Placido Engine Case

EXECUTIVE SUMMARY 5

Ronald Penson, senior supply chain manager of Placido Engine Company, is tasked with managing a critical issue with their existing vendors. Placido manufactures high quality engines and has a reputation for quality. The issue they are challenged with is a corrosion problem with their magnesium castings suppliers. To bring the castings to the standard required by the Placido, quality assurance has been submitting them for rework at additional cost to the company. A task force was put into place to assess the corrosion problem and has determined that Placido will no longer rework unacceptable castings. A letter has been sent to all current suppliers outlining what Placido has identified as the correct casting manufacturing process. Additionally, they have warned suppliers that any necessary reworking due to corrosion will be charged to the supplier. As a result, Ronald has been under fire from his suppliers. All four suppliers have come back stating the changes will result in significantly higher costs. It is my decision to go back to management to give the suppliers 3 months to comply. In the meantime, business will take place as it was historically conducted and Placido will swallow the cost required to get the castings retooled. The intent is to avoid disrupting current supply and establish an appropriate timeline for existing suppliers to react.

ISSUE(S) IDENTIFICATION 10

- Placido manufactures a high quality product for the airline industry and any corrosion in their engines can create a massive liability for the company.

- Refinishing castings by Placido is necessary because rejecting them will result in delays that are more expensive than rejecting them.

- Castings should be rust free from the suppliers and they should be responsible for correcting the situation.

- All current suppliers are upset and pose a risk to current supply should they back out.

- Suppliers stating they are already properly treating castings and that it...