Case:

Supplier Selection at Casturn Systems $($A$)$

Case Overview:

Casturn $($the name and company data have been disguised$)$ is a large, global automotive supplier.

The company$$s transmission division$$s focus has been, and continues to be$,$ on technological

innovation. The division had grown recently through acquisition. As it did so$,$ it had not paid

enough attention to supply chain issues, and realized it needed to$.$ The chief procurement officer

$($CPO$)$ sensed that there was an opportunity to market test a number of $$commodities$,$ and asked

the global supply management $($GSM$)$ group to look into it$.$

Casturn$$s most recent attempts at market testing products in reverse auctions had failed. A major

shortcoming of the company$$s re$-$sourcing process$$and a major factor contributing to the

failure of its past attempts$$was that Casturn failed to do the preparation work needed to

generate a functioning market for its reverse auctions. Instead, Casturn$$s policies and approaches

created a dysfunctional market. There is evidence that suppliers did not participate meaningfully

in the bidding events because they were not confident the company would actually re$-$source the

business. When suppliers did bid, due to poor training they made errors that spoiled the bid

competition. Casturn needed to do much more preparation prior to each auction if it was to have

any hope of market testing its products successfully.

Learning Objectives:

$$ Understand market dysfunction in auctions and the types of efforts that are required to

ensure a successful auction.

$$ Examine the failures wrought by placing an overemphasis on the auction itself and an

underemphasis on preparation.

$$ Identify the groundwork needed for a successful auction.

$$ Analyze how appropriate opportunity identification, supplier screening, internal buy$-$in

for switching current supply sources, and appropriate auction design can be used to

implement a successful auction.

Study Questions:

$$ What are factors and trends influencing profitability at Casturn$$s transmission division?

$$ What are the benefits and disadvantages of the re$-$sourcing process in case A$,$ Figure $1?$

$$ What went wrong with Casturn$$s first two auction attempts?

Supply Chain Sourcing Dr$.$ Siqi Ma

$$ What improvements would you recommend implementing if the GSM division is to

achieve success in its re$-$sourcing initiative?