Supplier Selection at Casturn Systems (A)

Miguel Haro, director of Control Systems in Casturn’s Transmission Division, had returned to his desk after witnessing an online reverse auction for O-rings. Although supplier training for the event had been rushed, Haro’s Global Commodity Manager Mary Konchesky was confident that the event would yield significant cost savings. One bid stuck out from the rest: the incumbent supplier placed a bid that was 70% less than the current price they were charging for Casturn O-rings. Haro knew this seemed too good to be true. A few hours later, Haro’s phone rang. It was Konchesky, calling to tell him that she had just finished a call with the incumbent. Haro’s suspicions had turned out to be justified. Haro asked himself, “Would auctions ever work at Casturn?”

• Identify the drivers for successful use of electronic reverse auctions (e-RAs).
• Explain how e-RAs can be used for sourcing highly engineered parts.
• Describe the benefits and disadvantages of the re-sourcing process.
• Articulate strategies to ensure successful re-sourcing processes.