Rondot Case Study
Three months ago, an opportunity to outsource their painting operations to Graven was presented to Glenn.
As part of the evaluation process, tests were administered and colleagues were consulted. The tests showed that 5 steel housings which undergo hot-bond process can be converted to e-coating and only one family cannot be converted due to the cold-bond adhesion It requires. John underworld from manufacturing engineering encouraged the prospect, explaining that their wet-paint system has to be stopped or upgraded soon while
Betty McKinley from production planning called out that 2 weeks’ worth of inventory has to be added and an additional $0. 03 for transportation and packaging costs will be incurred. Now, Glenn has to discuss his suggestion to Terry Gibson (Purchasing Manager) and Dick Taylor (Plant Manager).
Key Issues 1. ACUTE- Primary issue that Glen has to face is his discussion with Terry and Dick regarding outsourcing their painting needs to Graven. This would mean contracting 5 out of their 6 steel housings or 60% of their volume to Graven while the 40% stays with them.
Outsourcing will also change their painting process to e-coating which is said to be more cost efficient vise–vise Rondo’s wet paint system. Align with this, the plant is also being pressured to reduce their costs.
2. CHRONIC- Rondos Automotive is also confronted with long-term issues like total sales and employment drop. They are also facing great amount of pressure caused by global competition and demand for lower prices. Analysis 1 . Rondos will cut down cost by at least $kick annually If they outsource their painting operations.
Comparison and computations are summarized below.
This also entails overhead expenses from 20,000-square foot section will decrease. Production capacity, on the other hand, will increase because their workers can concentrate on other manufacturing processes since painting operations were lessened. This can help augment their global competitiveness and total sales. Recommendations It is recommended that Rondos Automotive outsource their painting requirements not only because they will generate immediate savings and cut down plant costs but also because benefits of outsourcing will help contribute in resolving their other long-term issues.
To be more practical and more cost-efficient, it would be better if their purchasing team can look for a vendor which can accommodate 100% of their volume.
It should also be noted that Glenn has Joined the company only the previous year and he can be inexperienced in spearheading big projects. More thorough review and discussion should be done with more senior/ experienced team members. Also, since this can be a big contract, it should be redirected to the strategic purchasing group in Michigan.