Temko Earthmovers is a company that purchases short-block castings. These castings are used to build there R-208 tractor engines. The short-block castings are the major component for building these engines and are responsible for thirteen percent of the purchase price. Temko Earthmovers is currently experiencing Quality issues with their current supplier regarding these castings. Approximately 10 out of 100 units are being repaired and 40 percent of the blocks are being scrapped. This is causing Temko a lot of time and money in trying to repair these defective parts, so Temko’s purchasing manager has released a request for quote for the short block castings. Unfortunately they only had one supplier who was interested that came back with an offer. The supplier that came back with the offer is ACE Manufacturing Inc. ACE is a small start-up company that is looking for work and is willing to invest their time and money in purchasing the precision machinery that will have to be used to make this part for Temko.
Could Temko be the right company, to get ACE Manufacturing up and going? And could this supplier be the right fit for Temko in eliminating there future defective issues as well as save the company money?
Advantages and Dis-Advantages in Single/Sole Sourcing
* Increased co-operation and communication which improves a win-win relationship between buyers and sellers (This was strongly emphasized in the first video we watched). The less people involved the better, that way the bond is stronger.
* With a long-term contract (three to five years) will greatly reduce the uncertainty that the supplier will lose business to another competitor.
* With a long term contract the supplier will be more willing to purchase equipment or change their operating business to suit the needs of your company. Ex, purchasing the EDI system, precision machinery used to make custom parts.
* Provide lower costs per...
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