Case - Red Cross Canada

John has been working forEnbridge Inc.(https://www.enbridge.com/) as a Purchasing Director for 10 years. He has recently been hired byRed Cross(https://www.redcross.ca/) to be the Chief Procurement Officer for their global operations.

Enbridge Inc.is one of the largest energy company in Canada. As the Purchasing Director, John found majority of his purchase for Enbridge were capital equipment (e.g. machinery for oil exploration projects) from mostly Canadian suppliers.

At Red Cross, the environment is very different. Red Cross is a non-profit charity organization. As the Chief Procurement Officer, you are accountable to the International Head Office and also to the numerous donors around the world. Red Cross's purchase are mainly humanitarian aids from numerous suppliers in different countries.

Your first task is to pick a truck for delivering aids. The comparison of the 2 models under consideration are shown below:

	Model A	Model B
Purchase price	$100,000	$150,000
Expected life	10 years	12 years
Maintenance ($/year)	$5,000	$4,000
Downtime per year (down time cost = @$100 per hour)	240 hour	200 hour
Fuel economy Diesel price = $2/L Average mileage = 50,000 km per year	10L/100 km	8L/100 km
Salvage value	$1,000	$5,000

John's boss asked him to submit a presentation to top management on how he plans to manage the procurement function.

After the meeting with top management, you will need to present your recommendation on the truck purchase. You are considering using the TCO approach to make your recommendation.

Discussion questions:

1. Compare and contrast the purchasing environment between Enbridge and Red Cross
2. What adjustments John needs to make to be successful in his new role at Red Cross?
3. What recommendations would you provide John?
4. How would you justify your recommendation for purchasing the truck using the TCO model?