C. The previous month’s performance data for the office shows: 743 transactions, 98 percent with delivery on or before specified dates, 87 percent of supplies and material purchases at or within 5 percent of target price, 9 percent late deliveries, and a 5 percent rejection rate of materials and supplies received. D. A purchase request for a new robot, that according to estimates would cost $5. 5 million, was submitted by the maintenance department. It was supposed to be delivered and operational in seven months and only one source of supply was able to meet the delivery date. . An experienced buyer in Ted’s department, John McCauly, was negotiating with Fenwick Electronics for the robot. Although the maintenance department proposed $5. 5 million, Fenwick proposed $7. 2 million. Because of time, Fenwick was the sole source for obtaining the robot. b. John learned that the $5. 5 million estimate on the robot was in reality not an estimate but the amount budgeted for the machine last year. E. Several members from other departments of Eagle Manufacturing Company are not satisfied with Ted and the supply management department’s work.
c. The Vice President of Operations, Tim Raines, and the Vice President of Marketing, Ron Hankins, were not happy that operations had run out of parts that week. Also the quality of the incoming parts was causing major production problems. d. The president’s secretary was not satisfied with the poor quality of the janitorial services contractor. e. The head of administration, Mary Jacobs was not satisfied with the quality of the new brand of paper which was constantly jamming the machine thus reducing productivity and increasing frustration amongst the administration epartment. II. Major Problem A. One major problem is communication between the various department and an understanding of the ins and out of each department and how each function of each department can affect another department in some way. B. Another problem is the quality of the services or products purchased by the supply management department. Because the quality of the services or products were low, the quality of work or product are also low which can affect profit and can also affect the way another department can accomplish tasks.
III. Possible Solutions/Alternatives A. Communication would greatly help this situation. For example John, who is a buyer in Ted’s department did not know the $5. 5 million estimate on the new robot was actually the amount budgeted for the robot from the previous year. If John, the maintenance department, and even the finance department had been in frequent communication with each other regarding the new robot, John would have had a basis for developing a realistic negotiating objective with the supplier of the robot, Fenwick Electronics.
There really is no disadvantage to good communication within each department. B. Each department needs to understand how the activities in their department can affect other departments, company profits etc. For example supply management, manufacturing, and operations are related. New product development begins with the manufacturing department. The manufacturing department submits a materials requisition to the supply management department.
If the manufacturing department does not give the supply management department sufficient time to compare costs in order to purchase wisely, the company will most likely pay higher prices for materials. C. Eagle Manufacturing Company should hire a Director of Quality Assurance if they have not done so already. The Director of Quality Assurance would be involved in the development of new products to involvement in sourcing, supplier development, and qualifying the potential supplier.
The Director of Quality Assurance’s objective would be to minimize quality problems throughout the supply chain thus minimizing problems other departments may experience. Although hiring somebody to handle quality assurance would be another expense to Eagle Manufacturing Company, hiring somebody to handle quality assurance would be like an investment. This person would ensure that the quality of a potential supplier is exceptional which would then create good quality work which would then increase profits for Eagle Manufacturing Company. IV. Choice and Rationale
Eagle Manufacturing should first and most importantly focus on good communication within their departments and also make sure each department understands how all departments are interconnected and affect one another. Encouraging and maintaining open communication throughout the procurement process will 1) reduce the frustrations within each department and raise company morale and 2) possibly cut costs for supplies. V. Implementation/The Action Plan Ted Jones, the supply management manager for Eagle Manufacturing, must discuss the communication problem between departments to manager of each department immediately.