CaseStudy: Dart’s Parts, Inc. Z. “Dart” Mitchell leaned forward in his chair to
ID: 415938 • Letter: C
Question
CaseStudy: Dart’s Parts, Inc.
Z. “Dart” Mitchell leaned forward in his chair to read the e-mail that had just arrived from one of his major customers, Avery Machine Corp. It read as follows:
To all our preferred suppliers—
Due to our commitments to our primary customer, Globus Enterprises, we will in the future be doing all of our supply chain business by way of the Internet, e-mail, and EDI. This includes order preparation, bidding, forecasting, production scheduling, delivery monitoring, cost control, accounts payable and receivable, credit and financing, market and advertising planning, human resource acquisition, engineering specifications, and so on. To maintain compatibility with our systems, you will have to invest in a specific set of EDI hardware and software, available from GoingBust.com on the Web. Although the hardware and software are expensive, we anticipate that the cost savings and increased business this will provide over the coming years can more than offset the additional cost. Please let us know if we can continue to count on you as one of our preferred suppliers as we move our supply chain into the information age.
J. R. Avery,
Chairman Avery Machine Corp.
Dart’s Parts had been founded in 1974, when the country was coming out of the 1973–1974 recession and the need for machine part fabricators was great. Over the years, Dart had built up the business to where it now had a solid base of major customers and a comfortable back- log of orders. Dart had increased the capacity of the plant substantially over the years, moving from a small rented facility to its own 200,000-square-foot plant, with a separate 50,000-square- foot warehouse located adjacent to the main plant. Although not a “first adopter” when it came to new technology, Dart’s embraced proven advanced technologies both on the plant floor, with innovations such as robots and numerically controlled machine tools, and in the office, with computers, digital copiers, and other such office equipment.
Dart Mitchell had been reading industry magazines about some of these new technologies and had to admit they sounded promising. However, he had read about some horror stories, too, when the much-advertised features turned into a nightmare. In one case, a customer had forced its suppliers to obtain production schedules off its Web site. Initially responding to high growth in a new product line, the firm had put its component needs on its Web site, but when a major order was canceled, it was late in changing the Web production schedule. As a result, the suppliers were stuck with hundreds of unneeded components and the company wouldn’t reimburse them. In another case, a manufacturer had made a bid for electronic parts on a Web auction and won. However, when it received the parts, they were too large to fit in the standard-sized enclosure it was using and they all had to be scrapped.
Dart believed that this new technology was indeed the future of the industry, but he was concerned about getting in too early and being stuck with the wrong equipment. The new supply chain technology would undoubtedly open avenues to increased business, but it would also result in a number of costs. Of course, it would also save the company’s reputation with Avery, a major customer. However, obtaining the EDI system would be a major financial investment for the firm, particularly if Avery later dropped this approach and went to an all- Internet ERP system like some customers had been talking about doing. At this point, Dart wasn’t sure what to do.
I need a (a) Summary of the Facts (250 Words) & (b) Statement of the Problem (150 Words) for this Case study.
Explanation / Answer
(a) Summary of the facts – Dart’s Parts is facing the imminent possibility of investing in a new supply chain technology as requested by one the company’s major customers – Avery Machine Corp. Avery will be conducting all its future business by using EDI. EDI will cover different aspects of business like preparing for a transaction, bidding for materials and parts, scheduling of the production, and monitoring of the delivery process. Besides operations it will also be used for keeping a track on financials like accounts payable and receivables, and credit and financing.
To be able to continue as a preferred supplier for Avery Dart will have to purchase the software and hardware pertaining to EDI. The software and hardware are expensive and so will require substantial upfront capital expenditure from Dart. Although Dart has been quick to embrace and use new technologies and use them in a manner to provide them with maximum leverage and advantage, Mitchell is wary of some of the fallouts that can occur from these new technologies. For instance web production schedule may not always be able to provide real time changes. So in case of any cancellation the supplier’s resources as well as working capital will be locked in. Secondly Dart will have to be very careful when making bids for parts in a Web auction as the parts have to be of the standard size enclosure. Otherwise they will be of no use.
Thus, in the case, Mitchell is facing a dilemma. The dilemma is whether to make the large investment in new technologies and take the risks associated with it or do not make the investment at the cost of losing a big customer like Avery.
(b) Statement of the problem – The problem being faced by Dart is in the form of a trade off. The benefit of Dart implementing EDI, Email, and the Internet would be that his company would be able to gain a competitive advantage by implementing the new technology which is the new frontier for the industry. However, the gamble lies in the fact that not all of the kinks have been worked out in the implementation of these newer systems collectively and Dart could lose valuable time, resources, and capital should there be any issues. Dart has two alternatives in front of it and each alternative has its own pros and cons. Using and implementing the EDI will increase its business, cut its costs and help it retain Avery. On the other hand by not implementing EDI Dart will be able to avoid the uncertainties and will have the flexibility in the future to have the capacity to invest in an all internet ERP system.