Solved by verified expert :SCM
301
Sourcing Exercise
The
director of supply management at ACME Industries has come to you about choosing
a source for ascrew fastener that is used inmany of your company’s
products. ACME considers these screws to
have high value potential due to the amount of money spent to purchase
them. ACME could easily make this item, but
there are also very many suppliers in the market, all of which have the
capability to produce the fastener – it is not a unique item. You have received three different bids in response
to your Request for Proposal. After some
investigation into each company, you discover eachsupplier’s performance across
four key performance parametersare as follows:
Provide your answers to the
following. Remember to show how you came
up with your answer!
Felder
Company
Grotto, Inc.
Helm Brothers, LLC
Price/unit
$0.22
$0.25
$0.30
Quality Level
99.37%
98.73%
500 errors per million producedSix Sigma
Delivery on-time
96%
on-time
99%
on-time
98%
on-time
Order cycle time
2
weeks
3 weeks
24
hours
(1)
You estimate that the total cost for ACME to produce the
fastener would be $600,000 annually.
You know maximum annual production need would be 1,875,000 fasteners. Should ACME consider making this?
(2)
Given the information
above and referring back to the portfolio
analysis model (text pp.203-205), what type of commodity is this, and
what type of sourcing strategy should you employ? What sort of tactics and actions?
(3)
Assume that you judge the Price/unit and On-time Delivery
criteriato be equally important and that these are about 10% more important
than Quality Level and Order cycle time.
Quality Level and Order cycle time have the same importance weight.Using
a weighted point evaluation system(text
pp. 206-208)and scoring on a 1-3 scale, (3 being best, one being the worst)
which supplier would you rate the best?
(Showing your work here is important!).
(4)
Based on the data and your answer above, would you choose a
single source or multiple sources?Maybe cross-sourcing or dual sourcing? Why?
If multiple sourcing, how much business would you give each
supplier? Be specific!
(5)
Given our previous discussion of LEAN, would you suspect any
of the above suppliers to have adopted LEAN philosophies? If so, choose the one you think is the most
LEAN. What leads you to that conclusion?
