Managing Supply Chain and Operations 1st Edition by Thomas Foster ,Scott Sampson,Cynthia Wallin,Scott Webb

Exercise 4

Cathy Henderson joined the procurement and logistics staff at Hazeltonn Industries three years ago. Hazeltonn, a company with a solid reputation in the upper Midwest for providing reliable, high-quality, and efficient electric motors and drives, has been considering ways it could use its procurement division to better position itself competitively. Cathy has been assigned to manage the procurement and logistics for a line of electric motors that were used to power assembly lines. These motors are used by a diverse group of industries that appreciate the adjustable speed of the motors as well as their high quality. As more and more industries become interested in sustainability, these motors offer a potential competitive advantage because they are the most efficient motors in the marketplace.
Hazeltonn believes that the motors cou.d create a strong competitive advantage for the company, but is unsure how to position the company to take advantage of the types of motors that Cathy oversees. Management asked Cathy to conduct a formal analysis of her product line. Specifically, they wanted her to develop a strategic plan for how procurement could improve the strategic position of Hazeltonn. The company is interested in expanding the line of motors that Cathy manages and wonders what role procurement could play in this new product expansion. Management also wanted to know how the purchased parts that are used in the motors, especially copper wiring, might affect the firms success. Finally, management wonders if hiring a new sales manager with the goal of increasing sales by 30 percent would be preferred to reducing material costs for motors by 8 percent.
Cathy understands that she needs to discuss how strategic sourcing can help improve the organizations competitive position. She also understands that she needs to conduct a formal price analysis for the electric motors. An assistant gathered the following economic information related to the costs, labor, and overhead for the electric motors as well as last year's sales:

Question
Cathy needs a report by next Tuesday that outlined in general terms how procurement could assist in improving the company's competitive position. Describe what procurement's role might be in new product development, and provide a detailed analysis of the effect of a 30 percent increase in sales versus an 8 percent reduction in material costs.