Corporate Strategic Business Sourcing by Kevin R. Maromonte

By Kevin R. Maromonte

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3 percent, giving about a 10 percent annual reduction to warranty expense, shown on the worksheet as the warranty improvement trend. The sourcing company’s assessment team determined that External Source ‘‘A’’ delivered 40,000 of the last 50,000 braking system assemblies to its customers by the purchase order–required date. 2 (40,000 divided by 50,000 total, multiplied by 100 equaling 90 percent). 2. External Source ‘‘A’’ quoted an hourly price of $109 to produce the anti-lock braking system assemblies for the automobile producer.

The production portion of the company’s overall cycle time will be determined by the cycle times required by its production sources. To account for this when developing a Strategic Business Source for production services, a second delivery performance measurement is needed; specifically, the success of the source toward continually reducing cycle times needs to be measured. To accomplish this, the annual percent reduction to cycle times needs to be determined for the sources being considered to provide the company with production services.

External Source ‘‘A’’ quoted an hourly price of $109 to produce the anti-lock braking system assemblies for the automobile producer. 2 worksheet. For products similar to what would be produced for the sourcing company, External Source ‘‘A’’ has reduced its effective costs (its quoted hourly prices less its warranty expense as a percentage of sales) by 14 percent over the past two years. 2 production source assessment worksheet as the cost improvement trend for External Source ‘‘A’’. 1. 8. 2 worksheet.

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