Supply chain management

It was August 7th, and Brandt Womack had just been given his first assignment by his purchasing manager at Miamibased Snedeker Global Cruises Inc. It was the EAuction Development Program (EDP). The purpose of EDP was to identify potential products that could be purchased through eauctions, determine the necessary steps to conduct a successful eauction, and assess the impact of eauctions 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 highestever 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 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 many costsaving opportunities for the company and greatly reduced the overall order costs of the company. The company wanted to continue to pursue ways in which the centralized purchasing practice could reduce costs, and eauctions became a viable option. However, senior management at Snedeker was concerned about the impact on quality and the effect eauctions might have on suppliers.

At Snedeker, the purchasing cycle began with a master forecast for the upcoming year with orders being placed 8 to 10 months prior to need. This master forecast included everything from replacement engine parts to chocolate mints placed 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 EAuction Development Program, giving Brandt the master list of all the products needing to be purchased for the next year. Kasey instructed Brandt to determine which products would be best to purchase through eauctions and wanted to know how the eauction process would work. In addition, Kasey wanted Brandt to determine the effect that eauctions would have on relationships with current suppliers.

Brandt walked out of Kasey’s office overwhelmed. It was his first assignment, and he did not know where to begin the EAuction Development Program (EDP).

Case Questions

1. Suggest steps Brandt should follow to begin the EDP process.
2. Identify differences between traditional purchasing and use of eauctions. How can Brandt use these differences to make his selection? What types of items would be best suited for purchase through eauctions?
3. Assume Brandt has identified products to purchase through eauctions. What steps does he need to take to conduct a successful eauction?
4. What negative impact can eauctions have on supplier relationships, and how can Brandt ensure that they do not occur?