1. What went wrong with Casturn’s first two auction attempts?

 First auction attempt:

o over the course of the auction week, none of the suppliers submitted any bids
beyond their initial entry bids.
o In post-event analysis, the Casturn team analyzed the submitted bids from a
total landed-cost perspective, they discovered that all were above the
incumbent supplier’s current total landed cost
o the lack of movement in the auction has spoiled all chances of finding a more
competitive price
o Many suppliers thought auctions will not be around long at Casturn and their
current business with Casturn was safe because Casturn’s oversea plant has
long-standing relationships with most of their suppliers.
o Many of the incumbent suppliers participating in the auction seemed to feel
that their long-standing relationships with the newly acquired Casturn
endplant made their participation in these centralized global sourcing
initiatives optional
o Many newly identified entrant suppliers didn’t move their bids because they
didn’t take the event seriously, and they were unable to devote the necessary
time and resources to Casturn’s initiative.
 Second auction attempt:
o The sourcing team had to rush the training process on the morning of the
event to allow the incumbent supplier to participate, because when the
incumbent supplier, who initially rejected an invitation to participate, finally
agreed to take part, there was just one day left before the event.
o The rushed training ultimately resulted in the incumbent entering a wrong
value that spoiled the entire auction.

2. Can e-RAs be used for sourcing highly engineered parts?

1) There is potential for e-RAs been used for sourcing highly engineered parts. The e-
RAs are created to minimize the prices, reduce sourcing cycle time, bring market
credibility to prices, and make the sourcing process repeatable. However, based on
the e-RAs failure in 2007, the buyer should identify the whole situation from the
game theory perspective. The buyer needs to communicate clearly with suppliers and
ensure them align with the requirements to avoid the inaccurate bids. Supplier could
balance the cost and meet the standard quality in the meanwhile.

2) The buyer also needs to carefully evaluate prospect from its own side since the
suppliers might sense that the buyers have the inducing abusive opportunistic
behavior and spoil the relationships between suppliers and buyers.

3) Grading suppliers is another way of leveraging the e-RAs. Based on a large pool of
existing suppliers accumulated through years of acquisitions, it was a significant
opportunity to market test current contracts and source from the most competitive
global suppliers available.

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 3. What are the benefits and disadvantages of the re-sourcing process in Figure 1?
 Benefits:
o Cost savings
o Reduce souring cycle time
o Create a repeatable, credible sourcing process
o Level the playing field through increased transparency
o In step 3, improve the understanding of suppliers’ cost structure or get cost
concessions
o In step 5, every member of the sourcing board had veto power
o In step 6, PPAP ensured that the supplier could meet industry standards and
production requirements
 Disadvantages:
o Time-consuming (18 months) and full of hurdles
o Induce abusive, opportunistic behavior among buyers
o Strain relationships between buyers and suppliers
o Have negative long-term implications
o In step 3, it takes a lot of time sifting through quotes from e-RFQs
o In step 4, it was often challenging to schedule a meeting because it required
several synchronous hours of work for many different roles located across the
globe. GCM typically had to wait until they had a very competitive quote.
However, the result could be that the quoting supplier cannot make the part at
all.

4. Are there any improvements that should be made to the current practices within Global
Supply Management

o GSM should focus on a few main suppliers to be able to gain a relationship with
their company. This would be beneficial because there is better pricing when a
relationship is built, and multiple supplies are bought from the same vendor
would improve price and maintain quality.
o Casturn can put technical evaluation prior to the bid auction. This may avoid the
situation that the auction winner is incapable of meeting the specification
requirements.
o For less engineered items, e-RA’s could be used because it is more basic and less
costs would be spent on technical checks and such.
o Within Global Supply Management, the launch manage group could try to use e-
RAs, because e-RAs will help LM find supplier more quickly and reduce sourcing
cycle time.

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