Munster Pump Case Study

GAYLE COSTON

F1 2015

PROCUREMENT AND ACQUISITIONS MANAGEMENT

INSTRUCTOR: DAVID DAU

Gayle Coston

MUNSTER PUMP CASE STUDY

GAYLE COSTON

F1 2015

PROCUREMENT AND ACQUISITIONS MANAGEMENT

INSTRUCTOR: DAVID DAU

Gayle Coston

MUNSTER PUMP CASE STUDY

MUNSTER PUMP CASE STUDY

MAJOR FACTS:

The Muenster Pump Company has manufactured high-quality agricultural pumps for over 40 years.

The firm only has a single plant in a small mid-western town and they are the largest employer in town.

Management of Muenster has been passed down from generations and the organization has a fairly good relationship with city officials.

Since opening Muenster Pump the organization has been self-sufficient, even establishing their own foundry to cast pump housings which is still used today.

The president Bob Dorf has hired his cousin Terri for the purchasing manager position. Terri is an aggressive buyer who has had previous experience at a large appliance manufacturer and in her first two years at Muenster has brought materials costs down from 60 percent of the cost of sales to 50 percent.

A representative from Union Foundry met with Terri and suggested newer methods of casting pouring would allow their organization to provide attractive prices.

The Union Foundry came back with a price of $90 and two other foundries quotes came in at $94 and $98.

Terri discovered that it costs Muenster Pump $180 to make the same pump. The total overhead at Muenster was calculated at 200 percent and approximately 70 percent of overhead is for fixed costs such as depreciation, taxes, and executive salaries.

MAJOR PROBLEM:

The major problem is a decision to make or buy the pumps, the political aspect with the city, and the implications the decision would have on staff and the organization.

SOLUTIONS:

A. Continue making the pumps in-house and avoid political conflict with the city and keep relations with the family business intact. The advantage making the pumps...