CJ Industries and Heavey Pumps
Section 2
Case 1
Chris Stowe
Student number: 14210009
2014.11.19
Word Count: 1719 CJ Industries has an opportunity to provide Great Lakes Pleasure Boats with key engine components for their luxury line of pleasure boats. They earned this through the development of a strong buyer-supplier relationship with Great Lakes and this 5-year, $10 million annual contract offers them the chance to have an extended relationship if they can satisfy Great Lakes’ needs. The opportunity is critical for the successful future of CJI and the main goal of the company should be to completely satisfy the requirements of the contract with Great Lakes, and secure their future business with Great Lakes. While they do
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CJI needs to analyze its value chain and decide if building the pumps in-house justify the capitalization costs, impacts on their relationship with Heavy, and whether it will dilute their business proficiency.
From Heavey’s perspective: They are a small, local company that assumingly delivers quality products on time and at the convenience of their buyer’s needs. While their relationship with CJI appears to have been professional and successful, they will not be able to continue to supply CJI with all of their bilge pumps once the demand reaches 50 pumps monthly. This situation forces them to consider their options which are: to expand their production capabilities or maintain their current production levels and risk losing their business with CJI. Since they are a small company, they need to heavily consider whether expanding their production will benefit them in the long term. Certainly it would help them continue working with CJI, but it will be risky to invest that much in capitalization when it is entirely possible that CJI could choose to manufacture the pumps in-house anyways. The major uncertainty centers from the lack of a formalized contract with CJI. Also, they need
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6.) The Wilkerson Company original case is not effective and accurate without including an ABC analysis. ABC allowed us to assess the business performance of each of its businesses including: Valves, Pumps and Flow Controllers. This enabled us to realize that the Flow Controllers business is not profitable with a Gross Margin of -11.31%. I recommend specifically solving the problem of pre-tax margin going from 10% to less than 3%. The strategic decisions that need to be made are improving the unprofitable Flow Controllers business unit, while simultaneously increasing the sales of the more profitable Valves and Pumps business units. I would capitalize on the highest margin business of the Valves. Specifically, I would develop marketing strategies on how to grow market share in this business. I would assess what we are doing in this business and I would reapply it to our other businesses. This would include evaluating and eliminating costs in the other business units,
With reference to the Vickers Industrial Supplies request for a distributorship and associated pricing discount, I have prepared a decision report to assist you in taking a decision. The report contains the analysis of the situation, the options available, my recommendation and an action plan. The recommendation has been arrived at by evaluating the options based on criteria which are aligned with the company’s objectives.
The first issue presented for CJ Industries was its contract with Great Lakes. Though CJI had sufficient excess capacity to ramp up production on the parts to be supplied in the Great Lakes’ contract, they were not sure about the ability or willingness of Heavey Pumps to increase their production of the bilge pumps. The problem is that CJ Industries had signed the contract with Great Lakes prior to any discussions about ramping up production with Heavey Pumps.
The method showed that the pricing that was being used for the three products were not correct. The price at which the pumps were being sold was low were high whereas flow controllers were low. Because of which the most profitable product was coming out to be flow controllers whereas it was actually the least profitable.