Which of the following should be the best course of action of GE’s CPO?

GE has developed TurboProp engine that is made from over 850 metal parts. These parts are sourced from many suppliers. Value of spend on these parts make up 73% of total spend. Any delay in receiving a part will cause a bottleneck around the production of the engine.

Which of the following should be the best course of action of GE’s CPO?
A . Drive down prices by using market competition
B. Increase production
C. Part standardisation
D. Reduce delivery cost

View Answer

Answer: C

Explanation:

In this scenario, the final product has vast range of parts. The second problem is lacking any part can cause disruption to the production process. So GE has 2 things to do: to reduce the part varie-ties, and secure the supply. Part standardisation is the best option here. It can simplify the range of parts or materials used, and simultaneously, it expands the supply base of GE. If a supplier fails to deliver the part, the company always has other options to replace.

Costs are also a concern, but bottleneck in production imposes a serious risk to the organisation. Driving down costs using market competition cannot be a foremost priority.

Increasing production may help to reduce bottleneck. However, it will also increase the inventory of finished products and unnecessary upkeep costs. LO 3, AC 3.4