Running head: Supply Management Course Case Studies

Case Studies

Case Study #1 – Krause Corporation
1. Should Steve recommend buying the pipe or making it?
Steve could go forward as planned and make the steel piping in house to save money by using the lowest cost lowest acceptable quality steel. This would be risky since the material would inferior and also the risk of toxic fumes being released due to bad welding etc. Buying the pipe already formed and of better quality would be the second option. In house machines did not provide the proper ability to make 20 foot sections of piping. This causes more seams to be welded and increases risk of toxicity. Labor cost would increase because of the extra welding and fabrication costs to include overhead costs. I would suggest Steve buying the piping. This would save on man hours to create and weld 8 foot pipes to needed length, ensure a better quality piping was procured, and show that priority was on safety with regard to hazardous materials being released through leaky seams etc. Although it appears that buying may be more costly, I wouldn’t suggest short cutting such a sensitive area.
Case Study #2 – SMC Turbines
1. What options are available to Greg through basic supplier management? What actions do you recommend?
Early supplier involvement is important in this case. Early matching of process and product is important. If the supplier can’t perform at the fixed price due to unforeseen issues, a cost plus type of contract must be considered. This would also hurt the current vendor’s chances of future business with the customer. Management can also use the prospect of future business to entice the supplier to keep price low after correcting the issues at hand. In the event the contract is a firm fixed contract the vendor costs could be high but are still responsible for correcting the issues. I would hold the vendor accountable on a cost plus basis until the original agreed on quality was established.
Case Study #3 – Crossing the Border
1. Identify and discuss the key issues in the case.
Some of the key issues include the truckers strike. Another issue is the corrupt actions of the customs agents trying to bribe the truckers for money. The maquiladora is not autonomous while TAI is. This causes issues such as loss of control, loss of client focus, lack of clarity, lack of cost control, and ineffective management. Other issues include customs officials using tougher tactics to coerce payments from bribes and also causing undue delays in delivery times. Being that such corruption was an ongoing issue I would suggest finding another supplier for the short-term and negotiating new deals with alternate suppliers for the long term. Another option that may be more expensive than trucking would be airlift delivery. This would help deliveries for just in time requests. However, this may or may not help with the corruption that exists. Another option would be to negotiate pickup by the maquiladora at the border which could prevent longer delivery times and have local national representation at the border.
Case Study #4 – Futronics Incorporated
1. Assume you are Steve Hassell. Prepare an analysis and report on this issue for presentation at the next program meeting.
Advantages of procuring external services:
1. The company could save about 6% on about 90% of its procurements by going externally. Savings could be around $49,000 annually if we calculate $900,000 x .90 x .06 = $48,600).
2. Going external would allow the store to get rid of its internal inventory. If this happens about $42,000 could be saved $140,000 x .30 = $42,000 per year.
4. Ordering costs can be reduced by contracting a long term supplier. Procurement man hours would be reduced as well.
5. Futronics has 42 stores. To save money on delivery and time, suppliers should be efficient and well stocked to support adequately.
Disadvantages of purchasing externally include:
1. Stopping internal services also takes away customer loyalty and quality by the store itself. Control of services offered may also suffer.
2. A contract may be a good idea but forces the store to be in an obligation for a specific period of time. Time must be spent is the right vendor selection and right contractual terms.
3. Discontinuing the store operations would demand a great deal of time and effort to restart in case something went wrong.
4. Unofficial inventories would need to be monitored so money is not wasted.
Managerial considerations:
5. Management must look ahead to figure out what the company’s future storage needs are.
6. Suppliers must understand what it is the company wants.
Steve needs must decide on the type of solicitation he will use. He can use negotiation, competitive bidding, or two-step bidding. I would recommend proposal negotiation. This leads to better service and price performance. When dealing with receiving operations a blanket order for the receiving and invoicing processes could be implemented. Proper audit trails could be established. Separation of duties must be implemented so that the same person is not ordering and receiving. If operations are discontinued the company must be able to accommodate elsewhere. Lastly, Futronics can test these ideas by experimenting with a small group of products before going full scale. This would allow for them to keep operations alive while testing an alternative for success or failure.