Please Answer ALL of the (6) questions listed below
Please limit your answers to only the space provided on the page.
Thank you!
Global Purchasing and Supply Chain Management [There are 9 pages and 200 total possible points for the exam] Please Answer ALL of the (6) questions listed below Please limit your answers to only the space provided on the page. Business jet manufacturer Cessna has seen a very strong year in 2006 with more than 1,200 aircraft delivered and revenues of about $4.2 billion. That's up from $3.5 billion in 2005. This strong growth forced Cessna to purchase more parts and larger assemblies today than in the past. In 2003, buyers were sourcing 48,000 part numbers, in 2006 more than 62,000, with many part numbers representing large assemblies such as an entire tail section of an airplane. The company bought these parts from 791 suppliers, and had long-term agreements with 280 of them, representing 95% of its $1.8 billion annual spend on direct materials. Many of Cessna’s suppliers were not accustomed to providing some of the parts or larger assemblies that the aircraft maker requires. Therefore, Cessna approached suppliers and Cessna employees went to the suppliers’ facilities to help them develop the necessary capabilities. Cessna operates using the Textron Production System, which is based on the Toyota Production System and other principles, and focuses on reducing lead-time as well as assets and improving flexibility and customer responsiveness by eliminating waste. Cessna’s supplier efforts included the transfer of the Textron Production System to suppliers. Suppliers participated in value-stream mapping and improvement workshops. These efforts helped simplify processes and improve productivity. 1) When firms like Cessna are faced with deficient suppliers (i.e. suppliers with deficient product and delivery performance or capabilities), buying firms can principally choose between three approaches to remedy this problem. What are the pros and cons of the three options? How should Cessna decide which option to select? (Worth 40 points) Please answer questions 2 and 3 based on the following information. Imagine, an Italian food manufacturer (pasta, bread, etc.; sales € 2 billion) acquired a German food manufacturer in a related market segment (bakery products; sales € 700 million). After the approval of the acquisition, several teams were formed in order to integrate the two firms. You are appointed as team leader for the team “Purchasing & Supply Management”. 2) Which questions would you consider/ask when setting up a corporate purchasing strategy given the above situation? (Worth 40 points) 3) You are considering forming a purchasing consortium with another food manufacturer. What is the potential of such a consortium and which product groups will benefit most from the cooperation? (Worth 30 points) Bose Corporation, headquartered in Framingham, Massachusetts, offers an excellent example of integrated supply chain management. Bose, a producer of audio premium speakers used in automobiles, high-fidelity systems, and consumer and commercial broadcasting systems, was founded in 1964 by Dr. Bose, a MIT graduate. Bose currently maintains plants in Massachusetts and Michigan as well as Canada, Mexico, and Ireland. Its purchasing organization, while decentralized, has some overlap that requires coordination between sites. It manages this coordination by using conference calls between managers, electronic communication, and joint problem solving. The company is moving toward single sourcing many of its 800 to 1,000 parts, which include corrugated paper, particle board and wood, plastic injected molded parts, fasteners, glues, woofers, and fabric. Some product components, such as woofers, are sourced overseas. For example, at the Hillsdale, Michigan, plant, foreign sourcing accounts for 20% of purchases, with the remainder of suppliers located immediately within the state of Michigan. About 35% of the parts purchased at this site are single sourced, with approximately half of the components arriving with no incoming inspection performed. Bose has developed a detailed supplier performance system that measures on-time delivery, quality performance, technical improvements, and supplier suggestions. A report is generated twice a month from this system and sent to the supplier providing feedback about supplier performance. If there is a three-week trend of poor performance, Bose will usually establish a specific goal for improvement that the supplier must attain. Examples include 10% delivery improvement every month until 100% conformance is achieved, or 5% quality improvement until a 1 % defect level is reached over a four-month period. In one case, a supplier sent a rejected shipment back to Bose without explanation and with no corrective action taken. When no significant improvement occurred, another supplier replaced the delinquent supplier. Bose has few written contracts with suppliers. After six months of deliveries without rejects, Bose encourages suppliers to apply for a certificate of achievement form, signifying that they are qualified suppliers. One of the primary criteria for gaining certification involves how well the supplier responds to corrective action requests. Perhaps one of the most unique features of Bose's procurement and logistics system is the development of JIT II. This system was pioneered by Lance Dixon at corporate headquarters and has been reported on extensively in trade journals. The basic premise of JIT II is simple: The person who can do the best job of ordering and managing inventory of a particular item is the supplier himself. Please answer the following question based on this information (see next page): 4) Throughout the supplier performance system, Bose continuously assesses/evaluates its suppliers and strives for continuous improvement. Describe the typical levels/areas of supplier assessment/evaluation. Discuss the various benefits of supplier assessment/evaluation for Bose’s customers and for their suppliers. (Worth 40 points) The Boeing 787 Dreamliner is a superefficient airplane with new passenger-pleasing features. The Boeing 787 incorporates advanced materials (e.g., carbon fiber composites to reduce weight), systems (e.g., deterministic data network for safety critical applications) and engines (e.g., edges to reduce noise) and uses 20% less fuel than any other airplane of its size. Boeing's development of the 787 is also innovative in the collaborative management approach with suppliers. Critical to the plane has been the work of the 70 companies supplying the systems and components. The three engine suppliers General Electric, Rolls-Royce, and Pratt & Whitney developed highly fuel efficient and quiet engines with large-diameter turbofans to power the 787. For Boeing airplanes, outside suppliers provide 55% to 60% of content with the rest built in-house. For the 787, Boeing pushes outside supply to 70%. This came along with new organizational structures and ways of working with suppliers. First, supplier partners have taken on more responsibility, including more responsibility for managing the extended supply chain. Those changes are reflected in the name “global partners” which replaced Boeing's former supply management and procurement organization. Second, Boeing has taken the concept of supplier collaboration to new heights in development of the 787 Dreamliner. Developing and implementing these drastic changes in the way Boeing works with suppliers has proved to be a tremendous challenge. Due to various problems (including performance issues with key suppliers), Boeing had to push back the first flight of the 787 Dreamliner to the second quarter of 2009 and the first deliveries to the first quarter of 2010. Please answer the questions on the following two pages based on this information (see next two pages). 5) Boeing has taken the concept of supplier collaboration to new heights in development of the 787 Dreamliner. Delineate further possibilities to develop suppliers and why supplier development is important to a buying organization. (Worth 30 points) 6) The Boeing customers (e.g., Qatar Airways, Singapore Airlines) select the engines they want to have on their aircraft. Are the 787 engines from General Electric, Rolls-Royce and Pratt & Whitney a result of a “white box”, “grey box” or “black box” design? Furthermore, please explain all three alternatives. (Worth 20 points)