Opre 6371 Case 5-2

Topics: Costs, Economic cost, Cost-benefit analysis Pages: 6 (1581 words) Published: April 22, 2013
6Case 5-2: Rondot Automotive

Name: Lovee Sachdeva, Bin Wen, Matthew Miles, Ryan Buxbaum ,Yuguang Wang, Shaoying Lu.
Group: 3
Date: 2/22/2013

* Glenn Northcott is the purchasing planner at Rondot Automobile in Jackson, Mississippi. The company is a wholly owned subsidiary of Rondot Worldwide, a leading global designer and manufacturer of electrical and electronic components. (Note: You are Glenn) * Responsible for evaluation the outsourcing opportunity * Meet with Terry Gibson and purchasing manager to decide whether or not to take actions on outsourcing * Glenn had been approached by Greven E-Coating willing to provide electro coating services to Rondot Automobile * Goals of decision making: Reducing the total costs while maintaining and minimizing the risks from any changes made * Considerable global competition under severe cost pressure * Customer’s price reduction pressure expectancies from global competition * Total Sales and employment at the Jackson plant had steadily declined * Company is under significant pressure on cost reduction. The company’s current priority is to reduce operation costs * Rondot is a wholly owned subsidiary of Rondot Worldwide, a leading global designer and manufacturer of electrical and electronic components. Rondot Automotive operated 85 plants in 25 countries. * The purchasing organization at Rondot automotive had a hybrid structure and the Jackson plant’s purchasing department consisted of four people, including two buyers, a planner (Glen) and Terry Gibson. * Schedule with the purchasing manager, Terry Gibson, and the plant manager, Dick Taylor in one week, and both of them are under significant pressure to reduce costs at Jackson plant. * Greven E-Coating outsourcing opportunity

* Greven E-Coating Company uses a system whereby a DC electrical charge is applied to a metal part immersed in a bath of oppositely charged paint particles. * Considered more cost efficient compared to traditional wet paint systems * Samples provided from Greven E-Coating Company

* Tests results: 5/6 of families of housings could be converted to e-coaring using Greven at a cost of 15 cents each * Parts for five of the six represents 60% of the Jackson Plant’s volume * Failure because of different methods of adhesion of a magnet to the housing. Hot –bond adhesion process fits e-coating while cold-bond adhesion process does not fit e-coating system

Current situation:
* Total sales and employment at the Jackson plant had steadily declined over the past five years. * The number of employees at the plant had dropped from 1450 to 600 and plant management was under pressure to lower costs and regain market share. * Glenn has the option to do outsourcing on cleaning and painting work to Greven E-Coating. * Glenn needs to come up with an ideal recommendation on how to reduce the cost and propose that to Terry Gibson and Dick Taylor. * The cleaning and wet painting had been installed 17 years prior and undergone a number of upgrades, and the current painting method costs 25 cents for each housing.(There are six parts in a housing family)


1. Company to take decision on insourcing or outsourcing 2. Higher costs related to painting & cleaning
3. Lack of advanced technology to compete in cost reduction for a lower price 4. A decision to make, once made, is often difficult to reserve. If Rondot Automobile decides to make agreements on e-coating system, The plant needs to convert 100% hot-bond adhesion system 5. Total cost of converting 40% of cold-bond adhesion system to the total cost savings: Long-Term estimation, not short term 6. Whether the use of e-coating will lead to sole source dependency: Is the e-coating system a common painting method in...
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