Case Study

Supply Chain Management Case Study
supply Human Resources
ATTACHED FILE(S)
Part 2
Supply Issues
Case 1 CJ Industries and Heavey Pumps
Case 2 Credit Suisse: Sourcing IT Services
Case 3 Don’t Shoot the Messenger
Case 4 Early Supplier Integration in the Design of the Skid-Steer Loader
Case 5 John Deere and Complex Parts, Inc.
Case 6 Service Purchasing at the Sunny Hotel
Case 7 Supplier Development at Deere & Company
Case 8 A Supplier Partnering Agreement at the University of Las Vegas
Case 9 The VW Resende Modular Consortium
Case 10 Heartland & Company
1
1 CJ Industries and
Heavey Pumps1
In October 2007, CJ Industries (CJI) had just been awarded a 5-year contract with
Great Lakes Pleasure Boats amounting to U.S. $10 million per year, commencing in July
2008. CJI would be providing a number of key engine components for Great Lakes’ luxury
line of pleasure boats. The award marked an important milestone for CJI, in that it was
the culmination of several years of hard work and dedicated service, supplying Great
Lakes parts for their boats on an as-needed basis. The contract had significant long-
term follow-on potential as well, if they could continue to show Great Lakes they had
the capabilities to be one of their valued, alliance partners. In addition, with this contract
Great Lakes would represent approximately 30 percent of CJI’s annual sales, so perform-
ing adequately on this contract had a significant long-term financial impact on CJI.
One of the parts, a bilge pump, was an item that CJI had been purchasing from one
of their suppliers, Heavey Pumps, a small local specialty pump manufacturer, on an
informal, non-contract basis. The remaining items were all built in-house by CJI and
supplied to Great Lakes from one of their two finished goods warehouses located near
the Great Lakes production facilities. Heavey Pumps was producing and delivering
50 bilge pumps at a time at a cost of U.S. $1500 per unit and built to Great Lakes’ spe-
cifications, to one of the CJI warehouses, whenever an order was telephoned in by CJI.
The delivery costs (about U.S. $500 per 50 pump shipment, depending on the carrier
used) were included in the U.S. $1500 per unit price. This scenario typically occurred
about every four to six months. Normally, CJI would order another batch of 50 about
eight to ten weeks ahead of time, and Heavey had always been able to supply the
pumps before CJI’s stock was depleted.
Though CJI had sufficient excess capacity to ramp up production on the parts to be
supplied in the Great Lakes contract, they were not sure about the ability or willingness
of Heavey to increase their production of the bilge pumps. The new demand for bilge
pumps starting in July would be 50 pumps per month, and potentially more, depending
on Great Lakes’ demand, and the ability of CJI to perform on the contract.
There were a number of issues that Nik Grams, the purchasing manager who put the
contract together with Great Lakes, needed to work out with both Heavey and the pro-
duction manager at CJI, in order for this contract to be met with as few problems as
possible. The issue with Heavey Pumps was whether or not they could guarantee delivery
of 50 pumps per month to one of the CJI warehouses. This had been the one item that
had “slipped through the cracks” on the contract with Great Lakes, and it now loomed as
something that could conceivably put the contract in jeopardy. There were potentially
additional equipment, labor, and other production costs for Heavey associated with the
extra demand for bilge pumps, not to mention extra delivery costs as well. Heavey had
1. © Joel Wisner, PhD, C.P.M., University of Nevada, Las Vegas (joel.wisner@unlv.edu). This case was pre-
pared solely to provide material for class discussion. The author does not intend to illustrate either effec-
tive or ineffective handling of a managerial situation. The author has disguised names and other
identifying information to protect confidentiality.
3
been a reliable supplier for CJI for a number of years, but nothing else had ever been
purchased from them. In addition, because the demand for these pumps was rather low
and the deliveries were sporadic, no performance records had ever been kept for them.
Mr. Grams had also not known specifically about the quality history of the Heavey bilge
pump, although he could not remember ever getting one returned by Great Lakes for
any reason. Up until now, the pump issue did not seem like anything to worry about.
Another possibility for CJI would be to make these pumps in-house. Nik Grams knew
that CJI had the capability to make this pump, but it would require an initial capital
investment of about U.S. $500,000 according to the CJI production manager, along
with the clearing out of some space, and the hiring of three additional employees. With
only about nine months remaining until the contract start date, it would be tight, but the
production manager had assured Nik that they could do this, if needed. While Mr.
Grams didn’t doubt the production manager’s assurances that the production line could
be ready, he wasn’t sure that going to this added expense was a good investment for CJI,
given their lack of pump manufacturing experience. There were also at least two other
bilge pump manufacturers that Mr. Grams knew of, but both of them were about
500 miles farther away from the CJI warehouses, and he had never used either of
these firms in the past.
This whole thing seemed to Nik like an ideal job for his special project buyer, Bob
Ashby. He figured he had maybe a week or two to hammer out a plan to assure contract
compliance with Great Lakes, and Bob was known for his ability to put things together
quickly. So, he called Bob.
Discussion Questions
1. What are all the issues here, from both CJI’s and Heavey’s perspectives, that need to
be researched by Mr. Ashby?
2. Should CJI continue to use Heavey to supply pumps, should they make them
in-house, should they consider one of the other suppliers, or should they do some
combination of these alternatives? Discuss the advantages, disadvantages, and risks of
each of these alternatives.
3. How can CJI assure continued contract compliance and additional contract business
from Great Lakes in the future?
4 Part 2 Supply Issues
The case study link is provided below for the Case Study 1. Read and study the case and complete the questions at the end of the study. Use the case study outline below to assist you with your analysis. Questions should be answered using case study format. Ensure that you adequately explain the problem, describe alternative solutions and justify your recommendation. This exercise should be able to be completed in approximately 3-6 doubled space pages. Attached completed Case Study #1 as a MS Word document in the assignment area of the classroom – Case Study #1.
Case Study 1
Case Study Outline(see Outline for Case Analysis below)
OUTLINE FOR CASE ANALYSIS
Title Page (APA formatted)
Case Name:
I. Major Facts
(State here the major facts as you see them. Make statements clear and concise for your own understanding as well as for the understanding of the other students and the instructor.)
II. Major Problem
(State here the major problem as you see it. Emphasize the present major problem. You may wish to phrase your statement in the form of a question. In a few cases, there may be more than one major problem. A good problem statement will be concise, usually only one sentence.)
III. Possible Solutions
A. (List here the possible solutions to the major problem. Let your imagination come up with alternative ways to solve the problem.
B. Do not limit yourself to only one or two possible solutions. These solutions should be distinct from each other.
C. However, you may wish to include portions of one solution in another solution, as long as each solution stands alone. Only in this manner will your subsequent choice be definitive.
D. Briefly note advantages and disadvantages of each possible solution.)
etc.
IV. Choice and Rationale
(State here your choice, A or B or ___ and the detailed reasons for your choice. You may also state your reasons for not choosing the other alternative solutions.)
V. Implementation
(Prepare a plan to implement your choice)
Appendix (Answer case study questions)
Reference Page (APA formatted)

Running head: Case Study: CJ Industries and Heavy Pumps 1
Case Study: CJ Industries and Heavy Pumps
NAME
TLMT 313
American Public University
Professor Ernest Hughes
January 17, 2016
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Case Study: CJ Industries and Heavy Pumps 2
Case Study: CJ Industries and Heavy Pumps
I. Major Facts:
CJ Industries (CJI) is a company that makes and supplies different parts for boat
engines. In October of 2007, CJI was given a $10 million annual contract by Great Lakes
Pleasure Boats. In this contract, CJI would be providing Great Lakes many different boat
engine parts on an as need basis. This contract was a great opportunity for CJI seeing as
Great Lakes and this contract would supply CJI 30% of their annual sales.
Every part of CJI’s building process was done at one of their two facilities except
for a bilge pump that they purchased from a company called Heavy Pumps. These pumps
were built to Great Lakes specifications and CJI would receive these pumps ato ne of
their warehouses. Heavy Pumps and CJI had a very informal, non-contract basis.
Whenever CJI needed pumps, they would call Heavy Pumps in advance and the delivery
would be shipped. The cost of the pumps was $1500 for 50 bilge pumps with a $500
shipping fee. The order was typically made every four to six months by CJI.
The new contract from Great Lakes would require CJI to ramp up production.
This increase in production would require and additional 50 pumps per month and CJI
was not sure whether Heavy Pumps could provide pumps at this volume. The purchasing
manger Nik Grams needed to find out if Heavy Pumps would be able to ramp up their
production to meet the needs of CJI. The pump issue was not foreseen when the contract
was written between CJI and Great Lakes. If the demand could not be met or the
additional shipping was too much this could be as an issue for CJI.
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Case Study: CJ Industries and Heavy Pumps 3
CJI also had the option of making the pumps themselves. In order to do this, Nik
Grams consulted with the production manager and it was determined that a $500,000
investment would be needed and 3 additional employees would need to be hired.
II. Major Problem:
CJI needed to be able to count on Heavy Pumps to ramp up their production and
be able to keep up with the demand for the new Great Lakes contract. If they could ramp
up and supply them with the pumps needed, the delivery fee would also become an issue.
Currently CJI was paying the deliver fee of $500 every four to six months. This new
order would require them to pay that same delivery fee every single month. This would
be an increase in annual shipping costs from the current $2,000 – $3,000 to $6,000 per
year.
III. Possible Solutions
A. Nik Grams can meet with Heavy Pumps to see if the added volume of pumps they needed
would drive the price down. If the price dropped low enough per pump, this might offset
the shipping costs.
B. CJI could look into the two other suppliers more deeply and contact some of their
customers to find out their service record and get some more numbers on
pricing/shipping.
C. Nik Grams could see if Heavy Pumps or any other supplier would be able to produce
more than 50 pumps a month. This would possibly eliminate the shipping costs and since
the contract seemed to be stable if might be worth it to make one or two large purchases
of pumps a year.
D. Production could be set up in house and still meet the time frame.
IV. Choice and Rationale
CJI should set up production of the pumps in house. It would take an additional
investment of $500,000 dollars but would be worth it. This investment would not only
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Case Study: CJ Industries and Heavy Pumps 4
pay off for this contract with Great Lakes but it would also pay off with other future
production. Making the pumps in house would eliminate all shipping costs. It would also
let CJI control the amount of pumps made more specifically for each order or each
shipment to Great Lakes. In addition to increased control of pump production, CJI
wouldn’t have to worry about Heavy Pumps or any other supplier being able to reach
their demand. CJI would overall be more in control of the entire operation and supply
chain of pumps.
Other options weren’t necessarily the worst options but they still had CJI
depending on other companies for something that was crucial to their contract and supply.
Since this was production at a new scale and it had never been tested at these volumes it
would be better for CJI to manufacture in house.
V. Implementation
Once Nik Grams is sure that the production manger could meet the deadline and
pumps could start to be made the initial investment would have to be secured to start the
manufacturing process. Once the space was cleared out, the hiring of new employees
would need to take place and the employees would need to be trained. Finally, once the
employees were trained and the manufacturing was set up it would be time to start
production immediately. In the meantime, and order should be put through to Heavy
Pumps and as many pumps as possible should be on hand as extra supplies if the in house
production didn’t go as smoothly as planned.
Appendix
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Case Study: CJ Industries and Heavy Pumps 5
1. What are all the issues here, from both CJI’s and Heavey’s perspectives, that need to be
researched by Mr. Ashby?
Mr. Ashby has a few issues he would need to investigate. First would be the cost. Would
it be feasible and realistic to set up production at CJI or would it be more beneficial to for
Mr. Ashby.
2. Should CJI continue to use Heavey to supply pumps, should they make them in-house,
should they consider one of the other suppliers, or should they do some combination of these
alternatives? Discuss the advantages, disadvantages, and risks of each of these alternatives.
CJI should make the pumps in house. While the initial investment would be substantial, it
would be worth it in the long run. The efficiency that producing them in house would bring
would be worth it. If they were to outsource the pumps then CJI would have to pay shipping
costs and depend on Heavy to meet a demand they have never met before.
3. How can CJI assure continued contract compliance and additional contract business from
Great Lakes in the future?
Again, the best way to assure contract compliance would be to produce the pumps in house. If
the pumps are produced in house, the quality control would be perfect and there would be less
transportation needed to control. In addition the producing the pumps in house, CJI should keep
the lines open with Heavy as a fail safe in case their pump production doesn’t meet demand.
References
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Case Study: CJ Industries and Heavy Pumps 6
Burt,D,Petcavage,S,&Pinkerton,R.(2010).SupplyManagement.8thEdition.NewYork,NY:
McGraw­Hill
References
Finally, the reference page. The reference page has the word appears at the top of the page
centered. Also, the reference page has double space entries and there is a hanging ½ inch
hanging indention on the 2nd and proceeding lines.
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Case Study: CJ Industries and Heavy Pumps 7
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