Muenster Case Study

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Case Study: Muenster Pump Co. case MAJOR FACTS: - Muenster Pump Company manufactures high-quality agricultural pumps, being the largest employer in a small city in Muenster. - The company was founded by Emil Dorf and it has been ran by two generations of Dorf family members. - The company contains a foundry for casting pump housing and related items, providing all required pumping houses. - Terry Dorf was named purchase manager, proving to be an aggressive and conscientious professional, who tries to integrate world-class management in the small business. - L-1012 represents 60% of Muenster demand for cast housing. Muenster Pump Company spends $180 for producing L-1012 cast housing (36% of the final product price). - Union Foundry proposes Muenster Pump Company cast pump housing at attractive prices (L-1012 cast housing for $90). Other foundries sell it for $94 or $98. - Terry thinks about outsourcing the cast housings. The vice president of Manufacturing is opposing the changes suggested by the purchase manager arguing that the old company’s strategy is the key of success. MAJOR PROBLEMS: - Muenster Pump Company appears to be a small family business, with two- generations experience in manufacturing high-quality agricultural pumps but lacking experience with adapting to new marketing conditions. The evidence is given by the opposition of the VP in manufacturing to the purchase manager’s new ideas. - The main problem is the make-or-buy decision with respect to cast housing. The problems derived from outsourcing are related in this case to: financial benefits, quality maintenance, response time to new requirements and necessity to dismiss16 employees. SOLUTION: - Given that cast housing production are not activity strategic, neither critical to the business, Terry should gather more information necessary for taking a make-or-buy

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