TORONTO PUMP AND VALVE
Toronto Pump and Valve is a manufacturer of plumbing and pumping equipment with a number of small manufacturing facilities distributed across Canada. The manufacturing plants produce variations of TPV products adapted for the local market (e.g. the Edmonton facility produces primarily for the oil industry). TPV has been extremely successful. The branch plants (15) have been encouraged to operate independently relying primarily on their own staffs. In 1988, anticipating the effects of the new Canada-US Free Trade Agreement, the president of TPV, Sam Lamson, decided that the open border would create new competitive sources of manufacturing inputs and that TPV could benefit from access to American sources of supply if TPV had someone with knowledge and experience in the U.S. markets. Lamson hired Dick Picket, an American with considerable purchasing experience, as Vice President in charge of purchasing, a position created for him. Picket's first assignment was to determine the responsibilities of his job. Larry Osborne, a long time member of the finance department, was assigned to Picket as an assistant because he knew most of the branch managers and branch purchasing executives. Picket's appointment was announced in the TPV newspaper as well as in a memo to the executive group and to branch managers.
Picket quickly decided that the most effective way to profit from free trade was to centralize purchasing in Toronto where, using his knowledge and contacts, TPV could gain economies of scale through bulk buying. As a first step, he decided that head office needed knowledge of branch activities in order to coordinate buying in ways which would realize the expected savings. He intended to request that plant purchasing executives notify him of expected purchases of materials in excess of $25,000 at least one month before they were required. Picket showed the plan to Lamson and presented it to the Board of Directors when he...