Procurement Management

Final Exam

MGMT 6220

Fall 2018

Two Questions:

1. You receive this email:

2. To: Victor Kliossis

3. From: Anil Patel

4.

5. Victor,

6.

7. I was following up on your request to explore sourcing from a castings supplier located in India. I have identified a suitable candidate, the Golden Elephant castings company. As you stated, this is an important decision, as this supplier will be a single source providing castings for your entire new line of product in the C-series. As you know, the C-series forecast is $50M in revenue during the first year, and growing to $75 M in the second year. Based on your process specifications, this is the only available castings supplier in our supply base with the required heat treat ovens capable of meeting your specifications as well as the cost and price targets you specified. Essentially, this supplier has the lock on this business for the C-series. He seems to know this.

8.

9. We visited the supplier’s location, and were greeted by the company’s owner. He was very pleased with the results that our negotiating team came to terms with, and afterwards gloated with some pleasure that this was going to be a very profitable business deal for Golden Elephant. He noted that the firm was under new management as of six months ago, and that he was taking over management of the factory from the previous owner, who had sold out and gone into retirement. Upon taking a tour of the facility, we found it was well-lit, and workers seemed to know what they were doing. In private, the owner told us that he felt these workers were overpaid, but that he was trying to keep labor costs below the average for New Delhi, and tried to keep his workers in the dark. We did not see evidence of any statistical quality control charts but the owner assured us that workers were well-trained in these methods. The owner also noted that they are anxious for this business, as this will represent an order that will double their current business volume. We met with some of their technical engineers, and they seemed very young. In fact, one of them shared with us that he had just started the day before, and was replacing someone who had lasted only two months in that role.

10.

11. We met with their purchasing group. Their offices was full of paper piled up high to the ceiling, and they emphasized how busy they were processing PO’s with their vendors. When we asked who their primary steel supplier were, we were told that they liked to shop around for the cheapest price, and rarely bought any steel except at spot prices through intensive negotiations. They also noted that there had been some problems in getting steel in some cases, due to the recent shortages being driven by the high demand for steel.

12.

13. We then identified how shipments would get to your factory location in Omaha, NE. Golden Elephant will arrange for in-land transportation, as the owner’s brother-in-law has a trucking company. The shipment would then go through the Indian port. There have been some rumors of union problems with the dockworkers at this location, but our sources believe that this is only a rumor. Once the shipment arrives in the port of Los Angeles, it will be unloaded, put onto a trailer, and driven the Omaha location. We are still waiting on quotes for shipment times, as the recent hike in fuel prices means the shipping companies will not commit to a firm trans-oceanic shipping cost. This is the first time this supplier has exported product to the United States, but the owner has assured me that his administrative assistant has worked on shipping documentation in her former job, so this shouldn’t be a problem.

14.

15. Let me know what your decision is on whether to proceed.

16.

17. Anil

Identify potential and actual risks that are evidenced in this email. Then develop a risk assessment which includes your assessment of the risks of:

1. Supplier Relationship

2. Information sharing

3. Performance

4. HR

5. Disruption sources

6. Financial

Question 2:

Do this case

Using Teams at the Engineered Materials Business Unit

Consolidated Products is a $21 billion company headquartered in Atlanta, Georgia. The company’s five business units, which offer a wide array of products and services, are the result of an aggressive strategy of mergers and acquisitions starting in the late 1980s. Exhibit 1 provides an overview of Consolidated Products and its five primary business units. The corporate staff is surprisingly small, comprised of general management, legal staff, and human resources. Part of the reason for this small staff is due to the eclectic array of businesses housed within one corporate entity. A Business Week editor recently commented that “Consolidated Products could easily be broken up into five separate companies, since at one time it was five separate companies.” The editor also said that if the company “ever learned how to leverage its size in the marketplace, Consolidated Products could be a Wall Street powerhouse!”

While Consolidated Products is a global corporation with facilities around the world, it operates each business unit as a highly independent and decentralized company. The corporate culture is best described as entrepreneurial, with each business unit being headed by an executive vice president who has complete profit and loss accountability. This case focuses on the Engineered Materials business unit.

ENGINEERED MATERIALS

The Engineered Materials business unit, acquired in 1999, is the newest and smallest addition to Consolidated Products portfolio of companies. Part of this business unit’s efforts over the last year have centered on becoming more integrated across the various functional groups that make up the business unit. Unfortunately, this unit was previously part of Andreas Manufacturing, an old-line company with a strict hierarchical culture. Executive managers at Consolidated Products knew this purchase would present some interesting challenges regarding how this unit would fit in with the entrepreneurial culture that Consolidated Products has tried to create. Unfortunately, Engineered Materials is struggling. In fact, internal problems created by the efforts to change the culture helped push 2003 sales down 8 percent as the rest of the industry increased by 5 percent.

Executive management believes that the use of cross-functional teams is a primary way to change the unit’s culture while achieving major performance improvement savings. One of the teams that management expects to deliver major cost savings is the composite materials team. This team, chartered in November 2002, had initial savings targets of 15 percent cost and productivity savings, which translated to $3 million in annual savings. The team, which has been meeting on a regular basis for 12 months, has struggled to develop a purchasing strategy for composite materials. Unfortunately, this team is not working well together or making much progress, which has frustrated executive management and has affected the financial projections for 2004 and 2005. The team has fallen far short of its expectations. While no one has formally identified the exact reason(s) for the less than optimal performance, an internal consultant has interviewed several team members. Examples from comments made by these team members include—

· Some of the team’s members are not that committed to the assignment. One even commented that his regular job responsibilities come first. After all, that’s where his manager really holds him accountable. And, he continued, what is really the risk of not supporting the team? The way this member sees it, the real risk comes from putting in too much time on the team and neglecting “the real work.”

· Some of the team members maintain they do not really understand the team’s goals. The goals that the team developed are vague, or simply address team behavior. For example, one goal is for the team to “meet once a week.”

· While the team has a formally designated leader, he spends too much time talking and not enough time listening. He also gets angry when team members don’t agree with his position on an issue. Several members commented how rude he can be to team members.

· Some members perceive that management is not forthcoming with the necessary resources. In the opinion of one member,” Team members spend too much time requesting the necessary resources rather than working together on team assignments.”

· One member asked what qualified him to be on a team. He said he was never on a cross-functional team in his 20 years with the company. How is he supposed to know what it takes to be part of a “higher performance work unit?” This member further questioned whether the Engineered Materials unit, given its history and culture, is ready for team-based management.

Although the methodology was not rigorous, the internal consultant quickly determined that the use of teams at this business unit was in serious need of help.

Assignment Questions

1. Gaining team member commitment is critical to team success. Discuss how this unit can use its employee performance evaluation and reward system can encourage members to support cross-functional project teams. Be sure to provide examples of the kinds of rewards available to team members.

2. Goal setting is also important to team success. Discuss how organizations and teams should establish goals, and why having team goals is important.

3. Research has demonstrated a strong link between effective team leadership and cross-functional team success. Describe the characteristics of an effective team leader. Next, describe the responsibilities and requirements of cross-functional team leaders.

4. Identify the kinds of resources, in general, that cross-functional sourcing teams should be provided to be successful. (Note: A specific team could differ in its needs compared to other teams)

Identify the types of training that team members at Engineered