The Big “O” Company
Executive Summary. The Big “O” Company is undergoing some change since founder and president passed away. The company produced hydraulic cylinders, and has decided to cease all foundry operations and source this operation. The company has gone out to find a supplier whom can take care of the order to the correct specifications needed. A supplier from Indiana, Barry Foundry, has been selected due to low cost and good reputation. After the supplier was able to show that they could make 100 units to spec, Big “O” kicked hem off to do a full order of 4,000 units. There were problems that occurred with some of the castings, and Big “O” needed to change their specifications of the current casting. When Big “O” approached Barry, they understand that the entire order of 4,000 castings has already been made.
Problem Statement. The Big “O” Company has decided to cease the production of castings at Barry to implement engineering changes; however, Barry has already produced the entire order which has a sale value of rough $297,000. Barry is now in an awkward of trying to determine what they do with the stock. It will be considered obsolete if The Big “O” Company does not accept it, which means dead inventories for Barry or very expensive reworking cost. Barry is also in a jam as to defining what Big “O” is obligated to buy from the initial order.
Alternatives. When suppliers are working with customer order schedules, it is imperative to understand and iron put the contractual obligations. It is a must to determine up from how much raw and finished inventory the customer is responsible for in the supply chain. This is because there are cases, such as Barry’s, where suppliers have the capabilities and capacities to produce all open orders in one run. Depending on the set-up times and cost, this may prove to be beneficial for the supplier and customer. The supplier...