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 analysi

CJ Industries and Heavy Pumps

Lesline Abonwoh

American Public University

COURSE TLMT313: Supply Chain Management

Dr. Oliver Hedgepeth

2024/03/17

Case Name: CJ Industries and

Heavey Pumps

1. Major Facts

Major facts of the case study:

• CJ Industries (CJI) has been awarded a 5-year contract with Great Lakes Pleasure Boats, starting in July 2008, amounting to U.S. $10 million annually.

• The contract involves supplying key engine components for Great Lakes' luxury line of pleasure boats.

• This contract represents a significant milestone for CJI, which has been supplying parts to Great Lakes as needed for several years.

• Great Lakes represents approximately 30% of CJI's annual sales, making adequate performance on this contract crucial for CJI's long-term financial impact.

• CJI has been purchasing a bilge pump from Heavey Pumps, a local supplier, on an informal, non-contract basis.

• Heavey Pumps produces and delivers 50 bilge pumps to CJI's warehouses whenever ordered, with delivery costs included in the unit price.

• For the new contract, CJI needs 50 pumps per month, and its ability to meet the demand is uncertain.

• To ensure smooth contract fulfillment, the purchasing manager, Nik Grams, must address potential issues with Heavey and the production manager at CJI.

• The issue with Heavey Pumps is the guarantee of delivering 50 pumps per month, which could jeopardize the contract if not met.

• Another possibility is to make the pumps in-house, which requires a significant capital investment, clearing space, and hiring additional employees.

• Mr. Grams is still determining whether investing in in-house production is wise due to the lack of experience and costs involved.

• Two other bilge pump manufacturers are located farther away and have not been used by CJI in the past.

• Mr. Grams contacts Bob Ashby, a unique project buyer, to help develop a plan for contract compliance with Great Lakes.

1. Major Problem

The following are the issues Mr. Ashby needs to research from both CJI's and Heavey's perspectives:

• Regarding Heavey Pumps, Mr. Ashby needs to determine if they can guarantee the delivery of 50 pumps per month to one of CJI's warehouses, handle the new contract's increased demand and production costs, and assess the quality history of the Heavey bilge pump, including any returns or performance issues in the past.

• Regarding CJI, Mr. Ashby needs to evaluate if it is feasible to make the pumps in-house concerning the initial capital investment, space availability, and hiring additional employees. He also needs to assess CJI's experience and capability in pump manufacturing. Furthermore, two alternative bilge pump manufacturers located 500 miles from CJI's warehouses need to be researched, considering their reliability, delivery costs, and quality reputation.

1. Possible Solutions

• Negotiate and establish a formal contract with Heavey Pumps:

I. Advantages: A formal contract ensures commitment and guarantees monthly supply.

II. Disadvantages: Heavey Pumps may need help scaling up production to meet increased demand.

• Seek alternative suppliers who can meet the required demand consistently:

I. Advantages: Provides a backup option if Heavey Pumps cannot meet the demand.

II. Disadvantages: Identifying reliable alternative suppliers and establishing new relationships may take time and effort.

• Increase order quantity to incentivize Heavey Pumps:

I. Advantages: Encourages Heavey Pumps to invest in production capacity to meet increased demand.

II. Disadvantages: Higher upfront costs for larger order quantities and potential inventory management challenges.

• Explore outsourced production to a third-party manufacturer:

Advantages: It may provide faster implementation and access to specialized manufacturing expertise.

II. Disadvantages: Potential loss of control over production processes and quality standards, reliance on external suppliers.

• Arrange visits or request references from other clients:

I. Advantages: First-hand assessment of manufacturing facilities and direct feedback from existing clients.

II. Disadvantages: Visits require additional cost and time, and the availability of client references is potentially limited.

• Establish clear communication channels and provide regular updates:

I. Advantages: Builds trust and transparency and enables proactive problem-solving.

II. Disadvantages: Requires effective communication management and resource allocation.

• Monitor and fulfill contract requirements:

I. Advantages: Demonstrates reliability and professionalism and enhances customer satisfaction.

II. Disadvantages: Potential challenges in meeting changing demands and maintaining consistent quality.

1. Choice and Rationale

CJI should combine all the alternatives listed below, including their advantages and disadvantages. It is better to have more options than less.

• Continued use of Heavey Pumps: Advantages include an established relationship and past reliability. The disadvantages include uncertainty regarding Heavey's ability to meet increased demand, potential additional production, and delivery costs, as well as jeopardizing the contract if Heavey fails to deliver on time.

• In-house production: Advantages include complete control over production and potentially lower costs in the long run. The disadvantages include the initial capital investment, hiring additional employees, and lack of experience in pump manufacturing. Risks include tight timelines and uncertainties related to the learning curve.

• Consideration of other suppliers: Advantages may include a broader range of options, better pricing, and quality assurance. The disadvantages include additional delivery costs and uncertainties regarding these suppliers' reliability and performance. Risks include potential disruption in the supply chain and unknown compatibility with Great Lakes' requirements.

1. Implementation

To combine the use of heavy pumps, in-house production, and other suppliers, it would be advised to consult with heavy pumps to determine their monthly supply capacity. Based on this information, we can then ascertain the quantity required from other suppliers and proceed to sign a contract with them. While preparing for in-house production, we must ensure that there is no rush in the production process and sufficient time is allocated for revenue generation. This will provide ample time for the company to raise the necessary funds required for in-house production. The term of the contract with the new supplier would be determined by how long they anticipate it will take to raise revenue and prepare for in-house production.

Appendix

1) The following are the issues Mr. Ashby needs to research from both CJI's and Heavey's perspectives:

• Regarding Heavey Pumps, Mr. Ashby needs to determine if they can guarantee the delivery of 50 pumps per month to one of CJI's warehouses, handle the new contract's increased demand and production costs, and assess the quality history of the Heavey bilge pump, including any returns or performance issues in the past.

• Regarding CJI, Mr. Ashby needs to evaluate if it is feasible to make the pumps in-house concerning the initial capital investment, space availability, and hiring additional employees. He also needs to assess CJI's experience and capability in pump manufacturing. Furthermore, two alternative bilge pump manufacturers located 500 miles from CJI's warehouses need to be researched, considering their reliability, delivery costs, and quality reputation.

2) CJI should combine all the alternatives listed below, including their advantages and disadvantages. It is better to have more options than less.

• Continued use of Heavey Pumps: Advantages include an established relationship and past reliability. The disadvantages include uncertainty regarding Heavey's ability to meet increased demand, potential additional production and delivery costs, and jeopardizing the contract if Heavey fails to deliver on time.

• In-house production: Advantages include complete control over production and potentially lower costs in the long run. The disadvantages include the initial capital investment, hiring additional employees, and lack of experience in pump manufacturing. Risks include tight timelines and uncertainties related to the learning curve.

• Consideration of other suppliers: Advantages may include a broader range of options, better pricing, and quality assurance. The disadvantages include additional delivery costs and uncertainties regarding these suppliers' reliability and performance. Risks include potential disruption in the supply chain and unknown compatibility with Great Lakes' requirements.

3) To assure continued contract compliance and additional business from Great Lakes in the future, CJI should consider the following steps:

• Maintain open communication with Great Lakes to understand their expectations and proactively address concerns.

• Monitor their performance on the contract closely, ensuring timely delivery and adherence to quality standards. This will help build trust with Great Lakes.

• Continuously improve production processes, cost efficiencies, and quality control to enhance its competitiveness as a valued alliance partner.

• Demonstrate its ability to meet Great Lakes' changing demands beyond the initial contract period by exploring various options, such as expanding capacity or diversifying suppliers to ensure a reliable supply chain.

By effectively managing these aspects, CJI can increase the likelihood of contract compliance and foster a long-term partnership with Great Lakes.