Portland Bus Company CASE STUDY
Case 4-3: Portland Bus Company
Situation:
Richard Kaplan is a buyer of Materials Department at Portland Bus Company.
Reports to David, director of Material Department
Be responsible for sourcing fabricated metal components
PBC was owned by Dawe Motors
First use of reverse auctions assisted by Laura Henning, business consultant for Bothe US operations
Approximately 290 components
Involving 7 suppliers
Current situation
Total annual purchases were approximately $250, and about $60 million to be sourced through Materials Department
10 suppliers were responsible for 290 components in 3 fabricated metal parts, representing about $2 million annual spend
BASIC ISSUES;
1. The use of new information technology (online reverse auction) in supply process for the first time and its future impacts.
2. Supplier selection policies.
3. Business splitting: grouping and commodity.
4. 25 percent costs reduction.
5. Maintain supplier relationship.
6. Strategic spend and non-strategic spend of supplier
7. Leading and managing team
Problems:
A lot of time is spent in purchasing.
The costly and time-consuming purchasing of 290 items on 10 suppliers under the current standard process.
Tasks:
Status quo
Do nothing and stay on the standard purchasing process (RFQ/RFB, negotiation)
The use of new technology: reverse auction
Group the components into packages–21 packages
Choose vendors---choose 6 suppliers from the old ten suppliers and add a new one
Use the new technology for reverse auction
Preparation for reverse auction
Time for prepare for the auctions
Supplier selection policies
Type of auction
Event
Price visibility
Bid ranks
Implementation and Follow-up
Negotiate and clarification
Process efficiency and effectiveness
What are alternatives?
The type of auction to be used
The policy for selecting suppliers
Actions:
Communicate with internal partners before preparation:
Form cross-functional team
Create shared or common goals
Design standards for supplier selection
Situation:
Richard Kaplan is a buyer of Materials Department at Portland Bus Company.
Reports to David, director of Material Department
Be responsible for sourcing fabricated metal components
PBC was owned by Dawe Motors
First use of reverse auctions assisted by Laura Henning, business consultant for Bothe US operations
Approximately 290 components
Involving 7 suppliers
Current situation
Total annual purchases were approximately $250, and about $60 million to be sourced through Materials Department
10 suppliers were responsible for 290 components in 3 fabricated metal parts, representing about $2 million annual spend
BASIC ISSUES;
1. The use of new information technology (online reverse auction) in supply process for the first time and its future impacts.
2. Supplier selection policies.
3. Business splitting: grouping and commodity.
4. 25 percent costs reduction.
5. Maintain supplier relationship.
6. Strategic spend and non-strategic spend of supplier
7. Leading and managing team
Problems:
A lot of time is spent in purchasing.
The costly and time-consuming purchasing of 290 items on 10 suppliers under the current standard process.
Tasks:
Status quo
Do nothing and stay on the standard purchasing process (RFQ/RFB, negotiation)
The use of new technology: reverse auction
Group the components into packages–21 packages
Choose vendors---choose 6 suppliers from the old ten suppliers and add a new one
Use the new technology for reverse auction
Preparation for reverse auction
Time for prepare for the auctions
Supplier selection policies
Type of auction
Event
Price visibility
Bid ranks
Implementation and Follow-up
Negotiate and clarification
Process efficiency and effectiveness
What are alternatives?
The type of auction to be used
The policy for selecting suppliers
Actions:
Communicate with internal partners before preparation:
Form cross-functional team
Create shared or common goals
Design standards for supplier selection