Reference no: EM132211750

Global Industries, the parent company of Marsden Manufacturing, a pump maker supplying the aircraft and automotive industry, has recently implemented an ERP system and not too long ago tied in the last of its six subsidiaries. Marsden, the second to complete its final phase of the cut-over, has been operating on the new platform for several months. John Roberts, the company’s Sourcing Manager, has been wrestling with the concept of jointly contracting with some of the other subsidiaries for commonly used products and services. Since three of the others are serving the same industries, Roberts felt this would be a no-brainer.

While the other Sourcing and Procurement Managers agreed in principle to centralize some of their purchases with Marsden, gathering the actual data for an analysis has proven elusive. The previous manual system required considerable time and effort to conduct supplier analysis and selection, and little data existed on spending patterns at any of the companies. Data would be gathered manually on potential suppliers’ past performance, including their prices, their ability to meet delivery dates, and their history on quality but that information was widely dispersed in stored records and on disparate legacy systems. Sampling showed that they could expect that very little nomenclature or part numbers could be matched from one company to the next. There was no summary of the amount of spending by part or service at any of the companies.

The team of managers agreed that in order to compile this historical data, the staff must manually combine separate reports from supply management and finance. This effort appeared daunting since none of the firms had an excess of personnel. Roberts was tasked to lead this effort as best he could and develop a plan to consolidate spending for the next year. He was to report back to the team in six weeks.

Using the Executive Summary format that covers the following aspects.

Discuss potential benefits and barriers of implementing centralized purchasing and sourcing.

Outline the approach you believe Roberts should take to solve the existing problem and address the plan for the following year.

Given the current situation, how practical is it for the companies to consider centralization?