1. Do you trust the defect rate data provided by the suppliers? 2. What are your
ID: 372374 • Letter: 1
Question
1. Do you trust the defect rate data provided by the suppliers?
2. What are your impressions of the supplier evaluation criteria used by Sarah? What changes would you suggest?
Concrete VIRel Caledon As Sarah Jenkins, materials manager at Caledon Concrete was in supply, where combining purchases between the two from corporate purchasing, she wondered what recommen- Jon Del Rosario, purchasing manager in the corporate pur Mixers, ended her conference call with Jon Del Rosario operations for some products had yielded significant savines. dations she should make regarding the selection of a gearbox chasing group in Chicago, was responsible for coordinating supplier. The corporate purchasing group in Chicago was purchasing between the Caledon and St. Louis plants. advocating switching to a new supplier, but Sarah rema concerned about the risks of ending a long-term supply ar- ment at CCM. An MBA graduate from the Ivey Business rangement with a key supplier. It was now December the School, Sarah had worked at CCM for more than 20 years. 3rd and she wanted to make a final recommendation before Reporting to the general manager, her responsibilities in the plant shut down for the annual Christmas holiday break. cluded logistics and transportation, purchasing, inventor Sarah Jenkins was responsible for materials manago control, and production planning. Her counterparts in nance and accounting, quality, operations, sales, HR, and engineering rounded out the senior management team. CALEDON CONCRETE MIXERS Located north of Toronto, Canada, in Caledon, Ontario, Caledon Concrete Mixers (CCM) was a manufacturer THE GEARBOX of truck-mounted concrete mixers. Founded in 1910, the company employed 140 people in its 150.000 square foot While the concrete mixer truck was in operation, it was plant, including 100 unionized hourly workers, and had necessary to continu annual sales of approximately $25 million. Nearly 40 cent of company sales were exported, mainly to the United ed at the bottom of the large mixing drum and was used States ously rotate the load to prepare the concrete and avoid consolidation. The gearbox was locat per- to transmit torque from the hydraulic motor drive shaft, CCM had a strong reputation for quality and service in which rotated the drum. The gearbox also permitted the the industry. It operated as a private business until 2003, operator to adjust the speed and direction of the rotation when it was purchased by Illinois Machinery Corporation The gearbox was one of approximately 150 compo (IMC). IMC was a global manufacturer and marketer of nents that CCM used for the assembly of their concrete access equipment, specialty vehicles, and truck bodies mixers. The gearbox used by CCM came in two varia for the defense, concrete placement, refuse hauling, and tions, depending on the model of the concrete mixer. Each fire and emergency markets. Annual revenues in the most gearbox cost approximately $3,600 and volumes at CCM current fiscal year were $9 billion and IMC had approxi- ranged from 950 to 1,100 units per year mately 18,000 employees Concrete mixer transport trucks were designed to mix concrete and haul it to the construction site. Customers CURRENT SUPPLY ARRANGEMENT typically specified the truck model, which was ordered CCM and the St. Louis operation both used BGK Gmbl uipment manufacturer. CCM fitted the as the single source for gearboxes. BGK was a large diver sified German manufacturing company with annual rev vehicle with the concrete mixing equipment, which includ- ed a large drum and discharge system. Systems were cus- enues of 12 billion euros. The division that supplied CM tomized based on vehicle size (e.g.. 2-6 axles), discharge produced gearboxes for industrial applications in system (front or rear), and capacity (maximum capacity to range of industries, such as material handling eq carry 14 cubic yards of payload) uipmen energy, and mining. The company had a reputation IMC had an operation in St. Louis that manufactured a quality and reliability, although its products were ty similar product line to CCM under a different brand name, more expensive than those of their competitors with annual revenues approximately double the Canadian plant. Although IMC operated under a decentralized model, than 30 years. BGK offered a standard one-year wa CCM and the St. Louis operation cooperated in areas of engi- its gearboxes, but Sarah was not aware that CCM nering.purchasing, and sales, while operating autonomously experienced any notable quality problems and cu with separate leadership teams. One key area for synergies were generally satisfied with performance of the proud for high The relationshi p with CCM and BGK dated back more everExplanation / Answer
1.Do you trust the defect rate data provided by the suppliers?
Yes the defect rates provided by the suppliers has to be trusted unless proved otherwise. Not to forget, the suppliers are also manufacturing firms and have a long history of successful business. Also since the data about the products is widely available and certainly certified by their internal quality standards and also a central industry body, it can be trusted. We cannot distrust the data unless it is proved with numbers by failures reported in our trucks, other customers or by a central quality body.
The issue here are other purchasing and service parameters for supplier evaluation and even more importantly, the unwillingness of BGK to match up to the industry values/standards.
2.What are your impressions of the supplier evaluation criteria used by Sarah? What changes would you suggest?
Sarah’s evaluation criterion does look OK but since it is a critical component to the whole business and the supplier has been with us for long, it would be prudent to add as many parameters as possible in the evaluation to make it as accurate as possible.
Hence we suggest some parameters such as
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