IBM1003 Problem 2 The General Manager of Better Boat Bunks has reviewed your purchasing team's requisition to buy several key materials and components from a list of potential suppliers recommended earlier (see Problem 1). Your team also recommended a preferred supplier for each item to be purchased. However, your General Manager wants your decision to be clarified further before your recommendations are approved by the President (her father) and before Purchase Orders are prepared. The President started Better Boat Bunks in 2006 and "tight control" of every aspect of the company has always been important to him. He is a very demanding, strict and is an "old style" leader who started his business in an era when a company did almost everything in house and only used suppliers when it was absolutely necessary. The President's views are reflected in the company's three strategic objectives, which are: 1. Earn the respect of our customers with outstanding product quality and service; 2. Design and build products that meet our customer's needs for comfort and efficiency; 3. Conduct our operations with unparalleled efficiency, cost control to the highest standard of our quality management The competitive pressures, especially from lower cost suppliers in China and Indonesia, as well as improvements in manufacturing technologies over the years, has forced many firms to be extremely efficient, as well as focus on what they do best over what they cannot do as well as other firms. During a strategic review in 2016, BBB aligned its core competencies more closely with its strategic objectives and chose to focus on its fabrication capabilities. For BBB this meant, cutting, bending, stamping, drilling and welding of aluminum - the core components of their boat lifts- as well as the "finishing" aspects of their product including, wood cutting and carpet wrapping, painting, anodizing, sub-assembly and packaging for delivery. The company has invested over $1 million dollars in the past two decades to make these processes "world class". Once the President accepted these competencies, he has applied them rigorously. However, due to increasing competitive pressures, he now even questions whether other aspects of what they do can be outsourced. Consequently, with respect to the items that your team was to purchase from outside suppliers in Problem 1, the President is now questioning two aspects of the earlier decisions: 1. whether the crank handle & carpeting for the cut lumber should be made and finished by an outside firm and supplied to BBB ready to install, rather than purchasing the raw lumber and carpet and finishing it in-house. 2. If the raw aluminum (in 16' lengths) should be supplied to BBB cut to the company's required lengths. The General Manager on the other hand is concerned about the possibility of outsourcing these items. The difference in cost (savings) by buying from outside as opposed to producing the components in- house was $75.00 for each crank wheel and .05/ piece for the cut aluminum as well as a reduction of $50.00 per each bunk that would be precut and covered with carpeting. The GM feels that BBB should maintain control of these items to adhere to its strict quality requirements and look for efficiencies in these in-house processes to reduce the cost gap. The President's argument, based strictly on cost, is that the cost gap is too great to overcome, especially for the bunks and crank handles. For the moment you are to assume that the cost analysis is correct. Your team must therefore produce the following brief report for the General Manager and the President that includes: 1. A review of your decisions to purchase the raw materials required for the construction and fabrication of the bunks versus the assembly of pre cut and upholstered components. Your review must contain a list of "why make or why buy" statements for each item based upon the information in Problem 1, the information in this case and any other considerations your group can create that would logically apply to this company. The additional company features must be justified. 2. Since the President and the GM may decide to purchase these components from an outside source (based upon your review) prepare a list of the important specifications that must be met by a possible supplier. Therefore, if the decision is to purchase these items from an outside supplier your company will be able to accept the component as "finished", in compliance with your quality standards and ready to be attached to a completed boat lift. NOTE: the list and specifications MUST be related to the scenario and NOT be Generic statements. Section Break (Next Page)--