CJ Industries

1. Mr. Ashby needs to research a number of issues regarding CJI’s newest contact with Great Lakes. Issues arise mainly due to the lack of communication CJI had with its supplier prior to signing the contract.
With the increase in demand, it is unsure whether Heavey Pumps could guarantee delivery of 50 pumps per month. Because previous deliveries were sporadic, no record on the quality and performance was kept which made it hard to judge Heavey Pumps’ reliability. Another issue is whether Heavey Pumps is willing to increase their production for CJI.
CJI can produce the bilge pump in house; however, it would be a difficult start up with limited time until the start of Great Lake’s contract. First, an initial capital investment of approximately $500,000 is required in addition to three additional employers and clearing of some space. Although the production manager reassured that CJI is capable to make the pumps, with the lack of experience, this might not be the best investment for CJI.
CJI can choose to have a contract with other bilge pump manufacturers. It is important to consider the distance between the manufacturers and CJI warehouses. Since it is a new manufacturer, it is hard to measure the quality of the pump and extra delivery costs. This potentially can jeopardize the contract with Great Lakes.

2. There are three alternative solution for CJI, continue to use Heavey Pumps to supply pumps, make the pumps in house, and consider a different supplier.
An advantage of continue to use Heavey Pumps is that CJI already had a long history of working with Heavey Pumps. On the other side, whether Heavey Pumps was able to guarantee delivery of 50 pumps per month is a major issue. It is a risk since no performance records had kept for the past years; it is hard to evaluate the company.
Another solution is to produce the pumps in house. However, CJI lack the expertise which can lead to increase costs. Also, hiring new employees requires the time to train and learn the new processes which can delay the production. With in-house production, CJI has full control on production which lowers the risk.
Contracting with a different supplier might be able to solve the problem temporary since the supplier can provide the 50 pumps. However, the distance between the manufacturer and CJI warehouses can be proven problematic. Not only will it increase the risk of late delivery, this will also increase the delivery costs. Also, it is risky to sign a contract with a new supplier with minimum record on performance or quality.

3. CJI can assure continued contract compliance and additional contract business from Great Lakes in the future by keeping communication with its suppliers prior to signing the contract. This will eliminate risk regarding whether the number of pumps can be produced by contract time. Also keeping record of the pumps manufacturers would be important for evaluation will ensure the quality of the pumps.