CJ INDUSTRIES AND Ang, Gullab, Avendano, Pel,

HEAVEY PUMPS Relova

SUMMARY OF FINDINGS
CJ Industries (CJI) has been awarded with a 5-year contract with
Great Lakes Pleasure Boats
Provide key engine components for luxury pleasure boats
30% of their annual sales
Bilge Pump from Heavey Pumps
50 bilge pumps at a time for $1500 per unit, occurs every 4-6 months,
ordering a batch 8-10 weeks ahead
New demand for bilge pump that would be 50 pumps per month
Willingness and capability of Heavey Pumps
Produce in-house
Look into other suppliers
BACKGROUND INFORMATION
CJI supplies key engine components to Great Lakes Pleasure
Boats.
CJI has the efficient excess capacity to ramp up production
except for one item, a bilge pump.
Heavey Pumps, the bilge pump supplier. is a small local
specialty manufacturer. They have been a reliable supplier of
bilge pumps for years already.
Nik Grams, the purchasing manager, is the one who put the
contract together with Great Lakes.
PROBLEM STATEMENT
Having been awarded with a 5-year contract with Great
Lakes, CJI faces the dilemma of efficiently providing the
bilge pump based on what was stipulated in the
contract, which they have always purchased from
Heavey Pumps, should they accept the contract.
ALTERNATIVES
ALTERNATIVE #1

Communicate to Heavey Pumps the

Significant Increase in Demand for Bilge
Pumps and stick to them if they are
capable
ALTERNATIVE #2

Enter into a Joint Operation with Heavey

Pumps
ALTERNATIVE #3

Sub-Contract with the other Suppliers for

Additional Bilge Pumps
ALTERNATIVE #4

Manufacture the pump IN-HOUSE

RECOMMENDATION
HEAVY PUMPS IS CAPABLE =
ALTERNATIVE #1

HEAVY PUMPS IS NOT CAPABLE =

ALTERNATIVE #2
ANSWER TO CASE
QUESTIONS
QUESTION #1

What are all the issues here, from both

CJIs and Heaveys perspectives, that
need to be researched by Mr. Ashby?
ANSWER
Issues that has to be researched by Mr. Ashby regarding CJ Industries are:
They arent certain if Heavey Pumps has the capacity and willingness to increase the
production of bilge pumps to fill their order to able to fulfill their side of the contract
with Great Lakes
CJI might have to consider at least 2 manufacturers of bilge pumps to be their
supplier.
They did not consult with Heavey Pumps about the bilge pumps prior to signing the
contract with Great Lakes.
Whether the bilge pumps should continue to be bought from another manufacturer or
to be made in-house with an additional capital investment, hiring addition workers,
and figuring out the logistics to allocate space to the production.
Issues to be researched by Mr. Ashby regarding
Heavey Pumps:
First issue, whether or not they can guarantee that / bilge pumps can be delivered
to one of the warehouses of CJI each month.
Potentially, there will be an increase in costs for additional equipment,
labor,delivery, and other production costs to fill the additional orders of bilge
pumps.
Even though Heavey Pumps has been a reliable supplier to CJI, CJI has never
ordered anything else from Heavey Pumps aside from the bilge pumps.
Where have never been any performance records kept for the bilge pumps orders
because the demand was rather low and the deliveries were irregular.
The quality history of the bilge pumps from Heavey Pumps is unknown
QUESTION #2
Should CJI continue to use Heavey to supply pumps,
should they make them in-house, should they
consider one of the other suppliers, or should they
do some combination of these alternatives? Discuss
the advantages, disadvantages, and risks of each of
these alternatives.
ANSWER
CJI continues to use Heavey to supply pumps
opportunity to create a contractual partnership with them
properly forecast how many pumps will be needed in
cooperation with Great Lakes
implement a system to record performance to ensure
quality
unable to adjust to the sudden demand despite CJIs
initiatives
ANSWER
In-house
only cost 500k as an initial investment and hiring
3 extra employees
allow CJI to have total control over production
and its quality
no experience with creating the pumps
ANSWER
Other suppliers:
possibility to find suppliers who are more capable
and efficient
the firms are 500 miles apart from the CJI
warehouses and Heavey does not have an
established working relationship with them, nor
have they experienced working with them
QUESTION #3

How can CJI assure continued contract

compliance and additional contract
business from Great Lakes in the future?
ANSWER
Great business relationship is a must with all of CJI associates and
suppliers.
CJI should consider choosing the best alternative that will be feasible to
ensure of new demand for Bilge pumps.
Informing them about the increase in production and targeting how this
contract will help their suppliers in the future as they will be relying on
them for more product will help the success of CJI and be able to fulfill
their contract with Great Lakes.
LEARNINGS

COMMUNICATION IS VITAL TO
HEALTHY RELATIONSHIPS