I. Major Facts Related to the Muenster Pump Case
A. The company has cast its own pump housings for over 40 years. A competitor is now offering a cheaper alternative should Muenster choose to outsource pump housings. Terri, Purchasing Manager for Muenster, has learned that Union’s quote of $90 is one half the price it takes Muenster to manufacture their own pump housings. She’s proposed outsourcing but met with resistance on multiple grounds.
B. The ownership is against outsourcing based on:
a. Muenster controls the production, quality and quantity.
b. Muenster’s reputation and name directly tied to product created in-house.
c. Should the foundry close due to outsourcing, 16 employees would be …show more content…
d. If satisfied, continue outsourcing a percentage of the pumps but maintain the foundry and production by Muenster as well.
e. This choice may result in letting a few foundry workers go unless other positions can be found for them on site.
IV. Choice and Rationale: Plan A, Investigate New Developments in Casting for Possible Upgrade
A. Choice of Plan A, Investigate New Developments in Casting for Possible Upgrade.
a. Resistance of management must be overcome by presentation of a detailed plan.
b. The initial costs in upgrading to a new system for producing the pump housings, as outlined in plan, will include:
i. Initial costs in research of new casting methods, and costs for inspection and testing comparison of quality between old method and new developments. ii. Capital investment costs for equipment. Cost of disposing of old, if needed. iii. Costs for more physical space. iv. Costs in training on new equipment, decreased productivity during down time (changeover), learning curve and training period.
v. Increased inspection costs as inspection and testing will be imperative to ascertain the quality matches the prior method.
c. Long-term results to include:
i. Lowered Total Costs per Housing ii. Muenster remains competitive with new technological developments but continues to produce a well-known, reputable product. iii. Muenster maintains