of reports are as follows:

• Housing starts recovered significantly in 2017, buoyed by improved economic conditions and rebuilding in Fort McMurray.

• Housing starts recover to 33,300 units by 2021 and approach 37,000 units by 2027, but do not surpass the 40,600-unit peak reached in 2014.

• Combined new residential and renovation growth adds a modest 6 percent, or 4,500 jobs, restoring overall residential construction employment to 2014 levels by 2021, which remains below the 2014 peak.

• The 2018–2027 Construction and Maintenance Looking Forward scenario for Alberta anticipates another tepid year for labour markets due to continued declines in oil-and-gas-sector investment.

• Moderate employment growth is expected in 2019 and over the medium term, as non-residential building demands rise alongside the steady residential recovery already underway. Total employment recovers slowly, but workforce demands are more diverse and increasingly met by a local Alberta workforce

• Commercial and institutional building construction is expected to recover in 2018, following a slowdown in 2017, and rise steadily over the coming decade.

• on-residential employment is anticipated to decline by a further 5,200 jobs through 2019. A recovery adds back close to 9,000 jobs across the remainder of the scenario period.

• Alberta’s non-residential construction market will continue to diversify as non-oil-and-gas-sector demands rise, but the sector remains a prominent source of overall employment over the scenario period.

Report clearly shows that the construction market both for residential and Non-residential will be slow and growth will be steady and the job opportunities in construction industry will also decline which simultaneously reduces the purchasing power. Due to ongoing market trends TTC have to think about sourcing the flooring products from low cost manufacturing countries without compromising on quality and profit margin. TTC main aim is to get at least 20 % growth in sales by the end of year and 10 % reduction in cost in existing range of products. TTC has finalized 2 countries for sourcing their products, China & India but after comparing the quality, cost and availability of resources China is considered as best country for sourcing.

Issues Identification

Short Term- Tactical

•   Customers need new innovative products at low price with high quality  
•  Tactics, planning & Strategy on appointing intermediaries or global acquisition of products across the border
• Need to have total transparency on following points before final decision: -

• How to find the right supplier from sourcing country China
• Lack of knowledge & experience regarding negotiation with Asian countries
• Payment term options for Asian supplier
• How to overcome procurement and financial risk
• How to overcome language barrier and foreign culture

Long Term – Strategic

• Company wants to cull down total cost of ownership by 10%
•  Need to focus mainly on log term supplier relations & development  
• With existing sale company wants to increase 30% of annual sales by end of next year

Operating Environment

The Annual sales of $9 billion, Alberta's building products industry is one of the largest and strongest in the province and has earned a reputation for excellence, particularly in the area of cold-weather construction. Alberta’s building products and technologies sector is made up of over 1,200 listed companies employing more than 33,000 people who manufacture a variety of commodity and value-added products. Most of these companies are small to medium size businesses specializing in custom work and leading-edge technology. (ref  http://www.albertacanada.com/business/industries/bp-about-the-industry.aspx)