I.

Statement of the Problem

Due to increased demand of pumps. There is a risk or possibility that CJI industries will not meet the increased need of their customer Great Lakes Pleasure due to uncertain commitment of their supplier Caolinn Pumps to increase their production of bilge pumps.

II. Statement of Objectives

To be able to meet the increase need of Great Lake Pleasure Boats when their demand increases. To analyze if Caolinn Pumps alone will be able to provide their bilge pumps to meet their needs. To determine if it is feasible and practical to create pump in-house with an estimate of $500,000.00 as capital

III. Relevant Case Fact/Findings

Caolinn Pumps has been a good supplier of bilge pump for CJ industries however there is a informal non-contract basis which can increase a risk of CJ industries not meeting their requirement of production. CJ industies does not have any other suppliers since other two suppliers were 500 miles away from the CJI warehouses.

III. Relevant Case Fact/Findings (contd)

CJI Industries can use up to $500,000.00 to produce pumps in-house however they lack knowledge and skills in those fields. CJI industries should be able to forecast their increased demands to Caolinn pumps higher than 8 to 10 weeks ahead of time since Caolinn has been able to replenish their stocks before depleted

IV. Alternatives (A. Assumptions)

CJI should also have a backfill of supplier in case Caolinn pumps cannot really provide or meet their sudden increase of demands, however since Caolinn pumps will be their primary supplier of bilge pumps they should formalize their contract and undergo to a Service Level of Agreement or SLA.

IV. Alternatives Pros

Service Level of Agreement will provide an objective contract which will meet their needs with low risk of undelivered pumps since SLA when not met can provide penalties for the other party.

IV. Alternatives Cons

Service Level of Agreement does not only penalize the provider with out any means. When we go to an SLA it increases the unit cost of a product (not using a baseline price only) this means that Caolinn pumps will provide their needs and pay for penalties if the price was right. Therefore this will be an increase of costing per pumps.

IV. Alternatives Risk Assessment

CJI having an SLA with Caolinn pumps can lessen the risk of not meeting their bilge pumps requirements per month as it increases as the demand increases. CJI having a backfill supplier once Caolinn did not perform will also lessen their risk of not meeting the needs of their customers.

IV. Alternatives Benefits

CJI industries can now objectively commit with the sudden increase of their customers needs needs since the contract of the suppliers of their materials were standardized. The risk of not meeting the sudden increase of the demand if their primary supplier cannot produce the pumps will decrease since CJI industries will be able to have a backfill supplier.

Conclusion
CJI industries does not need to produce pump in-house since this will take time and it will cost approx $500,000.00 adding to that they are not knowledgeable in that business. In Addition, Since the sudden increase of pumps does not occur frequently there is also no need to invest in producing pumps inhouse.

 Having a standardized contract with Caolinn pumps using a Service level of agreement can lower the risk of not producing the required number of pumps needed and having a backfill supplier will also protect CJI industries from not meeting their customers needs. There will be an increase of costing for CJI since SLA may increase the unit cost and the backfill supplier may also not use the baseline price however knowing that there is a sudden increase of demand and CJI meeting all those demands indicates more income and increase brand name for CJI industries.

Conclusion contd