MEMORANDUM

Date: October 16, 2015

To: Mr. Kubler
From: Pedro Mendes, Production and Shipping Manager
Subject: New Production and Shipping Procedures
We are having some problems related with the suppliers and our customers arent
satisfied with our service. Often our products are sent late due to non compliance with
the schedule by suppliers. Moreover, this month some problems caused the delay of
shipping three orders of our regular corporate customers. Just take a look at how much
we spent this month with emergency delivery to cover the suppliers delays:
Emergency expedited Delivery Additional Costs
Delivery to customer X
$ 237.00
Delivery to customer Y
$ 252.00
Delivery to customer Z
$ 263.00
Expense to repair the computer system $ 422.00
Overtime labor
$ 458.00
$ 1,632.00
To save the extra money spent this month, I have been considering alternatives. First of
all, our technology team solved the problems with the computer viruses and we will not
have any problems in the coming months. They acquired a new software that provides
online secure data services with an excellent reputation in the market. Additionally, as
showed in the table above, the supplier was late with the products, and we had to sent
the final products to the costumers with additional costs of shipping. To solve this
problem, a new supplier was found. Textile Images, Inc. is more reliable and has a good
reputation in the market. Some points were defined with them:

The orders will be sent and they will have 10 days to produce and ship them to
our company
We will pay 50% of the manufacturer cost when we send the order
The other 50% will be paid just if they comply with the deadline

The Textile Images agreed with this aspects, but their price is 15 percent more
expensive than our regular supplier price. This difference may disappear with the
elimination of the additional delivery costs. And we will have a lower cost compared with
the cost of the actual month.

Costs with the actual supplier

Manufacturer cost for 500 t-shirts
Overtime labor
Emergency expedited delivery
Costs with Textile Images
Manufacturer cost for 500 t-shirts
Overtime labor
Normal delivery

$2,000.00
$458.00
$752.00
$3,210.00
$2,300.00
$280.00
$2,580.00

We can see that this strategy of paying a little more in the beginning to avoid extra costs
in the end is successful. Two of the largest clothing manufacturing of the United States,
PL Clothing and SETA Uniforms, adopted the same strategy and their sales are
increasing since then.
Please call me at Ext. 640 if you have questions. It would be better if we schedule a
meeting so I can explain personally the topics showed here. This new supplier is a good
opportunity to have better product quality and increase our sales with the satisfaction of
the customers. I have prepared a contract with the new conditions of payment. With
your approval before October 26, we can start working with them for the November
orders, avoiding more delays and bad situations with our customers.