Case Analysis: Muenster Pump Co

I. Major Facts

Producer of high quality agricultural pumps for over forty years, Muenster Pump Co (MPC) is family owned and the largest employer in the city. MPC also enjoys a cordial relationship with city officials. MPC owns the only plant in the small Midwestern town and employs about 16 personnel at the foundry. A competitor is offering a less expensive alternative should Muenster choose to outsource pump housings. The Purchasing Manager has actively negotiated with a competitor and has come in with a price to manufacture the pump housing at one half the cost of Muenster’s manufactured pump housings. She proposed outsourcing to senior leaders, but met with considerable resistance.

II. Major Problem

Members of Muenster Pump Company management would like to increase profits by reducing production costs and by outsourcing the production of pump houses.

III. Possible Solutions/Alternatives

A. Alternative 1: Status Quo. Do nothing. Always an option and sometimes an effective alternative, to do nothing is rarely a good choice. In this case, if Muenster does not outsource, the foundry remains open, 16 jobs are not lost and the company maintains good community relations; however, maintaining status quo, Muenster may not taking advantage of latest technological advances and is ultimately reducing profitability and becoming less competitive. However, increased profitability does not appear to be a concern with senior management.

B. Alternative 2: Do not outsource, but evaluate the possibility of Muenster’s use of the new casting developments that are used by other foundries. New developments in casting technology are currently being employed by other firms to reduce costs and improve profit margins. Based these potentially new developments, an IPT should be established to research and assess Muenster’s historical method of producing a quality product and to determine the costs involved to upgrade Muenster’s foundry. Through testing and...