Glenn Northcott is a purchasing planner in Rondot Automotive. Their Jackson, Mississippi plant manufactures an average of 7million small motors which they distribute to their OEM customers. Their purchasing organization which has a hybrid structure is comprised of two groups—strategic purchasing (dotted-line reporting to purchasing manager) and plant purchasing department (straight-line reporting to purchasing manager). Currently, they are being pressured to cut down their plant costs and reduce their prices. Aside from these, they are also facing employment and global competition issues. Three months ago, an opportunity to outsource their painting operations to Greven was presented to Glenn. As part of the evaluation process, tests were administered and colleagues were consulted. The tests showed that 5 steel housings which undergo hot-bond process can be converted to e-coating and only one family cannot be converted due to the cold-bond adhesion it requires. John Underwood from manufacturing engineering encouraged the prospect, explaining that their wet-paint system has to be stopped or upgraded soon while Betty McKinley from production planning called out that 2 weeks’ worth of inventory has to be added and an additional $0.03 for transportation and packaging costs will be incurred. Now, Glenn has to discuss his suggestion to Terry Gibson (Purchasing Manager) and Dick Taylor (Plant Manager).
1. ACUTE- Primary issue that Glen has to face is his discussion with Terry and Dick regarding outsourcing their painting needs to Greven. This would mean contracting 5 out of their 6 steel housings or 60% of their volume to Greven while the 40% stays with them. Outsourcing will also change their painting process to e-coating which is said to be more cost efficient vis-à-vis Rondot’s wet paint system. Align with this, the plant is also being pressured to reduce their costs. 2. CHRONIC- Rondot Automotive is also confronted with long-term...
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