Case 5-2: Rondot Automotive

Name: Xinhong He, Lisi Xu, Ailun Zhang, Qifeng Xu, Shangjie Shen.
Group: Fairy Tail
Date: 9/27/2011

Situation:
• Glenn Northcott, purchasing planner at Rondot Automotive in Jackson
O meets and provides evaluation with his boss, Terry Gibson and Dick Taylor,
purchasing manager, and the plant manager
• a new system proposed by Greven E-coating Company
O Electrocoating system
O Prepared samples for each family of housings

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O Provide cost estimates

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O A cost of 15￠ each

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• Current situation
O Operated in more than 100 countries, employing more than 200,000 people

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Operated 85 plants in 25 countries
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O The plant produced approximately 7 million motors per year
O The number of employees at the plant had dropped from 1450 to 600
O Plant management was under pressure to lower costs and regain market share
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O The coating on the housing had to be capable of withstanding 240 hours of salt
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spray testing
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O A continuous-flow wet paint system had been installed 17 years prior

O The system had undergone a number of upgrades and modifications
O Cleaning and painting operations cost 25 ￠ for each housing: 10 ￠ in material, 3 ￠ in
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labor, and the rest in overhead

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BASIC ISSUES
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1. Outsourcing
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2. Supply’s role in outsourcing

3. Inventory management
4. Operations management
5. Cost management

Tasks:
• What does Glenn do?
O Catch outsourcing opportunity
O Status quo
• What are alternatives?
O Complete cost-benefit analysis
O Should we change the existing system (continuous-flow we paint system)?
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 • What is the company’s purchasing policy?
• Does upgrading the old wet-based system develop the efficiency?

SUGGESTED QUESTIONS FOR DISCUSSION;

1. What importance is the e-coating system to the company?

2. How does our company reduce expenditure?
3. How would you evaluate the feasibility of outsourcing?
4. How many suppliers are desirable?
5. What alternatives are open to Glenn Northcott here?
6. What action will be taken?

Actions:
• meet with purchasing manager, Terry Gibson, and the plant manager, Dick Taylor
• Review cost – benefit analysis

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• Having a meeting with Betty McKinley, and John Underwood about the evaluation of

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outsourcing opportunity

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• Determine if Greven is acceptable? (feasibility evaluation)
O Supplier audit – process capability

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O Ask supplier to send more samples using the hot-bond process – service, quality,
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cycle time, responsiveness
• Make recommendation with implementation plan
O Accept outsourcing opportunity- define phase in/phase out strategy, determine costs
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of changing to a new system including transportation and packaging fee, inventory

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management
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 Cost of 15￠ each

 3￠ per part for transportation and packaging
O Or, not accept this opportunity
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 Stay with old wet-based system

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 Cost 25￠ for each housing

O Or, upgrade our system
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Results:
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• If accept outsourcing opportunity;

O Cost savings:25￠-15￠-3￠=7￠ of each housing
O Add another two weeks’ worth of inventory
O Lower labor and material costs
O Production price reductions
O Become more competitive
• If not accept the opportunity;
O Reduce risk for investment
O No savings- no price reductions
O No extra time have been wasted
• If upgrade our system;
O Risk for Investing money
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 O May reduce operating time

Priorities:

1. Maintain cost reduction

A. Reduce production cost
B. Reduce labor cost
2. Maintain our company’s reputation ,image for reliability and high market share
3. Maintain high customer satisfaction
A. Product price
B. Quick delivery time
c.

Best Conclusion = I recommend outsourcing to a professional company which provides low price.
For we will take much more risks if we choose to upgrade our system, we’d better outsource. Only
in this way can we pull the line out and become more efficient. Meanwhile, it takes long time to

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testing a new upgraded system. Therefore, I strongly with the idea of outsourcing.

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