According to the case, CJ industries manufacture products related to the engine. The company has been granted a five-year contract valued at $10Million annually by Great Lakes Pleasure Boats to supply engine units. CJ industries manufacture all the products needed for the contract but purchase bilge pumps from Heavey Pumps Company. The company is in a dilemma of whether to buy from Heavey Pumps, manufacture internally, or the other two firms. This paper focuses on analyzing the case study.
Major Facts
Following the case, CJ Industries manufactures engine-related products. In October 2007, the company was granted a five-year contract valued at $10 Million every year by Great Lakes Pleasure Boats to commence in July 2008. The contract involves CJI supplying significant machine components for Great Lakes Pleasure Boats in manufacturing their boats. CJI makes all products vital for the contract and supplies from their finished goods warehouse but outsources bilge pumps from Heavey Pumps Company. They are therefore faced with the challenge of acquiring the bilge pumps.
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CJ Industries can increase production but are not sure of Heavey Pumps' capacity and readiness to expand theirs due to the additional production costs (Kumar, 2018). There are also no records showing the performance of Heavey Pumps in supplying a high number of bilge pumps. Therefore, it is not clear whether the company will be able to supply 50 pumps in a month. CJI has an option of manufacturing the pump internally, but there is a concern about the extra costs and the timeframe to find resources for the manufacturing plant. CJ Industries has an option of purchasing from the companies suggested by Mr. Grams, but the distance is 500 miles. It is not clear whether the quality of pumps produced by the companies is worthy or bad.
Major Problem
The main problem currently facing CJ Industries is determining the option to settle for in the sourcing the pumps as the company is observant not to jeopardize the contract. The purchasing manager has to make a decision regarding buying the bilge pumps from Heavey pumps or from the other two suppliers who are 500 miles away. The company also has an alternative to manufacturing the pumps, which will attract additional costs (Kumar, 2018). CJI seeks to ensure adherence to the current contract and get other business contracts from the Great Lakes Pleasure Boats.
Possible Solutions
There exist three probable resolutions for CJ industries. The first involves purchasing the pumps from Heavey Pumps. The advantage is that the company has experience in production. The CJI will also evade the costs of establishing a manufacturing plant (Raut et al., 2019) . The disadvantage is that Heavey Pumps do not have records to support their performance. Therefore, there is uncertainty about their ability to meet the pumps' demand and quality.
The second solution is starting an internal production of the pumps. The company will have to extend its operations and include additional resources to ensure the successful manufacture of the items. The advantage is that the company can sustain production even during high demand (Raut et al., 2019). They can also ensure that quality pumps are manufactured on time to ensure compliance. The disadvantage is that it will incur additional costs. The company also lacks experience in the production of the pumps.
The third option is sourcing from the two alternative companies. The advantage is that CJ Industries will avoid the expensive costs of establishing a pump-manufacturing plant. The disadvantages include that they are 500 miles away, which will lead to additional delivery costs (Raut et al., 2019). There is no experience from the firms. Besides, there is no surety of the quality of the pumps manufactured by the two companies.
Choice and Rationale
Following deliberation of the available options, the paramount resolution for CJ Industries would be to internally manufacture the bilge pump and adding it in the strategy of expanding production to fulfill the escalating demand. Even if the option would lead to an additional cost of over $500,000, the advantage is that the long-term fiscal profit of fulfilling the demands of the contract for the five years is worth the risk (Qazi et al., 2018). It also guarantees that the company complies with the contract in the required period. Besides, the company will not have to worry about bleaching the contract resulting from unconfirmed supplies. The reasons for not selecting the other options include the companies' uncertainty about meeting the supplies on time. For the Heavey Pumps, they may be unable to supply the required pumps in a month. The other two companies are 500 miles away, which would translate to additional delivery costs. There is also no guarantee of the companies delivering quality pumps.
Implementation
The procedure for executing the resolution should be initiated immediately. CJ Industries should capitalize on expanding their production while adding the production of the pumps in their plot (Qazi et al., 2018). Capital should be set aside for the establishment. The essential additional equipment and labor related to manufacturing the pumps should also be acquired.
Appendix: Case Study Questions
Question one
The first issue is that CJ industries can produce pumps. However, there are further costs and extra space required for the production. Mr. Ashby should research the estimated cost-benefit analysis of the company, ramping up production and manufacturing the pumps to determine if the investment is worth it. He should also investigate on Heavey Pumps' capability to supply the pumps (Qazi et al., 2018). The company has experience in the manufacture of pumps. They, however, do not have the records showing the performance of the production of the items. Mr. Ashby will then decide the best option.
Question Two
CJ Industries should stop using Heavey Pumps for bilge pumps and manufacture them internally. The main advantage is that it will ensure CJI adheres to the contract (Qazi et al., 2018). The disadvantages include that the company has never produced the pumps before so quality could be compromised. There are also additional costs.
Question Three
CJ industries can guarantee sustained contract compliance and further business in the future by ensuring they meet the production of the required pumps in the given period. It will also ensure that quality pumps are produced (Qazi et al., 2018). By establishing a firm for the bilge pumps, they will be able to monitor supply. The company will also ensure the pumps are delivered to its clients at a convenient time.
References
Kumar, R. (2018). Some Issues in Supply Chain Management. Retrieved from http://14.139.60.7:8080/xmlui/bitstream/handle/123456789/2790/TH-1606.pdf?sequence=1&isAllowed=y
Raut, R. D., Mangla, S. K., Narwane, V. S., Gardas, B. B., Priyadarshinee, P., & Narkhede, B. E. (2019). Linking big data analytics and operational sustainability practices for sustainable business management. Journal of cleaner production , 224 , 10-24.
Retrieved from https://doi.org/10.1016/j.jclepro.2019.03.181
Qazi, A., Dickson, A., Quigley, J., & Gaudenzi, B. (2018). Supply chain risk network management: A Bayesian belief network and expected utility-based approach for managing supply chain risks. International Journal of Production Economics , 196 , 24-42.
Retrieved from https://doi.org/10.1016/j.ijpe.2017.11.008
