Supply Chain Diversification Strategies Risk Management Case Study

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CJI Case Study


I. Major Facts


1. CJ Industries (CJI) Awarded a Major Contract: In October 2007, CJI secured a 5-year contract with Great Lakes Pleasure Boats, worth $10 million annually, starting July 2008. This contract represents 30% of CJI\'s annual sales.
2. CJI\'s Dependency on Heavey Pumps: CJI has been purchasing bilge pumps from Heavey Pumps, a local manufacturer, on a non-contractual basis. These pumps are a part of the components CJI supplies to Great Lakes.
3. Increased Demand and Supply Challenges: The new contract requires CJI to supply 50 bilge pumps per month, a significant increase from the previous sporadic orders of 50 pumps every four to six months.
4. Uncertainty of Heavey Pumps\' Capacity: There are doubts about Heavey Pumps\' ability and willingness to meet the increased demand.
5. In-House Production Consideration: CJI has the capability to manufacture these pumps in-house, but it would require a $500,000 investment, space clearance, and additional labor.
6. Alternative Suppliers: There are other bilge pump manufacturers, but they are located further away and have not been previously used by CJI.

II. Major Problem


Can CJ Industries guarantee a consistent and reliable supply of bilge pumps to meet the demands of the new contract with Great Lakes Pleasure Boats, considering the uncertainties with their current supplier, Heavey Pumps, and the challenges of in-house production or using alternative suppliers?

III. Possible Solutions


A. Continue with Heavey Pumps


· Advantages: Established relationship, proven quality.
· Disadvantages: Uncertainty in meeting increased demand, potential production and delivery cost increases.

B. In-House Production


· Advantages: Control over production, potential long-term cost savings.

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· Disadvantages: High initial investment, lack of experience in pump manufacturing, time constraints.

C. Use Alternative Suppliers


· Advantages: Potential to meet demand, diversification of supply sources.
· Disadvantages: Unknown quality and reliability,…

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…production, the implications of a long-term contract with CJI, and the impact on their business if CJI chooses another supplier or opts for in-house production.
2
Continuing with Heavey Pumps has the advantage of maintaining an established relationship and proven quality. The risk here is Heavey\'s potential inability to meet the increased demand. In-house production offers control over production and potential long-term cost savings but requires a significant initial investment and comes with the challenge of CJI\'s lack of experience in pump manufacturing. The risk involves failing to meet quality or delivery standards and the financial burden of the initial setup. Using other suppliers could meet the demand and diversify supply sources, but it introduces unknowns regarding quality, reliability, and logistics. A combination approach reduces dependency on a single supplier and offers flexibility, but it can be complex to manage and might lead to inconsistency in quality.
3
To assure continued contract….....

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"Supply Chain Diversification Strategies Risk Management" (2024, January 12) Retrieved June 4, 2026, from
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