Opre 6371 Case 5-2

6Case 5-2 Rondot Automotive Name Lovee Sachdeva, Bin Wen, Matthew Miles, Ryan Buxbaum ,Yuguang Wang, Shaoying Lu. Group 3 Date 2/22/2013 - Situation * Glenn Northcott is the purchasing planner at Rondot Automobile in Jackson, Mississippi. The beau monde is a wholly owned subsidiary of Rondot Worldwide, a leading globose designer and representr of galvanic and electronic components. Note You are Glenn) * Responsible for evaluation the outsourcing opportunity * Meet with Terry Gibson and purchasing film director to decide whether or not to take actions on outsourcing * Glenn had been approached by Greven E- finis willing to provide electro coating go to Rondot Automobile * Goals of finality devising Reducing the entireness speak tos composition maintaining and minimizing the risks from any changes made * substantial global competition under severe bell pressure * Customers price drop-off pressure expectancies from global competition * Total Sales and employment at the Ja ckson lay out had steady declined * Company is under significant pressure on cost reduction. The companys current precedency is to reduce operation cost * Rondot is a wholly owned subsidiary of Rondot Worldwide, a leading global designer and manufacturer of electrical and electronic components. Rondot Automotive ope markd 85 plants in 25 countries. The purchasing placement at Rondot automotive had a hybrid structure and the Jackson plants purchasing segment consisted of four people, including two buyers, a planner (Glen) and Terry Gibson. * Schedule with the purchasing manager, Terry Gibson, and the plant manager, gibe Taylor in one week, and both of them are under significant pressure to reduce costs at Jackson plant. * Greven E-Coating outsourcing opportunity * Greven E-Coating Company uses a dodge whereby a DC electrical charge is apply to a metal part immersed in a bath of oppositely charged paint particles. * Considered more than cost efficient compared to traditional awry(p) paint dodgings * Samples provided from Greven E-Coating Company Tests results 5/6 of families of ho usings could be converted to e-coaring using Greven at a cost of 15 cents each * Parts for five of the sise represents 60% of the Jackson Plants volume * Failure because of different methods of affixation of a draw to the housing. Hot bond adhesion offset fits e-coating while cold-bond adhesion process does not fit e-coating system Current situation * Total sales and employment at the Jackson plant had steadily declined everyplace the past five years. * The number of employees at the plant had dropped from 1450 to 600 and plant concern was under pressure to disgrace costs and regain mart share. * Glenn has the option to do outsourcing on cleaning and word picture work to Greven E-Coating. Glenn of necessity to come up with an ideal recommendation on how to reduce the cost and propose that to Terry Gibson and hammer Taylor. * The cleaning and wet flick had been in stalled 17 years prior and undergone a number of upgrades, and the current painting method costs 25 cents for each housing. (There are six parts in a housing family) BASIC ISSUES 1. Company to take decision on insourcing or outsourcing 2. Higher costs related to painting & cleaning 3. Lack of advanced technology to compete in cost reduction for a glare price 4. A decision to make, once made, is often difficult to reserve. If Rondot Automobile decides to make agreements on e-coating system, The plant needs to convert 100% hot-bond adhesion system 5.Total cost of converting 40% of cold-bond adhesion system to the total cost savings Long-Term estimation, not short term 6. Whether the use of e-coating will lead to doctor source dependency Is the e-coating system a common painting method in market? 7. The potency of e-coating VS. of traditional coating system 8. damage benefits analysis on the process 9. Inexperienced decision making on outsourcing opportunity Tasks * What does Richa rd Kaplan do? Richard needs to clarify and calculate the total cost savings and the cost of converting from cold-bond adhesion to hot-bond adhesion * 25 Cents * 6 = $1. 50 * 15 Cents * 6 = $0. 90 * Does the difference $0. 60 can unfold the conversion from traditional wet coating system to e-coating system? The durability and re-paint enjoin is also needed to consider If the wet-coating system has durability of 10 years while e-coating repaint rate is 8 years, The total cost of conversion from traditional wet-coating system to e-coating system will increase importantly * What are alternatives? * Negotiate with Greven E-Coating for a lower costs * Conduct a careful research on both advantages and disadvantages of E-coating system * Search for more options in potential sources and substitute items other than traditional wet-painting and e-coating * The dispute of maintaining long-term proficient and economic viability for the possible 100% hot-bond adhesion system * The revision of policy of supplier selection Criteria of standardization and policies regarding the choosing of suppliers * An understanding of the market conditions in order to set appropriate expectations for the price provided from Greven E- Coating * Analyze data collected for cost and technical information * Identify the root causes of sales decline. If the sales revenue can be improved, the company can maintain the current painting process to revoke future external risks * * regain that is the cold-bond adhesion system a necessary facility for the particular family to manufacture any specified electrical and electronic components * Dose this outsourcing plan fit the business goals and objectives? * What does the companys top management think rough the Jackson plants outsourcing plan? * Which level of management makes a final decision on outsourcing? Talk to manufacturing manager and clarify more information about cold-bond adhesion * Talk to the manager in the family that uses cold-bond adhesion system. Clarify the reason why the family of housing distinguish to use cold-bond adhesion * Identify and estimate total cost to uninstall and setup the new bond system if the method of adhering a magnet to the housing is not mandatory SUGGESTED QUESTIONS FOR DISCUSSION 1. How to make analysis of the cost of switching current painting process versus the cost of setting up a painting process? What kinds of training should be provided due to the new standards of temperature, air and etc? 2. If the result of outsourcing is rejected, is the subcontracting an alternative for the company?What are the benefits and risks of using reverse auctions for specialized OEM parts? 3. What risk management and contractual steps are necessary before moving company owned tooling to a new supplier? 4. What are the benefits and risks of outsourcing? Actions * Determination of detailed place & mandatory of Cold-Bond Adhesion system * Meet with both Manufacturing manager and the family manager in Jackson Plant. * Determine the total costs of uninstallation the current cold-bond adhesion system and the installation of hot-bond adhesion system * Total Cost Savings calculation * Identify the cost savings potential after the modification. With the newly modified standards, channelize with Greven E-Coating and analyze the decision based on the feedbacks from the supplier. * Determine whether the total cost savings can cover the conversion cost from cold-bond adhesion system to hot-bond system * Estimate the future necessity and future technological angle of inclination of replacing traditional wet paint to E-Coating. If the company is going to replace the traditional wet painting in the future anyway, the cost of conversion can be ignored. * Talk with Betty McKinley again and localize the detailed cost of holding two more weeks of inventory * Make agreements on price and quantity, stave negotiate the term of warranty and quality assurance with Greven E-Coating Results If a ccept outsourcing opportunity * Cost savings25-15-3=7 cents on each housing * Add another two weeks worth of inventory * Lower pains and material costs * Product price reductions i. e. ability to offer reduced price to customers. * Become more competitive and there will be a gradual increase in the profit and market share. * If not accepting outsourcing opportunity (i. e.. using the earlier system ) * No savings- no price reductions * expurgate risk for investment * Extra cost in upgrading the system * Spending on more grate in this operation which results in additional costs * May result in lower operational time * Extra time for testing upgraded system. If total cost savings is greater than the costs of uninstallation of Cold-bond adhesion + Installation of hot-bond adhesion + unornamented inventory carrying costs * Prepare the agreements and contract documentation on outsourcing decision with Greven E-Coating * The contract content with Greven E-Coating tends to be short-ter m to avoid sole-source dependency situation. Reach out lower priced suppliers while maintain the quality assurance * If total cost savings is equal to or less than the costs of uninstallation of Cold-bond adhesion + Installation of hot-bond adhesion + extra inventory carrying costs * Determine the importance of common tendency of using E-coating for other manufacturing companies.If the E-coating is not mandatory in the future market, reject the outsourcing plan to avoid extra possible risks * Find out other alternative ways to reduce total costs, such as reduction of labor costs, manufacturing overhead or the replacement of cost-efficient equipment or facilities Priorities * Maintain cost reduction at the Jackson plant. * Increase sales volume and high market share. * Ensure a sure-fire outsourcing decision. * Maintain companys reputation-image for reliability. Conclusion The painting process should be outsourced in order to bring home the bacon significant cost savings. Ensure su pplier selection process is properly done, forecast and mitigate against outsourcing inhering risks and ensure quality standard is met at all times. These will help in achieving a victorious outsourcing agreement.