Question

Custom Equipment It was July 2, and Mat Roberts had just been given his robots/weldguns, affiliate-produced parts/fabricated com- first assignment, te Wire Management Program" ponents, and steel/other metals. Matt was hired recently (WMP), by the purchasing manager of Atlanta-based to replace two retiring purchasing agents. Custom Equipment Inc. The purpose of the WMP was t reduce the supplier base for the company's wire and cable requirements. As a newly hired purchasing agent, Matt MATT ROBERTS wondered how to proceed Matt held an undergraduate business degree from a well- known business school. Upon graduation, Matt had worked for a year as an inventory analyst multinational manufacturing organization. He had CUSTOM EQUIPMENT Custom Equipment Inc. (CE) was a relatively new applied to CE after visiting its display booth at a local division of Custom Equipment Global, a multinational manufacturing trade show. Matt was eager to make an electrical engineering and technology company CE early contribution at CE and he believed that the WMP enerated sales of S66 million in the past year, and had presented an excellent opportunity forecast growth of 25 percent for each of the upcoming four years. CE's products were divided into assembly line WIRE MANAGEMENT equipment and press automation equipment. Assembly PROGRAM (WMP) line products included units such as framers, in which a vehicle frame was fed onto a line and welded in specified Matt's manager had recently initiated the WM areas. Press automation products were units built to move believing that CE could improve value for all of its wire vehicle frames, doors, and hoods between machines and cable requirements from volume leverage already installed within the customer's assembly prss ationali The machines were built in Atlanta, tested, approved, currently spent processing multiple supplier invoices. A disassembled into sections, shipped to the customer's stronger relationship cou facility, and then re-assembled. the supplier base would also save time be fostered with the chosen supplier, which could help increase the priority of CE All machines at Custom Equipment were hand-built. orders and open further opportunities for cost savings Most units were unique due to the requirements of the Also, transportation costs could be reduced because all manufacturer and the intended purpose of the machines. tems would be arriving from a single source. Finall Each machine was comprised of steel, mechanical, sourcing from a single supplier would allow the electrical, and hydraulic parts. Wires and cables were purchasing agent to focus on issues involving higher purchased in lengths and installed throughout the unit. With automotive design changes occurring annually, CE dollar values Matt's manager had given him the impression that the evious builds or WMP should be implemented before the end of October bidding on new lines. CE prided itself on customer satisfaction. In the automotive industry, a key factor was on-time delivery of equipment required to begin production. MANUFACTURING COMPONENTS Last year CEs total component purchases totaled $32 million. CE had a total supplier base of 3,000 companies, of which less than 5 percent were regular suppliers. The first reason for having such a large number of suppliers CE'S PURCHASING DEPARTMENT The purchasing department at CE was composed of six was that newly hired purchasing agents usually had purchasing agents and one manager. Responsibiles prviously established relationships with certain suppliers. were divided into commodity groups. These groups The second reason was that some suppliers specialized in consisted of electrical, mechanical, hydraulic/pneumatic, certain products.

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Required Question:

1. Should Matt try to suggest a better method for reducing purchasing costs? (200 words)

3. How can Matt find out more information about the suppliers in a short period of time? (200 words)

3. what are his internal or external resources that he should consider?

Answer 1

1. Yes, Matt can suggest a better method for reducing purchasing costs as the main issue is materials management. The company has no systematic process to forecast the demand or consolidate the orders. There are excess or short orders and multiple orders of same item. This can be managed to minimise costs apart from Matt's WMP method for reducing purchasing costs. There is requirement of inventory management and preventing shrinkage of the received items which are not managed properly and result in missing items.

2. Matt can find information about the suppliers in a short period of time by checking the order and purchase records from the accounts and purchase teams. The sales team can also brief him upon the main suppliers and the products supplied by them. He can check with the Shop floor employees also for their feedback. The managers also keeps records of supplier's delivery performance which Matt can access to get information in short period of time. If their is proper data management program used by the company, it can be an effective source of finding the relevant information in a short period of time regarding suppliers, sales revenues, volumes and types of products etc.

3. Internal or external resources that he can consider are company records and supplier contacts. He can collect feedback from market resources and trade agencies. There are information available on the trade volumes about each supplier, their main business partners, product offerings and history of their business, He can check the market trends and competition. He can share a questionairre format with suppliers of interest for clarifications. The data can be collected and organized on their past records and performance, business deals offered by them, lead time, support and suitability for the WMP.