Gas Company
FAUQUIER GAS COMPANY
On April 14, Mr. Bill Murphy, manager of supply management for the Fauquier Gas Company in the Carolinas, was concerned about being able to find a supplier who could deliver 3 1/2 miles of large-diameter pipe for a new residential and commercial development.
Company Background
Fauquier Gas Company, as one of the nation’s 440 gas companies, served an area where land use was changing from agricultural to residential and commercial. To meet the increased demand for gas resulting from this conversion, 3 1/2 miles of new gas lines had to be ready for customer hookup by September. An additional 10 miles of new gas lines were planned for the next year.
The Supply Management Area
Mr. Murphy, as the manager of supply management, was responsible for the purchases of materials used in gas distribution such as pipe, meters, fittings, etc. Other major areas included the procurement of furniture, systems and forms, stores management, and materials forecasting and control. The supply organization was under the management control of the vice-president for operations.
The Specification Decision
In January, Mr. Murphy was having lunch in the company cafeteria when he heard Mr. Clive Byers, the construction project manager, talking about a new project. Fauquier Gas Company was going to add 3 1/2 miles of new gas lines and would start construction in June in order to “gas the line” that September. Murphy asked Byers for the purchase request so he could immediately contact suppliers (mills) and get quotations on prices and deliveries. Murphy knew from experience that the mills’ schedules for pipe production required a substantial lead time. He was concerned that the mills would not be able to accommodate Fauquier’s schedule. Byers told him that the purchase request would be sent over as soon as Pat Wilson, the design engineer, completed the pipe specification and Sam Law, the construction project engineer, approved it.
Mr. Charlie Buck, the design superintendent, headed the design organization. Both the design and construction organizations were under the management control of the vice president of operations.
Mr. Murphy called Pat Wilson and asked about the pipe specification. Wilson told him that the diameter of the pipe would be 24 inches with a wall thickness of 3/4 inches and that the length would be 57 feet. In prior purchases, the wall thickness was 3/8 inches and the length was “random double normal” (40 feet plus or minus 5 feet). When Mr. Murphy inquired about the change in wall thickness and length, Wilson replied that the operation of the line would be governed by less stringent specifications if the wall thickness was 3/4 inches. Wilson said using 57-foot-length pipe would reduce welding costs.
When asked which wrapper would be applied to the pipe, Wilson said that he had not yet gotten to that part of the specification. In past purchases, Fauquier had used two types of wrappers-coal tar and pry-tech. The mill supplying the pipe would apply the wrapper. The company that applied the coal tar wrapper was located in Philadelphia and the one applying pry-tech wrapper was in Atlanta.
Mr. Murphy was concerned about the economic consequences and the schedule impact of the proposed changes in wall thickness and length of the pipe. At lunchtime on April 14, he had
not yet received the purchase request with the pipe specification.
1. What are the key facts?
2. What is the problem?
3. List and discuss three alternative solutions.
4. What is your recommended solution?
Adapted from a case copyrighted by the Institute for Supply Management (formerly the National
Association of Purchasing Management) and the School of Government and Business
Administration, George Washington University. Reprinted by permission. Joseph Hood wrote
this case during one of the ISM-sponsored case writing workshops.
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