Reference no: EM132201420

Charley Ruggles, supply manager at the Newton Manufacturing Company, was wondering whether to take the plunge into worldwide supply management. A salesman from Eurofabrik, Ltd., a foreign producer of small assemblies and stamps, had just left a proposal on his desk for one of Newton’s major purchases, the transklutch. Eurofabrik’s price was 35 percent below what Charley was paying to a local supplier—even figuring in the extra cost of duty, ocean freight, and overland transportation to the Newton plant. Newton used this assembly, a combination of stampings and turnings; in all its “Powermaster” assemblies sold both for use in consumer and industrial end-products. The transklutch was half of the unit cost of a Powermaster final assembly. Charley had instructions from Slaterer P. Colby, Newton’s president, to cut costs. “Charley, the cost-price squeeze on the Powermaster really hurts. Supply management is responsible for half the cost of this product, and you have to get your material cost down. However, don’t cut corners on quality! We can’t afford to lose our reputation for a quality Powermaster! Give me a report at our meeting in two weeks!” Ruggles had just started to work on the problem when the Eurofabrik salesman called. “Our plant is one of the most modern in the Common Market, and that’s why we can give you such a low price. We have all the latest equipment, and our quality reputation is well known. In three months you will have the first shipment made exactly to your specifications.” Charley talked it over with several of his closest supply management friends at lunch: Ralph Wilson, supply management director of ABC; Gene Nelson, supply manager for Universal Manufacturing; and Larry Smith, supply manager for the local electric utility. Ralph: “I’d rather look into it, Charley. You know we have been buying foreign on some of our raw materials and metals for years. You have to get used to some of the delays and red tape, but it’s sure worth it! I got a promotion out of my foreign buying record.” Gene: “Whoa! That’s just on commodities, Ralph, not components! We got stung when we couldn’t get foreign suppliers to stick to our specifications on components. The late deliveries and headaches aren’t worth it. We had to go back to our U.S. suppliers after that adventure!” Larry: “There’s another side, too, Charley. We believe in ‘buying American’ and supporting local industry. Say, don’t you purchase transklutches from Merit Machine here in town? That makes it a pretty touchy political issue then, I’d say.” Transklutch quality was important. If a Powermaster failed in service, the final customer usually complained to Newton. Deliveries had to be on schedule to prevent assembly line downtime and minimize expensive safety stock inventory. Technical service had never been a problem, as their supplier, Merit, was just down the street. Ruggles knew he had to have an answer for the president in ten days, and the Eurofabrik proposal might be it. He could not go in half-cocked, but neither could he look into all aspects of the problem in this short a time.

1. What key issues, figures, and information should Ruggles pull together?