Summary
The scenario depicts Wonderful Widgets, a firm specializing in the manufacturing and distribution of a single product, widgets. The company is able to produce widgets using its current equipment, facility, layout and materials and is able to procure the product through various suppliers. Recently, it has been noted that operational costs have been rising each month.
Problem at Hand
In the scenario, the Supply Manager is responsible for making all decisions pertaining to the procurement of the product. Since operating costs are rising, the Supply Manager must be proactive in seeking solutions to reduce these costs and streamline certain processes. This must be accomplished by the end of the current quarter. Further, Corporate will see the savings or another increase in operating costs when the quarterly report is reviewed.
Options
Two options are available to the Supply Manager; produce the widgets internally or acquire the widgets through outsourcing to various suppliers.
Internal Production
The pros of producing the widgets internally surround the overall cost of their production against the cost of purchasing them from an outside source (Hamlett, 2013). If the purchase price is higher than what it would cost Wonderful Widgets to manufacture the product, and the firm has the capability to meet production standards, then consideration should be given to produce the widgets internally (Hamlett, 2013).
Cons surrounding internal production include the possibility of losing alternative sources for the widgets, design flexibility and access to other firm’s technological innovations and thus the potential to even-out a competitor’s advantage (Simchi-Levi, Kaminsky, Simchi-Levi, 2008).
Outsourcing
The...
... middle of paper ...
...ifference between manufacturing them and outsourcing their production. This makes it unclear as to whether minimizing total landed costs is feasible. Additionally, the assignment instructions were confusing. It was unclear whether to discuss distribution strategies or procurement options.
Works Cited
Hamlett, K. (2013). Chron. Reasons for Outsourcing in a Manufacturing Industry Retrieved from http://smallbusiness.chron.com/reasons-outsourcing-manufacturing-industry
-1292.html
Lister, J. (2010). Chron. The Disadvantages of Integrating Internal and External Suppliers.
Retrieved from http://smallbusiness.chron.com/disadvantages-integrating-internal-external-suppliers-36054.html
Simchi-Levi, David, Kaminsky, Philip, Simchi-Levi, Edith, (2008). Designing and Managing the
SupplyChain: Concepts, Strategies and Case Studies, 3rd Edition. New York, NY: McGraw Hill.
Opossumtown, Inc. has been selling different types of equipment to contractors in the construction industry since 2007. It is a publicly traded company and therefore answers to its shareholders. As with all publicly held corporations, the company needs to show consistent growth in revenue from year to year. Therefore, in 2014 in an effort to increase revenue, Opossumtown, Inc. implemented a plan to increase marketing and selling expenses while decreasing selling prices. By implementing these changes, the company is looking to achieve its goal of increasing operating income by 6% and net income by 4%.
Merbatty is a boat company with an estimated 8% market share. This company has been in the boat building business for 33 years. Merbatty has wealthy and successful customers that focus more on the quality of the boats than the price. Thus it is important that they get more affordable but high quality material from the right suppliers. The company has put aside a lot of capital to expand over the next 5 years; this 5 year plan will help reach their profitability targets. They are mostly situated in and around the USA and Europe. It has come to their attention that the market has become more competitive and they find it difficult to reduce their cost. The sales made for the company are mostly made by sales agents around the world
Its positive aspects included the democratization of design and access to products as goods could be produced in greater abundance at lesser costs. Still, critics argued that it removed the creativity from design and limited consumer choice. Some companies, such as General Motors, were able to implement “flexible mass production” techniques that allowed for minor variation in general product designs to allow consumers to fine-tune objects for their specific use. This alleviated some of the concern, but still was a point of criticism in the design
I think a benefit to the proprietary product model is either when a company is the first entrant into a new market or if a company is introducing a product that is incredibly more innovative than any other competitor’s product being sold in the marketplace. A proprietary device will allow the company to better control all aspects of the marketing chain: pricing, promotion, product and promotion to further ensure the viability of the product as a new entrant.
Introduction Bytes Products Inc. is one of the largest suppliers of the production of electronics components in the Midwest. The annual sales of these products are at its records high and now it’s becoming hard for the company to keep up with the increased demand. James M Eliot is the CEO and chairman of the board, is trying to address the problem faced by the company to meet the demand of its product. Currently Bytes products dominate the market with a good 32% market share. Mr. Eliot is trying to solve the problem to constantly dominate the market by increase the number of plants they currently have, so they can meet the demand.
Happy Chips, Inc. is faced with a serious problem, with only having one mass merchandise customer called “Buy 4 Less” being unhappy with the company’s operating performance. Buy 4 Less had several problems cited including frequent stock outs, poor customer service responsiveness, and high prices for the products being supplied. Buy 4 Less came up with solutions they think seem fit to fix the problems they found with Happy Chips, Inc. and if Happy Chips, Inc. wishes to remain a supplier to their company they will have to incorporate these changes. The problem however with this scenario, is that employees of Happy Chip, Inc. are not happy with the demands Buy 4 Less has bestowed upon them which include providing direct store delivery four times a week instead of three, installing an automated order inquiry system to increase customer service responsiveness, and decreasing product prices by 5%. Even though the easiest thing for Happy Chips, Inc. to do is to agree to the changes Buy 4 Less wants them to do, Wendell Worthmann, the manager of logistics cost analysis doesn’t agree to the changes right away. The main problem with this case is that Buy 4 Less is Happy Chips, Inc. one and only mass merchandise customer that accounts for 400,000 annual unit sales and 12% of annual revenue. With the mass merchandise segment having such a high profit potential, Happy Chips, Inc.
...pital resources like distribution vehicles and storage warehouses should be outsourced to help reduce the high cost of operation which in turn can lead to reduction of its products price. The company should concentrate on product development and evolution and delegate distribution roles to outsourced firms. Such initiatives have worked well in the new Indian market and should be implemented in other areas.
Example: A garment Industry has 500 direct sewing operators and helpers. The cost to company for the 500 operators is Rs. 39,00,000. The company works for 8 hours per day for 26 days in a month. Therefore,
Outsourcing labor and materials in a global market can significantly stretch the supply chain structure. This can have both positive and negative effects. Looking to different countries provides the opportunity to access different markets and find the lowest possible manufacturing costs. Many companies also embraced the Toyota Motor Corp. model of just-in-time inventory and other lean manufacturing techniques that emphasized speed and cost reduction (Bosman, 2006...
Products are not standardized and vary by country in terms of type, packaging and specification. This increases production time, production costs, lead tim...
The transportation & logistics industry is a form of industry that keeps people and products on the move, it includes airlines and airports, shipping companies, logistics service providers and other transportation companies. That’s why it is considered the backbone of modern global supply chains. In a place like the Kingdom of Saudi Arabia that has diverse geography with a dry desert and great temperature extremes and a large area of about 2.1 million square km, a transportation & logistics industry is a necessity. Imagine you need to move from one city to another (of course it will be so hard to cross large areas of empty deserts) you have only two options to transfer from one to another city; the first option is to drive and the second option is to fly and ship your car via a car transport carrier. The harsh climate in Saudi Arabia makes people to prefer using the second option, this cause the market of transport market to enlarge. Albassami International Group is one of the biggest companies established to satisfy those needs. It is considered one of the biggest companies specialized in vehicle transportation in the Middle East. The philosophy of the company is to serve the needs of the clients over the span of thirty two years, throughout which they constantly had an eye to the future by evaluating the most appropriate ways in which to make transporting clients’ vehicles via the best and safest answer. They operate round the clock to serve clients at all times.
...h the full expenses included. Challenge overseeing and incorporating over a huge supply change and developing patterns.
Distribution- work on alternatives of outsourcing the distribution network or transportation routes. Should focus on outsource this non-core business activities if it is non-profitable. It is costly by not understanding the multi distribution network in standard line delivery (Multiple drop off points through retail channel sales)
The outsourcing activities of Dell and HP are considered to be one of the many reasons for their downfall in the recent past as they have not been able to perform well in their response to service requirements. Some competitors such as Apple have therefore outsourced only the manufacturing but have kept the design, branding and after sales service in house.