The director of supply management at ACME Industries has come to you about choosing a source for a screw fastener…

The director of supply management at ACME Industries has come to you about choosing a source for a screw fastener that is used in many of your company’s products. ACME considers these screws to have high value potential due to the amount of money spent to purchase them. ACME could easily make this item, but there are also many suppliers in the market, all of which have the capability to produce the fastener – it is not a unique item. You have received three different bids in response to your Request for Proposal. After some investigation into each company, you discover each supplier’s performance across four key performance parameters are as follows:
Provide your answers to the following. Remember to show how you came up with your answer!
Felder Company Grotto, Inc. Helm Brothers, LLC
Price/unit $0.22 $0.25 $0.30
Quality Level 99.73% 99.73% 5000 errors per million producedSix Sigma
Delivery on-time 96% on-time 99% on-time 98% on-time
Order cycle time 2 weeks 3 weeks 24 hours

(1) You estimate that the total cost for ACME to produce the fastener would be $600,000 annually. You know maximum annual production need would be 1,875,000 fasteners. Should ACME consider making this?

(2) Given the information above and referring back to the portfolio analysis model, what type of commodity is this, and what type of sourcing strategy should you employ?

(3) Assume that you judge the Price/unit and Quality Level criteria to be equally important and that these are about 10% more important than Delivery and Order cycle times. Delivery and Order cycle times have the same importance weight. Using a weighted point evaluation system and scoring on a 1-3 scale, (3 being best, one being the worst) which supplier would you rate the best? (Showing your work here is important!).

(4) Based on the data and your answer above, would you choose a single source or multiple sources? Why?

(5) Given our previous discussion of LEAN, would you suspect any of the above suppliers to have adopted LEAN philosophies? If so, what leads you to that conclusion?