Hydro One John has been working for Royal Bank of Canada (https://www.rbc.com/about-rbc.html) as a Purchasing Manager for 10 years. He has recently been hired by Hydro One (https://www.hydroone.com/) to be the Purchasing Director for their global sourcing and procurement operations. While working at the Royal Bank, John is mainly responsible for ensuring adequate supply of office supplies such as stationery, and office machines to keep the office and branches working with no disruptions. Hydro One Limited is an electricity transmission and distribution utility serving the Canadian province of Ontario. Hydro One was established at this time as a corporation under the Business Corporations Act with the Government of Ontario as sole shareholder.[6] Following its initial public offering on the Toronto Stock Exchange in 2015, the Government of Ontario began selling shares to the public with a final goal of 60% of the company being held by private investors. As the Purchasing Director, you are responsible for a multi-billion dollars purchasing budget, and your supplier network include heavy power generation and distribution equipment from engineering companies on all continents, including the US, Germany, France, and China. 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 8 years 10 years

Maintenance ($/year) $6,000 $4,000

Downtime per year (down time cost = @$100 per hour) 300 hour 200 hour

Fuel economy Diesel price = $2/L Average mileage = 50,000 km per year 12L/100 km 9L/100 km

Salvage value $5,000. $10,000

John's boss asked him to present 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 RBC and Hydro One

2. What adjustments John needs to make to be successful in his new role at Hydro One?

3. What recommendations would you provide John?

4. How would you justify your recommendation for purchasing the truck using the TCO model?