Oceanics Case Study

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  • Topic: Cost overrun, Costs, Cost
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  • Published : October 17, 2012
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November 17, 2011 Andy Moon – A00838117 Mr. Karl Fichter Case Study 2 – Pressure Vessel

1. Problem The supply manager of Oceanics Inc., Jack Toole, is faced with a situation in decisionmaking for purchasing one manufactured pressure vessel from either one of the two suppliers, Atomic Products Company and Nuclear Vessels, Inc., who will provide the best value. While Jack needs to choose the best value from a purchasing standpoint, he also needs to choose a supplier that satisfies the requisitioner of the pressure vessel, the engineering department of Oceanics, Inc. Another critical issue to be considered would be that pressure vessels are closed containers designed to hold gases or liquids at substantially higher pressure than the atmospheric pressure (Wikipedia, 2011). Pressure vessels are dangerous objects sensitive to pressure differentiations, at which could cause fatal accidents. Therefore, Jack carries the responsibility in acquiring a capital asset that could possibly affect other people’s lives. 2. Summary The engineering department of Oceanics, Inc., had given out a purchase requisition of a pressure vessel to the supply manager, Jack Toole. Out of twenty suppliers, eighteen submitted their proposals, and only two suppliers were left after a preliminary evaluation. The two suppliers, Atomic Products and Nuclear Vessels, differentiated in price, shop facilities, past experience, subcontracting, organization, delivery, and guarantee. After Jack and Oceanics’ engineer, Mr. Holpine and the manufacturing engineer, Mr. Grinn, visited the two suppliers’ plant sites, Mr. Holpine and Mr. Grinn ended up having differing arguments in choosing the better supplier. Jack’s objective is to satisfy Oceanics’ engineering department’s requisition specifications while choosing the supplier with the best value from a purchasing perspective. 3. Site Observations Jack, Mr. Holpine, and Mr. Grinn focused in observing the age, quality, and inspection levels on the machines, laboratories, incoming materials, and other general shop facilities at both plants of Atomic Products and Nuclear Vessels. One thing that the Oceanics’ team should have investigated at both suppliers’ plant sites is a sample of each supplier’s pressure vessel. By observing the largest samples of pressure vessels available at both plants, the Oceanics’ team could have learned the level of quality in meeting the requisition specifications from Oceanics in the most direct way. Furthermore, a sample pressure vessel would reveal the quality of design compared to specifications. After noting that Atomic Products has confined space for placing a pressure vessel of such size specified by Oceanics inside their plant, Oceanics’ team should have 2 Andy Moon – A00838117 OPMT 1191 – Purchasing

investigated the volumetric space required to store the entire pressure vessel inside Atomic’s building. Also, the investigation should have continued as to determining any outdoor factors such as heat or water that may have any adverse affects on the quality of the pressure vessel. Should there be no relation to outdoor storing and the quality of the pressure vessel, Atomic Products would eliminate one issue that could possibly be recongnized as a defect. After finding out that Nuclear Vessels’ plant facilities such as machines and laboratories seemed to be of considerable age, Oceanics’ team should have asked Nuclear Vessels for a continuous record of maintenance, repair, and operation for Nuclear ’s plant facilities. In this way, Oceanics would be more assured for Nuclear Vessels’ quality of manufacturing processes. 4. Supplier Evaluation In order for a better aid in supplier evaluation, consider the following table of basic cost analysis for the two suppliers, Atomic Products and Nuclear Vessels. Table 1. Supplier Evaluation - Cost Analysis

Total Estimated Cost Shop Rate Overhead Rate Total Shop Rate per Hour Total Time Requirement (Hours)

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