Which of the following should be a priority action of the company?

GSC Ltd is a manufacturer of car parts. To accommodate growing demands of electric cars, the company is developing a new component which requires different type of steel. The project team estimates that the component will be ready for production in 1.5 years. Until then, they need to keep the production busy.

After checking the inventory records, the production team sees that the company has 3 months of stock. The lead time for each batch is two months.

Which of the following should be a priority action of the company?
A . Create new specification to new supplier
B . Standardise the specification
C . Create new specification to current supplier
D . Make a call-off order to current supplier

View Answer

Answer: D

Explanation:

The scenario is very long with many distracting data. Students need to read carefully and use their experience to solve this problem.

The company is developing a new component which requires different type of material. But this component will not be available for mass production in 1.5 years. This means the company still needs to produce the current components with current materials until the development is finished. They must continue purchase the materials from current supplier through call-off orders. This situation is an example of straight re-buy.

Reference: CIPS study guide page 3

LO 1, AC 1.1