NEGOTIATIONS WITH GILPIN
Due to the long-standing relationship with Gilpin and concerns that losing the contract could push the company into bankruptcy, Mike allowed the company to submit a second proposal. In his meeting with Gerald Gilpin on February 19, Mike indicated: “If you want to keep the business, we need a solid proposal with specific recommendations that will reduce our costs substantially.”
Gilpin’s second proposal, received on March 25, provided an overall annual price reduction of $2.0 million and did not include specific information regarding measures to support the lower pricing. During the meeting between Mike and Gerald Gilpin when the second proposal was presented, Gerald confirmed that he intended to sell the business, although a buyer had not yet been identified.
THE DECISION
Under the existing circumstances, Mike felt compelled to recommend awarding the label supply contract to Stiles. He based his decision on the better pricing offered by Stiles and concerns regarding the financial stability of Gilpin. Mike toured the Stiles facility in Billings the first week of April and a procurement audit had been completed the following week. Brian Evans concurred with Mike’s recommendation, and in a meeting on April 19, Gerald Gilpin was notified that his company’s label supply contract would expire on May 30 and it would not be renewed.
Meantime, Mike had been working with Pat Schofield, project manager at Stiles, to create a transition plan. The major tasks were:
• Create rotogravure print cylinders for high-volume brands (total of 285 cylinders)—completion date May 15.
• Production trials and qualifications of labels at Stiles—to be completed May 22.
• Production line trials with high-volume brand labels at Rocky Plains (led by Rocky Plains Brewery Support Group)—completion June 15.
• Implement Stiles pricing in Rocky Plains ERP system—completion June 1.