1 CJ Industries and Heavey Pumps\' In October 2007, CJ Industries (CII) had just
ID: 385639 • Letter: 1
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1 CJ Industries and Heavey Pumps' In October 2007, CJ Industries (CII) had just been awarded a 5-year contract with Great Lakes Pleasure Boats amounting to U.S. $10 million per year, commencing in July 2008 CI would be providing a number of key engine components for Great Lakes' luxury line of pleasure boats. The award marked an important milestone for CII, in that it was the culmination of several years of hard work and dedicated service, supplying Great Lakes parts for their boats on an as-needed basis. The contract had significant long term follow-on potential as well, if they could continue to show Great Lakes they had the capabilities to be one of their valued, alliance partners. In addition, with this contract Great Lakes would represent approximately 30 percent of CII's annual sales, so perform- ing adequately on this contract had a significant long-term financial impact on CII. One of the parts, a bilge pump, was an item that CII had been purchasing from one of their suppliers, Heavey Pumps, a small local specialty pump manufacturer, on an informal, non-contract basis. The remaining items ere ali buit in-house by CII and supplied to Great Lakes from one of their two finished goods warehouses located near the Great Lakes production facilities. Heavey Pumps was producing and delivering 50 bilge pumps at a time at a cost of U.S. $1500 per unit and built to Great Lakes' spe- cifications, to one of the CII warehouses, whenever an order was telephoned in by CJL The idelivery costs (about US $500 per 50 pump shipment, depending on the carrier used) were included in the U.S. $1500 per unit price. This scenario typically occurred about every four to six months. Normally, CJI would order another batch of 50 about eight to ten weeks ahead of time, and Heavey had always been able to supply the pumps before CJI's stock was depleted.a Though CJI had sufficient excess capacity to ramp up production on the parts to be supplied in the Great Lakes contract, they were not sure about the ability or willingness of Heavey to increase their production of the bilge pumps. The new demand for bilge pumps starting in July would be 50 pumps per month, and potentially more, depending on Great Lakes' demand, and the ability of CJl to perform on the contract. There were a number of issues that Nik Grams the purchasing manager who put the contract together with Great Lakes, needed to work out with both Heavey and the pro duction manager at CII, in order for this contract to be met with as few problems as possible. The issue with Heavey Pumps was whether or not they could guarantee delivery of 50 pumps per month to one of the ClI warehouses. This had been the one item that had and it now loomed as something that could conceivably put the contract in jeopardy. There were potentially edditional equipment, labor, and other production costs for Heavey associated with the extra demand for bilge pumps, not to mention extra delivery costs as well Heavey had 1,0 Joel Wisner, PhD, CPM, University of Nevada, Las Vegas ( el wis ere nivedu). This case was pr pared solely to provide material for dass discussion. The author does not intend to illustrate either effec- or ineffective handling of a managerial situation. The author has disguised names and other tive identifying information to protect confidentiality.Explanation / Answer
1)-
Mr Ashby has together all the information related to CJI's to hold the respective agreement. Heavy pump obstacles as well as other concerns and questions are also the major factors that Mr Ashby has to look after. He has to ensure that the specific workload is effectively hunted by CJ industries which would enable them to produce other components for building the pump. Determination of the total cost of operation from making the initial investment as well as for paying heavy pumps with a total percentage of 10 million dollars as well as to calculate shipping cost or the possibility of utilising any of the other two companies in future.
2) -
As specifically stated in the case study the best option for CJ industry is to use combination of adding heavy pumps to their operational structure. Ensuring them by providing them a percentage of the total contract revenue as well as increment in the overall productivity of the pump of other part to ensure better manufacturing as well as a Project regarding overall pump production. Increasing the Inventory of the forms as well as investing in the initial start up cost for maintenance of hiring experience personal in this field for making the products internally would be the main approach for improving the overall benefits of a specific type of operation.
The most important part of this is specific aspect is to providing assurity that heavy pumps is specifically willing to work with CJ industries. Increased amount of compensation is offered by CJI which would increase the overall availability of opportunities for the company to maintain better standards and operation.
The biggest disadvantage of relying on other to company is there trustworthiness. As there is no pre existing relationship with the specific company it would be really hard to determine their trustworthiness. Even if the percentage is given out of the contract to this specific company trustworthiness cannot be easily determined. CJ industries must not have been looking to pay transportation costs and to provide profits to other two companies as a percentage of the total annual earnings which they don't know about completing the task can destroy the overall a relationship with the Great Lakes.
3) -
CJ industries can easily assure producing high quality pumps as they are very well known for not jeopardizing the relationship with Great Lakes by delivering top quality product. We can also ensure that specific term buy maintenance of standards of the quality for the pumps delivered in time without any degradation in production quality or delivery. It is only possible with the help of expansion. For ensuring that the company has full Corporation from heavy pumps as well as ensuring the production for the pumps are as good as Heavey's when they have to make their own. CJ Industries can specifically show great Lakes regarding their ability to overcome adversity in a very short period of time which would definitely determine the future of the company.
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