1. Is there anything that you think Sarah could do to get a better deal from BGK
ID: 372379 • Letter: 1
Question
1. Is there anything that you think Sarah could do to get a better deal from BGK?
2. As Sarah Jenkins, what recommendations would you make regarding the selection of a gearbox supplier? Be prepared to justify your recommendation.
Case 7-2 Caledon Concrete Mixers o as in supply, where combining purchases between the t As Sarah Jenkins, materials manager at Caledon Concrete w Mixers, coded her coference call with Jon Del Rosario operations for some products had yiekded significant savings corporate purchasing, she woodered what recommen Jon Del Rosario, purchasing manager in the corporate per dations she should make regarding the selection of a gearbox chasing group in Chicago, was responsible for coondinaing ocating switching to a new supplier, but Sarah remained Sarah Jenkins was responsible for materials manage concersed 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 Brd and she wanted to make a final recoemmendation before Reporting to the general manager, her responsibilities in the plant shut down for the annual Christmas holiday break cluded logistics and transportation, purchasing, inventory supplier. The corporate purchasing group in Chicago was purchasing between the Caledon and St. Louis plands control, and production planning. Her counterparts inf nance and accounting. quality, operations, sales, HR, and CALEDON CONCRETE MIXERS Located north of Torceto, Canada, in Caledon, Ontario, Caledon Concrete Mixers (CCM) was a manufacturer engineering rounded out the senior management team. THE GEARBOX While the concrete mixer truck was in truck-mounted concrete mixers. Founded in 1910, the company employed 140 people in its 150,000 square foot annual sales of approximately $25 million. Nearly 40 per- States. the lading 100 unionized hourly workers, and had necessary to continuously rotate the load to prepare avoid consolidation. The gearbox was locat- concrete and ed at the bottom of the large mixing drum and was used to transmit torque from the hydraulic motor drive shaft. cent of company sales were exported, mainly to the United 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 Ilinois 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 typically specified the track model, which was ordered CCM and the St froem the original equipment manufacturer. CCM fitted the as the singl vehicle with the concrete mixing equipment, w Louis operation both used BGK GmbH e source for gearboxes. BGK was a large diver manufacturing company with annual rev. CCM a wide hich includ- sified German enues of 12 billion euros. The division that supp ed a large drum and discharge system. Systems were cus tomized based oe vehicle size (e.g. 2-6 axles), discharge produced gearboxes for industrial applications i system (froet or rear), and capacity (maximum capacity to carry 14 cubic yards of pay load). range of industries, such as material handling equime energy, and mining. The company had a reputation for h IMC had an operation in St. Louis that manufactured a quality and reliability, although its products were similar product line CCM under a different brand name, more expensive than those of their competitors. typically annual revenses approximascly double the Canadian The relationship with CCM and BGK dated back i plant. Although IMC operated under a decentralized model, than 30 years. BGK offered a standard one-year warrant CCM and the St. Louis operation cooperated in areas of engi its gearboxes, but Sarah was not aware that CCM neering, parchasing, and sales, while operating autooomously experienced any notable quality problems and cusert with separate leadership teams. Oe key area for synergies were generally satisfied with performance of the r on tomensExplanation / Answer
1 - Here as in the above give case, there is nothing much that Sarah could do to get a better deal of BGK. BGK is not ready to change the terms and conditions of the sale of gearboxes to the company, plus the price what they have quoted is much more than the rest 2 suppliers, who also are giving various different conditions which are in favour of the company. Although Sarah could ask BGK to reduce the price and ship acc to order, as the warranty was never that big concern as there were negligible complains about gearboxes failing.Or else she could ask for extended warranty and same conditions of contract what IGR is providing at the same quoted rate, as they had a long-term relationship and the product of BGK was well accepted in Market.
2 - If I were Sarah Jenkins I would have a reccomended selection of IGR for the supply of gearboxes, as the given in the case above the terms and condition of supply what IGR has given is the best and the scores on the framework also say so. Although BGK had a relationship with IMC for 3 decades it was hesitant to change the terms of sale for a regular customer. The company wanted an increased warranty and fast delivery, which both IGR and Moretti SPa were providing, but the IGR had a lower failure rate and Moretti was involved in oil leak so IGR had upper hand. Hence to create a new value for itself and its prospect customers, IMC should go with IGR for gearbox supply.
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