Callaway Electronics Company

Founded in the late 1970s by Phil Knight, a brilliant engineer, the Callaway Electronics Company has experienced tremendous growth as a producer of specialized components for the computer industry. But like many companies that have experienced this type of growth, Callaway has reached near-capacity conditions in its plant. Undertaking an expansion of new capacity will be at least sixteen months in the future. Known for its high quality and innovative approaches, Callaway has been forced to subcontract some work. Recently, one of the major computer manufacturers approached Callaway to design and build a subsystem. While capacity could be made available for almost all of the subsystem at the Callaway facility, it became apparent that one key component, a rather intricate and yet very inexpensive circuit board, would have to be subcontracted. The boards were under a government contract that would make Callaway a subcontractor. All of Callaway’s suppliers are also subcontractors. This would mean “tons of forms” to be sent to suppliers but would also give Callaway some leverage. Based on the projected value of the order, it would be necessary for each supplier to provide a cost and price breakdown on the SF 1491. From this breakdown, Callaway could estimate the reasonableness of the price.
Callaway engineers would provide the design to meet the customer’s specs, and, in turn, it would be supply management’s responsibility to handle the contracting aspect. Since the board is custom designed, it would require a fair degree of interaction between the potential suppliers and Callaway’s engineering staff. Cost was also’ a factor. Thus, there would have to be both an engineering evaluation with respect to technical aspects of the part as well as a cost analysis made.
Tom Cunningham, the supply manager of Callaway Electronics, concurred with