Muenster Pump Case Analysis

Topics: Management, Outsourcing, Economic cost Pages: 3 (899 words) Published: April 25, 2011
Muenster Pump Case Analysis

I.Major Facts Related to the Muenster Pump Case
A.The company has cast its own pump housings for over 40 years. A competitor is now offering a cheaper alternative should Muenster choose to outsource pump housings. Terri, Purchasing Manager for Muenster, has learned that Union’s quote of $90 is one half the price it takes Muenster to manufacture their own pump housings. She’s proposed outsourcing but met with resistance on multiple grounds.

B.The ownership is against outsourcing based on:
a.Muenster controls the production, quality and quantity.
b.Muenster’s reputation and name directly tied to product created in-house. c.Should the foundry close due to outsourcing, 16 employees would be without jobs, creating an economic hardship on the small community and potentially damaging good relations with the city officials.

II.Major Problem with Muenster Pump Case
Upper management refuses to entertain the idea of outsourcing when presented with cost savings alternatives. There is stubborn hometown resistance to the idea of change. III.Possible Solutions/Alternatives

A.Plan A – Do Not Outsource but Investigate for Muenster’s use the new casting developments used by Union Foundry a.The new developments in casting claimed by Union are evidently known and in use as the other two foundries presented only slightly higher prices. b.Based on the information of new developments and substantially lower costs, secure upper management’s blessing and create a cross-functional team (upper management, production, finance, operations, etc) to research the new developments and ascertain the costs involved to upgrade Muenster’s foundry. c.Explore and research, testing comparisons, if Muenster’s historical method of producing a quality product will work with the new casting developments or if this could harm the quality and, in turn, the company’s reputation. d.Final decision will be based on equipment needed, training...
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