1. What are all the issues here, from both CJI’s and Heavey’s perspectives, that need to be researched by Mr. Ashby? CJ Industries (CJI)
The first issue presented for CJ Industries was its contract with Great Lakes. Though CJI had sufficient excess capacity to ramp up production on the parts to be supplied in the Great Lakes’ contract, they were not sure about the ability or willingness of Heavey Pumps to increase their production of the bilge pumps. The problem is that CJ Industries had signed the contract with Great Lakes prior to any discussions about ramping up production with Heavey Pumps.
The next issue for CJ Industries was whether or not Heavey Pumps could guarantee delivery of 50 pumps per month to one of the CJI warehouses. This had been the one item that had “slipped through the cracks” on the contract with Great Lakes, and it now loomed as something that could conceivably put the contract in jeopardy. This could have been prevented by developing and keeping quality and performance history records on Heavey Pumps – supplier evaluation.
Continuing, there were also at least two other bilge pump manufacturers, thus, CJ Industries may need to consider another supplier.
Finally, CJ Industries could make the bilge pumps in-house. CJ Industries had the capability to make this pump, but it would require an initial capital investment of approx. $500,000 according to the CJ Industries production manager, along with the clearing out of some space, and the hiring of three additional employees. With this capability, a cost benefit analysis should have been performed on the bilge pump – the make or buy decision is a strategic decision.
The first issue for Heavey Pumps is the contract awarded to CJI to supply Great Lakes.
Heavey Pumps was producing and delivering 50 bilge pumps at a time typically about every four to six months. However, the contract would increase demand for...