Wide Wide World of Supply Management

Topics: Management, Cost accounting, Cost Pages: 2 (566 words) Published: February 23, 2012
THE WIDE, WIDE WORLD OF SUPPLY MANAGEMENT
Charley Ruggles, supply manager at the Newton Manufacturing Company, was wondering whether to take the plunge into worldwide supply management. A salesman from Eurofabrik, Ltd., a foreign producer of small assemblies and stamps, had just left a proposal on his desk for one of Newton’s major purchases, the transklutch. Eurofabrik’s price was 35 percent below what Charley was paying to a local supplier—even figuring in the extra cost of duty, ocean freight, and overland transportation to the Newton plant. Newton used this assembly, a combination of stampings and turnings; in all its “Powermaster” assemblies sold both for use in consumer and industrial end-products. The transklutch was half of the unit cost of a Powermaster final assembly. Charley had instructions from Slaterer P. Colby, Newton’s president, to cut costs. “Charley, the cost-price squeeze on the Powermaster really hurts. Supply management is responsible for half the cost of this product, and you have to get your material cost down. However, don’t cut corners on quality! We can’t afford to lose our reputation for a quality Powermaster! Give me a report at our meeting in two weeks!” Ruggles had just started to work on the problem when the Eurofabrik salesman called. “Our plant is one of the most modern in the Common Market, and that’s why we can give you such a low price. We have all the latest equipment, and our quality reputation is well known. In three months you will have the first shipment made exactly to your specifications.” Charley talked it over with several of his closest supply management friends at lunch: Ralph Wilson, supply management director of ABC; Gene Nelson, supply manager for Universal Manufacturing; and Larry Smith, supply manager for the local electric utility. Ralph: “I’d rather look into it, Charley. You know we have been buying foreign on some of our raw materials and metals for years. You have to get used to some of the delays and red...
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