CJ Industries and Heavey Pumps – Discussion Questions 1. What are all the issues here, from both CJI’s and Heavey’s perspectives, that need to be researched by Mr. Ashby?
CJ Industries (CJI)
The first issue presented for CJ Industries was its contract with Great Lakes. Though CJI had sufficient excess capacity to ramp up production on the parts to be supplied in the Great Lakes’ contract, they were not sure about the ability or willingness of Heavey Pumps to increase their production of the bilge pumps. The problem is that CJ Industries had signed the contract with Great Lakes prior to any discussions about ramping up production with Heavey Pumps.
The next issue for CJ Industries was whether or not Heavey Pumps could guarantee…show more content… With about nine months remaining until the contact start date, Heavey Pumps would need to look at their existing customer orders to see if they had enough capacity to quadruple production of bilge pumps for CJ Industries.
Furthermore, Heavey Pumps would need to evaluate the costs associated with this contract (i.e. labor, production, warehousing, purchasing, transportation, etc.) to determine a new unit price for the bilge pumps associated with CJ Industries contract.
Finally, as with CJ Industries’ cost benefit analysis, Heavey Pumps ought to decide if they should continue to service CJ Industries. If so, perhaps consider changing from their current informal, noncontract basis to a more long-term agreement.
2. Should CJI continue to use Heavey to supply pumps, should they make them in-house, should they consider one of the other suppliers, or should they do some combination of these alternatives? Discuss the advantages, disadvantages, and risks of each of these alternatives.
Option 1 – continue to use Heavey Pumps. This would be probably the easiest decision since Heavey Pumps had been a reliable supplier for CJI for a number of years. This is also contingent on Heavey Pumps and the issues discussed above, i.e. quality and performance, price, delivery timing and volume requirements. The disadvantage would be CJ Industries may need to consider another supplier which might not prove to be as reliable.