Carter Systems Canada, Inc.
Mr. Travis received a purchase request from the operations manager for 12,000 GMT-680 housing assemblies. The engineering department had made the necessary design changes submitted by GM. One month ago,a purchase order for a similar design for the same auto platform was $27.88 per unit for 8,000 units.
BACKGROUND
Mr. Travis, the supply manager at Carter Systems Canada, was responsible for the purchase of the GMT-680 housing assembly. The GM-680 housing assembly was the major component part for automobile seat warmers for the GM luxury productline. Seat and steering wheel warming technology is complex and the manufacturing process is wrought with quality problems. It is not unusual to receive a sourcing shipment with a yield of 70 percent good housing assemblies. The source of the quality varaiation was traced to the numerous engineering changes that were submitted by the auto manufacturers. In other words,each new housing assembly purchase represented a new design. Mr.Travis found it useful,therefore,whenever he was required to issue a request for quote (RFQ) for housing assemblies, to make an estimate of the probable cost of the item from historical costs of similar equipment and from his experience with previous cost-adjusted engineering changes.He would estimate the new housings by adjusting the previous housing assembly cost with the new design estimated costs. This analytical approach required Mr.Travis to use his engineering and business school skills. This way he was well prepared to better evaluate the supplier quotes.This approach also will result in more effective negotiation sessions with successful suppliers. Mr.Travis determined the change in materials costs by analyzing the engineering changes. See Table C9.1.
Carter Systems Canada, Inc.Mr. Travis received a purchase request from the operations manager for 12,000 GMT-680 housing assemblies. The engineering department had made the necessary design changes submitted by GM. One month ago,a purchase order for a similar design for the same auto platform was $27.88 per unit for 8,000 units.BACKGROUNDMr. Travis, the supply manager at Carter Systems Canada, was responsible for the purchase of the GMT-680 housing assembly. The GM-680 housing assembly was the major component part for automobile seat warmers for the GM luxury productline. Seat and steering wheel warming technology is complex and the manufacturing process is wrought with quality problems. It is not unusual to receive a sourcing shipment with a yield of 70 percent good housing assemblies. The source of the quality varaiation was traced to the numerous engineering changes that were submitted by the auto manufacturers. In other words,each new housing assembly purchase represented a new design. Mr.Travis found it useful,therefore,whenever he was required to issue a request for quote (RFQ) for housing assemblies, to make an estimate of the probable cost of the item from historical costs of similar equipment and from his experience with previous cost-adjusted engineering changes.He would estimate the new housings by adjusting the previous housing assembly cost with the new design estimated costs. This analytical approach required Mr.Travis to use his engineering and business school skills. This way he was well prepared to better evaluate the supplier quotes.This approach also will result in more effective negotiation sessions with successful suppliers. Mr.Travis determined the change in materials costs by analyzing the engineering changes. See Table C9.1.
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