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The Tank Case

In: Business and Management

Submitted By CAashish
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The Tank Case
Issues
American Pride Molded Plastics being contractor for government need to select the supplier lowest cost in order to provide lowest possible cost to U.S. Army. Being a military component it has stringent quality requirements in order to perform well in extreme conditions. There are multiple risks associated with any quality issue which include Federal charges and negative publicity.
Alternatives
a) Single sourcing from Goodyear b) Single sourcing from Hsu & Hsu c) Assuming there is not restriction on having more than one supplier, dual sourcing with Hsu & Hsu as primary supplier and Goodyear as secondary supplier
Recommendation
I recommend that American Pride Molded Plastics should go with the dual sourcing with Hsu & Hsu as primary supplier (75% of total volume) and Goodyear as secondary supplier (25% of total volume).
Benefits of recommendation
Rubber cost with dual sourcing with 75% volume to Hsu & Hsu comes upto $56306.25 for 11250 tires. And the total cost for 15000 tires goes upto $92990.63 which is $0.27/lb. This gives the cost advantage of $53746.88 over lowest cost option from the three potential suppliers. This cost benefit will make the U.S. government convince to go with offshore supplier. Considering the normal risks associated with the offshore supplier having one mainland supplier mitigates the risk of disruption in supply. With this option there will be improved market intelligence and improved appraisal effectiveness for suppliers. Besides having dual sourcing will help to have immediate reaction plan in case of the supplier fails to meet expectation due to any reason.
Risks
Since this is a government contract, to make Hsu & Hsu a legitimate supplier, American Pride Molded Plastics need to get Hsu & Hsu and approved from government within one year of time frame. Also the compliance

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