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Case - Red Cross Canada John has been working for Husky Energy (https://huskyenergy.com/) as a Purchasing Director for 10 years. He has recently been hired by Red Cross (https://www.redcross.ca/) to be the Chief Procurement Officer for their global operations. Husky Energy is one of the largest oil company based in Calgary, Canada. As the Purchasing Director , John found majority of his purchase for Husky 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 $120,000 Expected life 10 years 12 years Maintenance ($/year) $5,000 $4,000 Downtime per year 240 hour 180 hour (down time cost = @$100 per hour) Fuel economy 10L/100 km 8L/100 km Diesel price = $2/L Average mileage = 50.000 km per year Salvage value $1,000 $5,000 John's boss asked him to prepare 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 Husky 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? Case - Red Cross Canada John has been working for Husky Energy (https://huskyenergy.com/) as a Purchasing Director for 10 years. He has recently been hired by Red Cross (https://www.redcross.ca/) to be the Chief Procurement Officer for their global operations. Husky Energy is one of the largest oil company based in Calgary, Canada. As the Purchasing Director , John found majority of his purchase for Husky 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 $120,000 Expected life 10 years 12 years Maintenance ($/year) $5,000 $4,000 Downtime per year 240 hour 180 hour (down time cost = @$100 per hour) Fuel economy 10L/100 km 8L/100 km Diesel price = $2/L Average mileage = 50.000 km per year Salvage value $1,000 $5,000 John's boss asked him to prepare 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 Husky 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