Instructor Manual: Handfield, Purchasing and Supply Chain Management, 8e, 2026; 9798214042039; Case 1: Avion Inc.
Instructor Manual Handfield, Purchasing and Supply Chain Management, 8e, 2026; 9798214042039; Case 1: Avion Inc.
TABLE OF CONTENTS Case 1 Avion Inc. .................................................... 2 ASSIGNMENT ......................................................... 3 Case One Instructor Notes ............................................ 4
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Instructor Manual: Handfield, Purchasing and Supply Chain Management, 8e, 2026; 9798214042039; Case 1: Avion Inc.
CASE 1 AVION INC. Susan Dey and Bill Mifflin, supply managers at Avion Inc., sat across from each other and reviewed a troubling performance report concerning a key supplier, Foster Technologies. The report detailed the deteriorating performance of Foster Technologies in the areas of material quality and on-time delivery. Susan:
Bill:
Susan: Bill:
Susan: Bill:
Susan: Bill:
Susan: Bill:
Susan:
I don’t believe what I am seeing. This supplier was clearly a star when we performed our supplier visits before awarding the contract for the new Amrod product line. I’m not pleased. I was on the team that performed the audit and site visit. Foster’s management was so smooth—they indicated they could meet all our requirements. I feel like this supplier has misled us. Didn’t you look at their processes and quality systems? We did, and everything checked out fine. But now every other shipment has issues, and the delays are hurting our ability to get our product to our customers. What really struck us about this supplier was how innovative they were. Really, their biggest drawback was simply their size- they lacked some depth at key manufacturing engineering positions. Maybe that’s why they are having problems. It could be that someone has left the company. We are going to have to address these problems quickly. I have a recommendation on how to move forward based on these problems. We should begin immediately to look for another supplier. I never was a fan of these single-source contracts. They leave us open to too much risk. But won’t that take a long time? Yes. We’ll have to conduct another supplier search with team visits. New tooling could really cost us, too. This could take months. Has anyone talked with the supplier about these problems? Kevin went over personally today and talked with the production manager. He didn’t have much time to explain, but he indicated on the phone that Foster’s production manager said we should accept responsibility for a good number of the problems that are occurring! Why should we? I think they are just trying to shift the blame for their poor performance.
At this point, Kevin O’Donnell, another procurement manager, entered the room. Bill:
Kevin, glad you’re here. We were just discussing how Foster is trying to blame us for their problems. I think we should dump them fast!
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Instructor Manual: Handfield, Purchasing and Supply Chain Management, 8e, 2026; 9798214042039; Case 1: Avion Inc.
Kevin:
Susan: Kevin:
Bill: Kevin:
Bill:
Susan: Kevin:
Bill:
Kevin:
Susan:
Yeah, well, you might not like what I’m going to say. I think Foster’s production manager is correct. I think I would be frustrated with us, too! What are you talking about? I spent a good part of the day over at Foster and learned some interesting things. For example, do either of you remember what we told Foster the monthly volume requirements for the product would be? I remember exactly. The volumes were projected to be 2,500 units a month. So, what’s the problem? We need to talk with our production group more often. The monthly volumes are now over 4,000 units a month! And not only that, but our production group also now wants material within 10 days of a material release rather than two weeks. We have also been changing the final material release quantities right up to the last minute before delivery. Uh oh. I remember on our site visit that the most their production system could handle was 3,500 units a month. And a two-week lead time was about as low as they could go. But why didn’t they inform us that these changes were causing problems? They still have some explaining to do. Apparently, they tried. What did your team tell this supplier about communicating with us after you finished negotiating the contract? We said that any operational problems or issues must go through our materials group. They were the members of the team responsible for evaluating and selecting the supplier and then negotiating the agreement. Foster’s production manager produced an electronic log detailing seven emails and two formal letters outlining the impact of our production and scheduling changes on their operation. He also called us several times with no response. Each of these inquiries received little attention on the part of our supply management group. I’m not sure how fond Foster is of us as a customer. I think they are anxious for this contract to wind down so they can dump us! What do we do now?
ASSIGNMENT 1. What initially appears to be the problem? What were the gaps in communication that occurred? 2. How easy or difficult will it be to switch suppliers? Explain why? 3. What do you think is the root cause of this problem? 4. What does it mean to be a customer of choice? Why does a buying firm want to be perceived by a supplier as a customer of choice?
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Instructor Manual: Handfield, Purchasing and Supply Chain Management, 8e, 2026; 9798214042039; Case 1: Avion Inc.
Provide specific examples of what a firm must do to be a customer of choice. 5. Explain the role of supplier performance management in managing supply chain activities. 6. What can you learn about managing a single-source contract from this case? 7. Develop an action plan for Avion that addresses the issues presented in this case. Be prepared to fully explain your recommendations.
CASE ONE INSTRUCTOR NOTES This very integrative case should stress some key points clearly to the student:
Communication with suppliers is perhaps even more critical after contracts are signed Changes in volumes and other requirements can alter the assumptions in the original negotiation and cause significant problems Buyers and sellers need to be proactive as demand and markets change Supplier switching costs are often very high, making the quality of the initial supplier evaluation and selection decision critical A natural tendency exists with many buyers to blame suppliers at the first sign of a problem, even when the buyer contributes to or even causes the problem Being a good customer entails certain responsibilities, such as treating the supplier ethically, communicating frequently, and working together to prevent or solve problems
Question 1: Students should identify the different parts of the value chain involved in this situation. Look for the identification of specific departments or groups along with their responsibilities. Question 2: Stress that what initially appears to be the problem (i.e., the supplier) may not be the root problem. Furthermore, the initial reaction was to blame the supplier without collecting the required facts. Students should probe to identify the root cause, which is really a lack of communication on the part of the buyer and changing demand and delivery conditions. It is possible that the buyer has
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Instructor Manual: Handfield, Purchasing and Supply Chain Management, 8e, 2026; 9798214042039; Case 1: Avion Inc.
a poor forecasting system that created the initial demand figures. Question 3: Students should discuss the various costs, activities, and time associated with supplier switching decisions. In this case, switching would be a difficult activity. Question 4: Root cause is the cause that, once corrected will eliminate the problem. Question 5: Suppliers enjoy working with buyers who are good customers, just as buyers like to work with good suppliers. Some ways that a buyer can be a good customer include:
Pays invoices promptly Treat the supplier ethically Share information early and often Work together to pursue new opportunities and solve problems (rather than blame) Respect the supplier’s need to earn a fair profit Do not switch suppliers frequently to chase better prices
Question 6: Frequent performance measurements can indicate when performance is trending downward or upward. Measurement can also indicate in what area performance is deteriorating (or improving). Measurement helps when investigating the root causes of problems. Question 7: Students should understand that suppliers have lead times with their suppliers, and that changes can cause higher costs, production schedule disruptions, and quality problems. At some point, schedules should be frozen or locked in with minimal changes. Question 8: Reducing lead-time reduces uncertainty and variability. It is generally much easier to forecast for a short time horizon than a longer horizon. The instructor should look for creativity and the quality of ideas with this question. If this is a class discussion question, then the instructor should ask the students for suggestions to
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