What are the problems in this case study?
CASE STUDY: SNEDEKER GLOBAL CRUISES
It was August 7th and Brandt Womack had just been given his first assignment by his purchasing manager at Miami based Snedeker Global Cruises Inc. It was the “E-Auction Development Program” (EDP). The purpose of EDP was to identify potential products that could be purchased through e-auctions, to determine the necessary steps to conduct a successful e-auction, and assess the impact of e-auctions on supplier relationships. As a newly hired supply chain manager Brandt wondered how to proceed.
Snedeker Global Cruises incorporated in 1986 and is a cruise company with 35 cruise ships and over 70,000 berths. Snedeker Global serves the contemporary and premium segments of the cruise vacation industry and offers a variety of itineraries to destinations worldwide, including Alaska, Asia, Australia, the Caribbean, Europe, Hawaii, Latin America, and New Zealand.
In 2005, Snedeker incurred its highest-ever procurement costs in sourcing the products and services needed for cruise ship operations and wanted to combat this trend. To that end Snedeker had been working on changing its buying practices. In the past, each individual cruise ship made all of its own purchases for the upcoming season. Purchasing was decentralized, with each ship making purchasing decisions based on its needs alone. The company began moving away from this practice and put into place a centralized purchasing department in charge of making purchases for the entire cruise line. The centralized purchasing strategy provided the overall order cost of the company. The company wanted to continue to pursue ways in which the centralized purchasing practice could reduce costs and e-auctions became a viable option. However, senior management at Snedeker was concerned about the impact on quality and the effect e-auctions might have on suppliers.
At Snedeker, the purchasing cycle began with a master forecast for the upcoming year with orders being placed eight to 10 months prior to need. This master forecast included everything from replacement engine parts to chocolate mints paced on pillows in cabins. When the forecast was generated it was given to the Senior Purchasing Manager, Kasey Davis. Kasey scheduled a meeting with Brandt to discuss the E-Auction Development Program giving Brandt the master list of all the products needing to purchase for the next year. Kasey instructed Brandt to determining which products would be best to purchase through e-auctions and wanted to know how the e-auction process would work. In addition, Kasey wanted Brandt to determine the effect that e-auctions would have on relationships with current suppliers.
Brandt walked out of Kasey’s office overwhelmed. It was his first assignment and he did know where to begin the E-Auction Development Program.