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Callaway Electronic Company Case Study

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Callaway has reached near-capacity conditions in the plant and is required to subcontract a key component for their subsystem. It has been decided that engineering would work with supply chain to select three potential suppliers. Tom Cunningham, the Supply Manager of Callaway Electronics, is in charge with deciding which of three contractors to choose for their subcontracting job. The three suppliers are: Castle, Eagle, and Apache. Below is an analysis of the proposal and terms of each supplier.

Table 1: Financial Ratio Analysis – Analyzing Liquidity
Castle:
Pros: * Met with Callaway to discuss product and to ensure proposed product meets specifications. * Callaway engineers were very impressed with the final design. * Exceeds many of the performance parameters specified. * Will carry inventory on a no charge basis.
Cons:
* All components are 100% custom made, which would result in long lead times for all parts. * No design changes are allowed once contract has been signed. * Cash advance of $2,000,000. * No cancellation clause in contract once contract is signed. * Least liquid compared to all the suppliers.
Eagle:
Pros: * Allows for redesigns of products, although charges Callaway full price for all units prior to resign if they are to be scrapped. * A number of units will be tested prior to shipping the products. * Can start project right away. * Can meet shipping requirements. * Can start shipping a month earlier than needed.
Cons:
* Most expensive quote of all three contactors. * Only met with Callaway once, which could result in potential issues in product due to not exhibiting a final product design. * Learning curve of 95% at 200,000 units, which is the longest of all suppliers. * 50% of components are custom made, which could potentially result in long lead times. * Cash

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