Cottrill case study

INTRODUCTION:

Judy Stevens, purchasing supervisor at the Cottrill Inc. plant in Columbus had to take a decision whether she wanted to change cottrill’s paging service from its current supplier Tallant to Saxton Wireless or wanted to remain with Tallant. She had to finalize her decision in few hours.

BACKGROUND INFORMATION:

Cottrill was established in the mid-1800s and was the one of the largest corn refining operations in North America. The company operated six wet-milling plants, four in the United States and two in Canada. The Columbus plant had been operating for over 20 years and employed more than 100 people. Cottrill’s purchasing department had to ensure that the plant ran efficiently and was responsible for replenishing a variety of supplies at the plant, ranging from chemicals to communications equipment. A current initiative for Cottrill, and particularly for the purchasing department, was reducing the level of working capital. This had been a focus in the purchasing department for over two years, and the departmental target was an annual decrease of $300,000.

The majority of Cottrill’s products were manufactured through a continuous flow process. Therefore, downtime at the Columbus plant was extremely costly and was estimated at $200,000 per hour. In an attempt to minimize plant downtime, management implemented an automated software program and an electronic pager system 12 years ago. The software program, called Production Messaging, monitored Cottrill’s equipment. The plant had a total of 20 pagers, and this number included a variety of different models.

SPECIFIC PROBLEM:

Several recent events had caused Judy to become dissatisfied with the current arrangement with Tallant. In June, Judy contacted Tallant with a routine request to replace a broken pager. Judy was dissatisfied with Tallant’s service, feeling that she spent too much time on the phone arranging the order and it took Tallant over a month to send out the replacement pager. Judy contacted Tallant again in September to replace another pager. She was informed that Tallant no longer carried this model and that the option of renting the pager hardware would be discontinued in the near future. Judy ordered a comparable product, valued at approximately $150, but felt a little unsettled by the new information. Cottrill’s budget was tight and she preferred renting this equipment instead of purchasing for cash flow reasons.

SAXTON PROPOSAL

In late October, a Saxton sales representative, Natalie Hopkins, contacted Judy to present a proposal outlining the benefits to Cottrill of switching to Saxton’s services.

EXHIBIT 1

Per-Unit Comparison of Service Terms for Tallant and Saxton

Tallant Saxton Monthly fee for airtime (per pager) $16.95 $13.95 Monthly fee for phone number (per pager) $1.95 None Monthly fee for equipment rental (per pager) $11.90 None Yearly maintenance fee (per pager) $60.00 None Service provided (no additional cost) 1-800 # help line Direct sales representative In order to confirm that Saxton’s pagers would be compatible with the relevant applications in the Production Messaging software a trial was scheduled for the first week in November. Unfortunately, the pagers did not immediately function with the Production Messaging software. However, after several attempts to solve the functionality issue, Cottrill’s systems group resolved the snags in the hardware and reworked the connection after completing some reprogramming.

ALTERNATIVES:

1-Judy can decide to switch to Saxton.
2-She can remain with Tallant.
3-She can call an urgent meeting with Tallant and discuss with them the issues she has with them and ask them to improve their service and also to continue the option of renting pager hardware. 4-The monthly fee for Saxton is $279. Judy can think of having Saxton wireless for one month testing period before terminating the contract with Tallant. So the fear of having the same issue to happen again like at trial time can be minimized. In the meantime, she can also search for other wireless system options which may be better than both Tallant and Saxton.

DECISION CRITERIA

1-Saxton will reduce the cost up to $5244 per year than Tallant. This is very important for Costrill as they are trying to reduce their working capital. Saxton will also provide a direct sales representative in case any issue arises; it will save time and will be more important in case of emergency. 2-Tallant has established reputation in the area of in-plant wireless messaging system and are working with Cotrill for 12 years. They have much more experience, so are more reliable than Saxton.

CONCLUSION:

SaxtonTallant
CostLowHigh
ServiceBestNot very good
FunctionalityNot certainCertain
ReputationNot establishedestablished
ExperienceLessmore

RECOMMENDATION:

I would recommend Judy to go for alternative 4. Saxton is lower in cost and better in service than Tallant. By spending $279 she can make sure if Saxton is fulfilling all the requirements of Costtrill. It will also give her time to compare functionality and reliability of both systems.