Global Industries, the parent company of Marsden Manufacturing, a pump maker sup

Question

Global Industries, the parent company of Marsden Manufacturing, a pump maker supplying the aircraft and automotive industry, has recently implemented an ERP system and not too long ago tied in the last of its six subsidiaries. Marsden, the second to complete its final phase of the cut-over, has been operating on the new platform for several months. John Roberts, the company’s Sourcing Manager, has been wrestling with the concept of jointly contracting with some of the other subsidiaries for commonly used products and services. Since three of the others are serving the same industries, Roberts felt this would be a no-brainer.

While the other Sourcing and Procurement Managers agreed in principle to centralize some of their purchases with Marsden, gathering the actual data for an analysis has proven elusive. The previous manual system required considerable time and effort to conduct supplier analysis and selection, and little data existed on spending patterns at any of the companies. Data would be gathered manually on potential suppliers’ past performance, including their prices, their ability to meet delivery dates, and their history on quality but that information was widely dispersed in stored records and on disparate legacy systems. Sampling showed that they could expect that very little nomenclature or part numbers could be matched from one company to the next. There was no summary of the amount of spending by part or service at any of the companies.

The team of managers agreed that in order to compile this historical data, the staff must manually combine separate reports from supply management and finance. This effort appeared daunting since none of the firms had an excess of personnel. Roberts was tasked to lead this effort as best he could and develop a plan to consolidate spending for the next year. He was to report back to the team in six weeks.

Using the Executive Summary format that covers the following aspects. But only need the (Recomendation, Outcomes, Threats, Defenses)

Discuss potential benefits and barriers of implementing centralized purchasing and sourcing.

Outline the approach you believe Roberts should take to solve the existing problem and address the plan for the following year.

Given the current situation, how practical is it for the companies to consider centralization?

Explanation / Answer

Q1) Below are the potential benefits and barriers of implementing centralized purchasing and sourcing-

1. Benefits include reduced leadtime, reduced costs, better materials planning and increased availability of materials as the orders can be placed through multiple suppliers on a priority basis.

2. Barriers include consolidation of the purchasing data, master data etc., availability of supplier performance information/history for the past few years, ease of implementing the centralized system etc.

Q2) Below is the approach that Roberts should take to solve the existing problem and address the plan for the following year -

1. Delegating the task of data consolidation to the sourcing managers of the respective locations and creating a timeline and a plan for data consolidation and delivery in phases.

2. Involving the ERP consultants and data solution consultants for conversion of the data from legacy systems and manual records to teh ERP systems.

3. Conducting multiple test or mock conversions till the errors/data issues are resolved and planning for the actual data conversion cycle.

4. Implemening the actual conversion cycle and developing reporting for validating and using the data.

Q3) Companies need to look for centralization if the products/services require similar materials from accessibel suppliers to ensure the leadtimes and costs are reduced while efficiencies are increased. Though the initial data consolidation and conversion looks very tough, by ensuring accurate data collection for a time period and accurate analysis related to supplier performance, it is achievable and also provides multiple advantages for the firm in long-term to compete in the IT enabled era.

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