The Dear John Mower Company

Case Study: THE DEAR JOHN MOWER COMPANY

Major Facts: Dear John Mower Company is an old-line manufacturer of gasoline-powered lawn mowers and riding mowers. Bigger competition has resulted in Dear John’s share of the mower market diminishing to 10 percent. The company has three engineers who are responsible for the progress and design of all new mowers. When at times engineer are not involved in the development of new products, the engineer also applies their energy to value exploration work in an effort to engineer costs out of the business’s products. Material costs at Dear John range from 55% to 65% percent of the cost of goods sold. Supply management has been a tedious function, of being accountable for issuing purchase orders authorizing the sourcing results for the engineers and for issuing order releases against these purchase orders. Contract Purchasing Manager, was hired in an effort to reduce the cost of purchased materials. CPM has found attainment through the application of price and cost analysis and professional negotiation concepts Material costs have dropped an average of 12.5 percent Change in savings have been the badly needed due to Dear John financial reports CPM opened considerations on approach to savings to Chief Engineer. (CE) was stubborn that his engineers are the top in the industry and cultivate the industry’s finest mowers (CE) feels insulted the CPM recommended that early supply management and early supplier participation would increase Dear John’s cost-effectiveness. With this Cpm has to take this issue up higher. Chief Operation Officer to get involve so to discuss the advantages and possible execution of early supply management and early supplier involvement so they can be successful

Major Problems: Dear John Mower Company mower market diminishing to 10 percent due to more rivalry corporations. Due to the advancement of mowers and engineer ordering what material they need without out sourcing which getting the best price the cost of this has put thee strain on the company coast out per mower to from 55% to 65% percent of the cost of goods sold. Chief purchasing Manager has concluded the materials being obtain are not the best price that his cost analysis has indicated materials of that engineer had ordered have decrease 12%. which means they could have been saving the company in reducing cost anywhere between 43% to 53% Now the CPM wants to apply new procedures of procurement come through the CPM office first to get approve or denied. So the company can get best material product for the best price instead of order straight through and giving the Chief engineer total control on wants need to be order.

Possible Solutions:

.1. one possible is solution is take up to high and get approval and giving the analysis as proof that how much they can reduce cost if procurement becomes the approving authority of purchasing orders.

2. Get with chief of engineering see why they need higher ended production material may others are not as good and she if comparable production material would suffice in producing a mower to lower cost.

3. come with plan or meeting get with all material suppliers and chief engineers see why could or couldn’t use them if their cost was lower. this give evolvement of chief engineer this still keeps the engineer involved with purchasing process in getting what they want.

Choice and Recommended Solutions: I would recommend the following solution get with COO and CE by giving following analysis of how they save the firm 12% coming through purchasing office first before the initial purchasing order by using multi sourcing of production materials the material in had that’s cost the least doesn’t mean we going to use them there for purchasing the leg work to make sure we are the best price for the materials. If some coming across as being better the CE will be let on why need to production material to lower cost to help with profit, then state say may want to send bid out for production material so we can justify to their competitor has the means of charging us less for same product they are given the option of matching if engineer still want to obtain the production material they have been using, using their competitor as leverage. then advice the CE the CPM is not there to hinder the production there to meet to objective strategic sourcing of finding the best production for best price so that business sales continue to grow with growth support the company objective goals. But I also make the manage the purchasing process of effectively and efficiently but the also the supply base in keeping the good relationships with other functional groups so like engineer and their supplier of production material and making sure procurement law is being followed according to policies and in supporting operation requirements. then would suggestion engineers or Ce if the come up a forecast new production material for new mower changes to current mower so that what need to produce of new design so that best price can be obtain before purchase order can be obtain or even a contract locking pricing for certain amount years. So cost doesn’t rise. Then show CE in knocking