15 Feb In August 1995, Donna Glitter, buyer for Metal Breeze Inc. (Metal Breeze), sat in her office in Giggles, Ontario and pondered how to outsource the company’s inefficient sheet meta

In August 1995, Donna Glitter, buyer for Metal Breeze Inc. (Metal Breeze), sat in her office in Giggles,
Ontario and pondered how to outsource the company’s inefficient sheet metal operation. To satisfy current
and potential customers’ requests to lower costs for upcoming contract bids, Donna had to decide quickly
whom to outsource and on what criteria to use for choosing a supplier.

COMPANY BACKGROUND

Metal Breeze Canada, Inc., located in Giggles, Ontario, was the sole Canadian subsidiary of Metal Breeze
International (MBI) , a large manufacturer of electronics hardware. MBI had seven plants in North
America and produced a broad range of products for the electronic industry, including radio equipment,
high frequency receivers and input/output panels. MBI was considered the market leader in North America
with the largest range of competitively-priced, premium-quality products. The parent company had
revenues of $744 million and employed 14,000 people. MBI opened its Canadian subsidiary in Giggles in
1961 to meet the needs of a growing Canadian market. Metal Breeze Canada employed 140 people and
had revenues of $30 million. The Canadian subsidiary made roughly 100 standard products and also
performed custom work, which represented approximately 35 per cent of revenues.

THE SHEET METAL OPERATION

Metal Breeze’s in-house sheet metal shop produced metal casings for a variety of the company’s radio
equipment products. The operation produced everything from standard “high runners”, with long
production runs of 150 pieces per week to customized one-offs. Raw sheet metal was cut, punched with
holes, slotted and bent into the required shape by a crew of 12 unionized workers. The shop ran one day
shift from 7:00 a.m. to 3:30 p.m. with a partial second shift, (three to four people) operating from 3:30 to
11:00 p.m., added when volumes warranted or when the shop had fallen behind in a particular order. The
crew was quite senior, with eight of the 12 having been with the company for an average of 15 to 20 years
while the other four had been there for an average of four to five years.

The sheet metal operation had been operating in the plant for the last 15 years and had been under
performing for the last four years. Its efficiency was measured at 40 per cent. For example, an operation
that according to a time study should take one hour would end up taking 2.67 hours. This not only affected
costs, but also drove up lead times for customers. The average fully allocated cost per part was $50
(unpainted), and the average lead time was approximately three months, significantly higher than the six
weeks demanded by customers. Frequently, a second shift had to be added to ensure that the order did not
exceed three months.

The majority of problems in the operation centred around the turret press, a machine used at the beginning
of the process, which cut the sheet metal into the appropriate size and punched in the proper holes and
slots, before any further work could be done to the product. The machine was old and prone to frequent
breakdowns. Parts for the press were expensive and hard to find; downtime could last up to a week, leaving
the whole operation idle.

OUTSOURCING

In July of 2020, Donna Glitter was approached by the general manager of the plant and was secretly told
of the decision to eliminate the sheet metal department due its inefficiencies. She was asked to source out
a supplier discreetly that would be able to provide the same services with shorter lead times and in a more
cost-effective manner.

Donna set about the task of finding suppliers by looking through trade magazines, reviewing literature that
had been dropped off in previous solicitations and talking to a few colleagues that were aware of the

decision. Through this research, she narrowed her focus to three companies and decided to send each a
request for a quote. She also decided that it would be a good idea to visit each supplier in order to get a
better feel for their operations.
NOMA SHEET METAL

Noma Sheet Metal was a large, well-established sheet metal shop located about two hours from Giggles.
It was recommended to Donna by a colleague who lived nearby. The company had a few large clients and
numerous small specialty clients and was known for its excellent quality. Donna commented after her
visit:

The facilities are quite large and modern, and they can certainly handle our required
volume. On the other hand, the shop floor was a little disorganized; there seemed to be re-
work parts lying all over the place. As well, the workers seemed to be a surly bunch; the
feeling I got was that they weren’t overly happy to be there.

The company had recently put in a paint operation, which was not yet fully operational. Although Metal
Breeze did have its own paint facilities, Donna wondered if it would be beneficial for suppliers to deliver a
painted product. Noma Sheet Metal was also ISO 9001 registered, as was Metal Breeze. Although not a
mandatory requirement, many of Metal Breeze’s customers looked favorably upon ISO registration. Noma
Sheet Metal offered delivery times of six to eight weeks and agreed to Metal Breeze’s 45-day credit policy.

Donna had the accounting department check the financial condition of the firm through Dun and Bradstreet
reports and was told that it was satisfactory.

Noma Sheet Metal quoted an average price of $48/part (unpainted) f.o.b. collect.

HENDERSON AND SONS

Henderson and Sons was a small, privately-owned, second generation operation located a half-hour from
Giggles. Henderson and Sons was the preferred supplier of a large company (which represented the
majority of its business) in Giggles with which Donna was quite familiar. This company was known for
its demanding quality standards.

Donna commented on her visit:

This operation was quite small, but they were expecting to grow. They had recently
purchased a brand new turret press, which gave them the increased capacity to take on our
required volume. The shop floor was amazingly clean and organized for a sheet metal
operation. The small crew seemed to work well together; there seemed to be a sense of
pride among the employees. On the flip side, the shop was not ISO registered and had no
intention of doing so.

The company did not have a painting facility and was not intending to add one. The company’s owner, a
draftsman by trade, also offered services for improving process and product design to Metal Breeze at no
extra charge.

There was no financial information available as the company was privately held.

The company promised delivery within six to eight weeks, quoted a price of $47/part f.o.b. collect and
agreed to Metal Breeze’s credit terms of 45 days.

METALWORKS

Metalworks was a privately-owned, mid-sized operation located one hour away from Metal Breeze. This

company had been supplying Metal Breeze with products that it could not make in-house for the past 15
years. There had been occasional problems with quality, mostly having to do with paint finishes that were
outsourced, although for the most part the quality had been very good. Originally a family-owned
operation, it had been sold to an individual about six months ago. Donna reflected on her visit:

The facilities and equipment are quite modern. The shop did seem a little cluttered and
disorganized. However, they will be moving to a larger facility in the near future. The
employees were the same ones that had been there under the previous owners; most of
them had been there for quite a long time and seemed to be enjoying working together.

The company was not ISO registered, although they had plans to do so in the near future. The company
was also considering putting in a paint line in its new location. There was no financial information on the
company as it was privately held. Metalworks promised delivery within six to eight weeks, quoted a price
of $55/product f.o.b. collect, and agreed to Metal Breeze’s credit terms.

THE DECISION

It was August 2020, three weeks after Donna was first approached by the general manager. Donna
wondered which supplier to choose and what criteria to apply for selection. For example, should price be
the most important criteria, or should it be something else? She knew that she had an important decision
to make and she needed to make it quickly in order to satisfy customers’ demands.

1. What do you feel are the immediate and basic issues with sourcing a supplier in the case?
2. With review of the quotes, Provide the Basic analysis using all applicable criteria discussed
in class.
3. Consider the different supply options for the company, what recommendation do you
suggest for the company?