CDBS Case Study – Spring 2025 - Wayne State University

Lecturer – Lori Sisk - [email protected]

Strategic Sourcing Proposal

As a buyer, you are a critical part of meeting Cummins Drivetrain & Brake Systems
(CDBS) 2025 goals. The current market has brought many challenges, including price
increases, additional freight costs, tariff changes, port delays, and material/labor
shortages. It is your job to mitigate the risks while accomplishing your objectives to
meet the 2025 goals. Each year, you set a strategic plan to meet the next year's
savings objectives and follow through on your programs to meet the current year's
goals.
Program – Torque Plates
Your current source for torque plates for air disc brake assemblies, Cast Iron Co., has
come to you with a price increase. Prior to this notice of a price increase, you market
tested these part numbers with the CDBS supply base and narrowed it down to three
alternate suppliers for consideration. Not only are you unable to pass this cost
increase to your customers, but this increase may have an impact on your 2025
savings pipeline.

With the pricing from the other potential suppliers and current supplier, you will need
to re-evaluate your strategy to determine if your current supplier is still the best for
CDBS, or if you need to select a different supplier. Cast Iron Co. is asking for this
increase in 120 days. The CDBS manufacturing facility that uses these torque plates
is in York, South Carolina. Every customer buys all versions of these components.

You are being tasked with re-evaluating your sourcing strategies that ensure
continuous supply while minimizing the cost impact of each part number and
satisfying the needs of Cummins-Meritor’s internal and external stakeholders.

Listed below are the parts supplied Cast Iron Co., (Current Source).
Monthl Freight Qty
Weig Old New
Part y Cost / On
Description ht Unit Unit
Number Volum pound to han
(Lbs.) Price Price
e SC d
AIR DISC
3215Z26 BRAKE - 14,9
15.45 1,800 $25.80 $30.85 $0.15
26 TORQUE 31
PLATE
AIR DISC
3215A26 BRAKE - 14,6
15.45 1,800 $25.80 $30.85 $0.15
27 TORQUE 23
PLATE
AIR DISC
3215S23 BRAKE - 7,60
24.85 2,300 $42.30 $49.73 $0.15
85 TORQUE 0
PLATE
AIR DISC
3215X24 BRAKE - 12,3
14.79 700 $23.60 $28.23 $0.15
68 TORQUE 14
PLATE
3215W24 AIR DISC 14.98 700 $23.60 $28.23 $0.15 12,1
67 BRAKE - 68
TORQUE
PLATE
Supplier Quotes and Relevant Information

Cast Iron
Supplier Supplier
Supplier A Co. (New
B C
Price)
3215Z2626 $23.93 $22.63 $25.15 $30.85
3215A2627 $23.93 $22.63 $25.15 $30.85
3215S2385 $39.57 $37.35 $41.23 $49.73
3215X2468 $21.22 $20.88 $22.93 $28.23
3215W2467 $21.22 $20.88 $22.93 $28.23
South
Country of Origin Mexico Taiwan US
Korea
Quality 90% 92% 87% 93%
Delivery 91% 93% 89% 96%
Available Capacity for CDBS
Product 95,000 80,000 70,000 90,000
(Annual Volume)
40' 40'
Shipping Method 53' Truck 53' Truck
Container Container
Freight Cost per Pound $0.23 $0.45 $0.33 $0.15
Current Current Current Current
Tariff/Duties/Import Fees
Market Market Market Market
Tooling Cost (One time
$200,000 $80,000 $150,000 $0
charge)
Production Lead-Time 45 days 30 days 21 days 25 days
Transit Lead-Time 7 days 55 days 65 days 3 days

Internal
Concern
Customer Profile
Overall sourcing strategy (meeting internal/external
Purchasing (you)
stakeholder requirements), price mitigation
Finance / Supply
Minimize inventory carrying costs
Chain
Quality Quality metrics – Min 85%
Supply transition plan, un-interrupted supply, monthly
Planning
demand monitoring
Sales No supply of parts; upset customers.
Logistics Cost of potential expedites.

Customer Torque Plate Minimum Delivery

Profile Volume Quality Requirements
[A] 25% 89% 93%
[B] 35% 76% 89%
[C] 40% 92% 86%
Case Study Deliverables
You are being asked to review your current savings program and confirm the amount
of savings (or loss) you will obtain in 2024 based on the new prices. You will then
present to the VP of Purchasing a creative, compelling recommendation to either
execute your current plan or change course to a different supplier based on your
analysis:
 Develop a supplier(s) sourcing strategy for each part that optimizes cost and
order quantity, satisfies the needs of the external and internal customers, and
ensures uninterrupted supply of the products. How do your strategies differ?
Please provide justification.
o Confirm the amount of savings (or loss) that you will incur
depending on your chosen sourcing strategy.- p
o Savings to be calculated using old price vs. new price of your
chosen sourcing strategy - p
 Justification of your group’s proposal/recommendation
o Include a detailed analysis of the circumstances with the current
supplier and the pros and cons of each potential supplier option
o Provide at least 2 forms of external information for your
recommendation
o Propose and compare alternatives; provide strengths and weaknesses
for each
o Research current market constraints impacting the supply chain
(purpose of sourcing on a variety of factors)
o Create a Total Landed Cost Model
o Create a graph comparison of the costs to help executive leadership
visually understand the difference between the old price and new prices.
o Calculate the cost of carrying the inventory based on your
sourcing strategy.
Use a target inventory formula of:
1.5x the total lead-time of the item * the cost of the item * the
daily demand of the item
o Create a plan of how this will be accomplished before the price increase
 What do you think are the critical factors in making a sourcing decision?
 What did your group learn from completing this case study?
Intro
Meet the Team
Case overview
Analysis of circumstances
Supplier a pros and cons
Supplier b pros and cons
Supplier c pros and cons
All three (talk about cost/cost breakdown)
Propose alternatives pros/cons
Weighted Score Card
**rough draft for the slides we should have, please add anything if you think of
something as well!!**

Create total landed cost graph/model ( https://www.freightos.com/freight-

resources/understanding-landed-cost-and-profitability/)
Market info (constraints impacting the supply chain)
Cost calculation slide (Calculate the cost of carrying the inventory based on your sourcing
strategy. formula 1.5x the total lead-time of the item * the cost of the item * the daily
demand of the item)

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