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SCENARIO:
Eagle Aircraft Engines, a manufacturer of engines for military and commercial aircraft, is preparing to negotiate a major five-year procurement for over 1000 parts from its suppliers. Its Airfoils and Casting Division (A&C) is responsible for purchasing roughly 100 of these parts.
Over the last three years, A&C at Eagle has purchased 90% of its parts from two suppliers: Crown and JDC. In preparation for the negotiations with suppliers, the five key personnel within A&C need to generate a “Business-Managed Procurement” policy in which A&C personnel must unanimously agree on four schedule and quality programs. The key personnel involved in the internal negotiation include three engineers, a buyer, and a financial analyst. They have all been sent a memo from the Purchasing Director outlining the overall procurement strategy. The Purchasing Director is putting pressure on them for consensus, emphasizing the importance of certain issues over others in preparation for his/her own negotiations with suppliers.
TEACHING MATERIALS:
For all parties:
- General Instructions
Role specific:
- Confidential instructions for Ferguson
- Confidential instructions for McGuire
- Confidential instructions for Banks
- Confidential instructions for Roberts
- Confidential instructions for Archer
Teacher’s package (33 pages total):
- All of the above
- Teaching Note
MAJOR LESSONS:
- To insure relationships that promote quality within the organization, both long-term and short-term interests must be balanced very thoroughly.
- Teams miss great opportunities to make “trades” with suppliers if they negotiate each issue separately. Packaging is crucial in this negotiation.
- Deciding how much information to disclose depends heavily on risk-trust, and perhaps the nature of the interest. If the interest is one that will put others at risk, or is driven by professional ambition rather than team goals, it will be risky to share with others on the team.
SIMILAR SIMULATIONS:
- Common Measures
- Multisumma