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Case Study

Part 2
Supply Issues

Case 1 CJ Industries and Heavey Pumps

Case 2 Credit Suisse: Sourcing IT Services

Case 3 Don’t Shoot the Messenger

Case 4 Early Supplier Integration in the Design of the Skid-Steer Loader

Case 5 John Deere and Complex Parts, Inc.

Case 6 Service Purchasing at the Sunny Hotel

Case 7 Supplier Development at Deere & Company

Case 8 A Supplier Partnering Agreement at the University of Las Vegas

Case 9 The VW Resende Modular Consortium

Case 10 Heartland & Company


1 CJ Industries and
Heavey Pumps1

In October 2007, CJ Industries (CJI) had just been awarded a 5-year contract with
Great Lakes Pleasure Boats amounting to U.S. $10 million per year, commencing in July
2008. CJI would be providing a number of key engine components for Great Lakes’ luxury
line of pleasure boats. The award marked an important milestone for CJI, in that it was
the culmination of several years of hard work and dedicated service, supplying Great
Lakes parts for their boats on an as-needed basis. The contract had significant long-
term follow-on potential as well, if they could continue to show Great Lakes they had
the capabilities to be one of their valued, alliance partners. In addition, with this contract
Great Lakes would represent approximately 30 percent of CJI’s annual sales, so perform-
ing adequately on this contract had a significant long-term financial impact on CJI.

One of the parts, a bilge pump, was an item that CJI had been purchasing from one
of their suppliers, Heavey Pumps, a small local specialty pump manufacturer, on an
informal, non-contract basis. The remaining items were all built in-house by CJI and
supplied to Great Lakes from one of their two finished goods warehouses located near
the Great Lakes production facilities. Heavey Pumps was producing and delivering
50 bilge pumps at a time at a cost of U.S. $1500 per unit and built to Great Lakes’ spe-
cifications, to one of the CJI warehouses, whenever an order was telephoned in by CJI.
The delivery costs (about U.S. $500 per 50 pump shipment, depending on the carrier
used) were included in the U.S. $1500 per unit price. This scenario typically occurred
about every four to six months. Normally, CJI would order another batch of 50 about
eight to ten weeks ahead of time, and Heavey had always been able to supply the
pumps before CJI’s stock was depleted.

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 to increase their production of the bilge pumps. The new demand for bilge
pumps starting in July would be 50 pumps per month, and potentially more, depending
on Great Lakes’ demand, and the ability of CJI to perform on the contract.

There were a number of issues that Nik Grams, the purchasing manager who put the
contract together with Great Lakes, needed to work out with both Heavey and the pro-
duction manager at CJI, in order for this contract to be met with as few problems as
possible. The issue with Heavey Pumps was whether or not they could guarantee delivery
of 50 pumps per month to one of the CJI warehouses. This had been the one item that
had “slipped through the cracks” on the contract with Great Lakes, and it now loomed as
something that could conceivably put the contract in jeopardy. There were potentially
additional equipment, labor, and other production costs for Heavey associated with the
extra demand for bilge pumps, not to mention extra delivery costs as well. Heavey had

1. © Joel Wisner, PhD, C.P.M., University of Nevada, Las Vegas ([email protected]). This case was pre-
pared solely to provide material for class discussion. The author does not intend to illustrate either effec-
tive or ineffective handling of a managerial situation. The author has disguised names and other
identifying information to protect confidentiality.


been a reliable supplier for CJI for a number of years, but nothing else had ever been
purchased from them. In addition, because the demand for these pumps was rather low
and the deliveries were sporadic, no performance records had ever been kept for them.
Mr. Grams had also not known specifically about the quality history of the Heavey bilge
pump, although he could not remember ever getting one returned by Great Lakes for
any reason. Up until now, the pump issue did not seem like anything to worry about.

Another possibility for CJI would be to make these pumps in-house. Nik Grams knew
that CJI had the capability to make this pump, but it would require an initial capital
investment of about U.S. $500,000 according to the CJI production manager, along
with the clearing out of some space, and the hiring of three additional employees. With
only about nine months remaining until the contract start date, it would be tight, but the
production manager had assured Nik that they could do this, if needed. While Mr.
Grams didn’t doubt the production manager’s assurances that the production line could
be ready, he wasn’t sure that going to this added expense was a good investment for CJI,
given their lack of pump manufacturing experience. There were also at least two other
bilge pump manufacturers that Mr. Grams knew of, but both of them were about
500 miles farther away from the CJI warehouses, and he had never used either of
these firms in the past.

This whole thing seemed to Nik like an ideal job for his special project buyer, Bob
Ashby. He figured he had maybe a week or two to hammer out a plan to assure contract
compliance with Great Lakes, and Bob was known for his ability to put things together
quickly. So, he called Bob.

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?

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.

3. How can CJI assure continued contract compliance and additional contract business
from Great Lakes in the future?

4 Part 2 Supply Issues


Title Page (APA formatted)

Case Name:

I. Major Facts

(State here the major facts as you see them. Make statements clear and concise for your

own understanding as well as for the understanding of the other students and the


II. Major Problem

(State here the major problem as you see it. Emphasize the present major problem. You

may wish to phrase your statement in the form of a question. In a few cases, there may be

more than one major problem. A good problem statement will be concise, usually only

one sentence.)

III. Possible Solutions

A. (List here the possible solutions to the major problem. Let your imagination

come up with alternative ways to solve the problem.

B. Do not limit yourself to only one or two possible solutions. These solutions

should be distinct from each other.

C. However, you may wish to include portions of one solution in another solution,

as long as each solution stands alone. Only in this manner will your subsequent

choice be definitive.

D. Briefly note advantages and disadvantages of each possible solution.)


IV. Choice and Rationale

(State here your choice, A or B or ___ and the detailed reasons for your choice. You may

also state your reasons for not choosing the other alterative solutions.)

V. Implementation

(Prepare a plan to implement your choice)

Appendix (Answer case study questions)

Reference Page (APA formatted)