Rondot automotive was a hybrid structure; Plant in Michigan manufactured HVAC, engine coolers and ant-brake systems. Where major contracts done by purchasing department in the company headquarters in Michigan, plant level reported to Purchasing managers who were in charge for materials management, contracts for local requirement. Purchasing department has 4 people 2 buyer, 1 planner and 1 purchasing manager. Glenn has to take a decision to cut down the production cost.
Key Issues:
• Rondot facing considerable Global competition & pressure from its customers for price reduction.
• Regain market share by cutting down costs so cutted down employers from 1450 to 600.
• Wet paint systems has been pretty old and outdated when compared to e-coating technology.
• Outsouced job would have inventory hold for 2 weeks extra and transportation costs 3c/part.
Analysis:
Traditional machine operates in 25c/part which includes everything and it is shipped immediately so inventory is not used, whereas in e-coating costs 15c + 3c for shipping and 2 weeks of inventory is used. And through e-coating just hot-bond process is successful so have to use the traditional machines for cold-bond processed parts. Traditional machine is upgraded time to time to compete with market whereas the company has to cut down costs to hold the market share.
Recommendation:
Glenn should recommend signing a contract with Greven e-coating and negotiating if they can and get a competitive price. And also to ship the finished products immediately to Greven, so inventory won’t be used. (Leenders, 2011)
Works Cited
Leenders, J. (2011). Purchasing and Supply Management. New York: McGraw-Hill Higher.
International Purchasing and Supplier Management
SCM 880