Best Practices in Supply Chain Management Case Study

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CJ Industries CaseI. Major Facts1. CJ Industries (CJI) has been awarded a 5-year contract with Great Lakes Pleasure Boats amounting to U.S. $10 million per year, commencing in July 2008.2. CJI will be providing key engine components, including a bilge pump currently purchased from Heavey Pumps.3. The contract with Great Lakes represents approximately 30% of CJI\'s annual sales.4. New demand for bilge pumps will be 50 per month, potentially more depending on Great Lakes\' demand.5. Heavey Pumps is unsure if they can meet this increased demand.6. CJI could produce the bilge pumps in-house but it would require a capital investment of about U.S. $500,000.7. There are other suppliers, but they are further away and untested by CJI.8. Bob Ashby, a special project buyer known for rapid implementation, has been assigned to develop a plan.II. Major ProblemCan CJI fulfill the increased demand for bilge pumps as part of their contract with Great Lakes while maintaining cost-efficiency and quality, considering the uncertain capability of their current supplier, Heavey Pumps, the significant investment required for in-house production, and the potential risks of utilizing untested suppliers?III. Possible SolutionsA. The first possible solution would be for CJI to continue with Heavey Pumps as their sole supplier of bilge pumps. This has the clear advantage of avoiding the need for capital investment in new production facilities, while also maintaining a pre-existing business relationship. However, the disadvantage of this approach lies in the uncertainty around Heavey\'s capacity to meet increased demand. Moreover, it may be possible that Heavey would want to renegotiate the contract terms given the increased volume, leading to potential cost increases.B. Another option is for CJI to move the production of bilge pumps in-house. This would grant CJI full control over the production of the pumps, providing assurance of meeting the increased demand. However, the disadvantages of this approach are significant. Firstly, it would require a large capital investment of approximately $500,000. Also, the timeframe to get the production line operational is tight, with only about nine months remaining until the contract start date. In addition to these, CJI lacks pump manufacturing experience, which may lead to unforeseen issues and challenges in the production process (Zhang et al., 2021).

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C. A third possibility is to utilize other bilge pump suppliers. This could potentially meet the increased demand without CJI having to invest in new production facilities. The downside to this approach is that these suppliers are located much farther away, which would result in increased delivery costs. Moreover, since CJI has never worked with these suppliers before, there\'s a…

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…relationship and the assurance of product quality, given the long-standing partnership. However, there are potential downsides. Heavey might not have the capacity to meet the increased demand, and could possibly increase prices. The sole reliance on Heavey makes CJI vulnerable to production disruptions and a potential cost increase could affect profit margins.Exploring other suppliers could provide CJI the ability to meet increased demand without a large capital investment. It diversifies the supply chain, reducing the risk of reliance on a single supplier. However, these suppliers are farther away which may increase delivery costs. New suppliers could also lead to quality inconsistencies. Risks include potential supply disruptions, quality issues, and unforeseen contractual disputes with new, untested suppliers.Planning for potential in-house production gives CJI full control over production and quality, ensuring stability in supply. It might also lead to long-term cost savings. However, this requires a significant upfront investment and CJI lacks pump manufacturing experience.By combining these approaches, CJI can potentially balance the risks and disadvantages associated with each strategy while enjoying their respective advantages. It allows them to secure their supply chain, manage costs effectively, and uphold their contract obligations.3. CJI can assure continued contract compliance by diversifying their supply chain and planning for in-house production, reducing the risk of supply failure and ensuring they….....

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