DESCRIPTION: In an extremely competitive market, ATI had to keep costs as low as possible to remain a global leader. The ATI facility was the largest in the world by production volume, and the cost of the material and parts that went into production accounted for 75% of the total manufacturing cost on average; but for some, it was close to 95%. It was up to Brad Rogeman, Director of Procurement at American Turbochargers, Inc.’s (ATI) production facility in Cincinnati, Ohio, to keep that margin as high as possible.
ATI was heavily reliant on its procurement department to provide a competitive edge in a very price-driven market. Generally, it was easier to gain price reductions for large parts. Such reductions translated into huge cost savings. In contrast, it was much harder for ATI to negotiate significant reductions in piece prices for small parts.
After reading and discussing this case, students should be able to:
- Identify the cause of fastener proliferation.
- Explore outsourcing criteria options for small, high volume, high variety parts, and determine which criteria are best for ATI.
- Explain how a complete and accurate database of fasteners, a ranking system, and standardization could help ATI address cost and resource issues relevant to fastener negotiations.
- Examine the best ways to execute any changes in strategy.
- Determine which strategy is financially justifiable using cost-benefit analysis.
Secondary Tags: Innovation
Sales Rank: #451