assignment

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First part

You are required to develop a case study for a company or product of your choice evaluating the supply chain. In the case study you will be required to describe (and/or illustrate) the current supply chain for the product and then analyze the supply chain and discuss whether the current supply chain support the business objectives of the company. In your analysis you can identify any weaknesses/or strengths and make recommendation to improve the supply chain.

The case study will be developed in three phases:
Brief general description of the product and company that you have selected for your case study. Include a brief description of the business objectives of the company as well. Typical questions to address:

INTRODUCTION:

A brief introduction of the product and the company you have selected for your case study (what?) and what you intend to do in your report (how?).

COMPANY

(name of company)
What core product/service does the company make/sell/distribute?
What is the main objective of the company (re shareholders)?
What strategies do the company employ (or plan to employ) to reach these objectives (e.g. extending markets; cost reduction; focusing on quality or service; innovation; ethical & sustainable issues; etc.)?

PRODUCT/SERVICE

(name of product/service)
What are the current characteristics of the product/service offered by the company (e.g. hi-tech; consumable; low value/high value units; big/small; etc.)?
How do end-consumers experience the current product/service (re price, quality, availability, desirability, service)?
What are the requirements of end-users (and potential new customers) of the product that would increase customer satisfaction (re price, quality, availability, desirability, service)?
What is the state of the industry and how important is this product in the industry (e.g. market share; competitiveness; main competitors; future growth and relevance of the industry)?
What is the strategy used by the company to compete in the industry (e.g. focus on cost; differentiation (quality, service, innovation, etc.); markets (global; niche; specialty)?
Will the current strategy ensures that the company reaches its main objectives (Is it aligned with what the company wants to achieve)? If not, what other strategy should the company focus on to be competitive with its product/service?

Case Study Project

Introduction

The Apple Company was founded by Steve Jobs, Ronald Wayne and Steve Wozniak in 1976 and renamed to Apple Computer, Inc in 1977. Apple Inc. is a multinational company whose headquarter is based in Cupertino, California in the U.S.A. The company business involves the design, manufacture and sale of computer software, consumer electronics, personal computers, services, peripherals, third-party applications and digital contents, and also provides networking solutions (Apple, 2013).

Among the most celebrated products of the company is the iPhone 4. The iPhone 4 is an electronic product that combines an iPod, an internet communications device and a mobile phone in one handheld device. The iPhone uses a multi-touch user interface; it features web browsing, class emails, maps and searching. This case study is based on Apple and the objective is to explore the company’s supply chain involving one of its brands-the iPhone 4, and whether it meets the long term objectives of the company.

The Company

Among the hardware products that the company deals with include the iPod, Apple TV, the iPad, the iPhone and the Mac computers. Their software applications include the iOS operating system, the OS X, the iWork and iLife production suites, the Safari web browser and the iTune media browser. In the phone making industry, Apple comes third after Nokia and Samsung.

The iPad has spurred the music business, the same as the iPhone has redefined the cell phone world and the iPad to the media and entertainment world. As of November 2012, Apple had close to 400 retail stores in 14 countries. In terms of revenue, Apple ranks among the largest global technology companies. The company had a market capitalization of $623.52 billion as of August 2012 (Browning & Stephen, 2012).

The financial objectives of the company include constant product innovation with at least one product launch and two upgrades. The next financial objective is to achieve crucial performance index and fulfilling the expectation of the investors. The customer related objectives includes regular innovation and launch of new products to retain the loyal customers and to gain new ones. The other one is to develop strategic approaches to enter into new markets (Tiffany, 2012).

The internal business objectives include developing the right suppliers for its products and developing a research & development division to key out future innovations and development opportunities. The last set of objectives relates to employees and talent management; making sure that the middle to top management talent is retained because these are the people involved in classified product research and in making tactical decisions.

The Product

The iPhone 4 is a 3G smart phone with touch screen features. It is a fourth generation iPhone and was preceded by the iPhone 3GS. The iPhone supports video calling, general e-mail and web access, downloading and viewing of music, movies, books, games and periodicals.

Its dominance from its predecessors is in the new design; it is composed of a stainless steel frame which doubles up as an antenna. The price for the iPhone 4 ranges around $99 for the 8GB version; the iPhone is widely available in many stores and comes with a two-year warranty. Buyers have a choice between a black and a white colored iPhone (Joshua, 2010).

Upon its launch, the iPhone 4 received an overwhelming reception from the market but with time there have been some short comings that have been pointed by numerous iPhone 4 owners. Within a few days of its release, some users of the iPhone complained about the insensitivity of the proximity sensor and also a yellow discoloration of the screen which disappeared after several days, a factor that was blamed on the glass lamination glue which was used (Joshua, 2010).

There was also a reported problem about the signal reception of the antenna and the quality of the camera image. Apple’s response to these issues has been to create iOS 5 and 6 updates for the iPhone with lots of added features and the ultimate solution has been the creation of iPhone 5. Apple introduced the iPhone 5 in September 2012 which saw the company manage to sell 5 million units within 3 days of its release into the market.

The new iPhone addresses the shortcoming of iPhone 4; it has a larger and longer screen, a faster processor, is much lighter, slim and a sharp design. It also comes with new features. With a price of $150, it is a wise tactical strategy by the company to retain and get more customers which is a key objective of Apple (Joshua, 2010).

References

Apple, I. (2013) Apple Incorporated. Business Day. Retrieved from          http://topics.nytimes.com/top/news/business/companies/apple_computer_inc/index.html

Browning, E.S. & Steven, R.. (2012). Apple Now Biggest-Ever U.S. Company. The Wall Street          Journal.

Joshua, T. (2010). iPhone 4 review. Retrieved from http://www.engadget.com/2010/06/22/iphone-4-review/

Tiffany, K. (2012). Apple Designer: Money isn’t Apple’s Main Objective. Retrieved from DailyTech

Second part:
Analyze the interactions between purchasing and suppliers. Typical questions to address:

SUPPLY CHAIN FOR PRODUCT/SERVICE

What are the main activities (facilities, transportation, storage, etc.) followed to ensure the end-product reaches its end-consumer?
(Draw a diagram of the main activities indicating the location of all these activities. Illustrate the physical flow of the goods through all these activities (with lead times if provided). Add the current business processes (e.g. ordering, manufacturing, selling, etc.) that affect the flow of goods (with lead times if provided).)
Are there any obvious flaws/problems with any or parts of the supply chain (e.g. process too cumbersome; duplication of activities; complicated process; lengthy processes; very costly; wastage or redundancies; etc.)?
Does the current supply chain contribute (or align) to the achievement of the product strategy and overall company objectives?


SUPPLY MANAGEMENT of the product

What are the main raw material/components/services that are required for the ‘make’ part of the supply chain? Is this a critical or strategic component of the end-product?
Who are the main suppliers of the raw material/components/services to the supply chain?
Do the current raw materials/components sourced meet the objectives of effective supply management (in terms of uninterrupted flow (reliability); cost; quality; contribution to overall customer satisfaction)?
Are than any risk/opportunities presented by the current supplier used to deliver the raw materials (e.g. operational, financial, environmental or reputational)? How does the supplier measure up to key performance indicators (e.g. cost, reliability, quality, etc.)? Is this a strategic supplier that contributes directly to end-consumer satisfaction?
Is there ways to streamline the acquisition of the raw material from the supplier (e.g. ordering process, supply function; using IT systems) or should the company investigate redesigning the procurement process?
If the company needs to identify or source alternative suppliers, is it not better (e.g. cost, quality, strategically, etc.) to make it in-house than using outside suppliers?
If the company decides to source suitable new suppliers, do they follow a structured process to ensure a good-fit supplier is selected (e.g. start with internal need analysis of raw material (in terms of volume, quality, availability; cost, etc.), a thorough market assessment and analysis of the possible suppliers (in terms of financials, operations & capability, reputation (ethical and sustainability), quality, environment (especially if it involves different countries)), deciding on key performance indicators to assess and measure suppliers (in terms of cost, quality, reliability, ability,
ethical and sustainability
, etc.))?
How does the company envision collaborating with the selected supplier (e.g. forming of alliances or partnerships, early supplier involvement in design, vendor management inventory, etc.)?

Summary: Does the company or manage its suppliers effectively? Any recommendations to improve.

We should follow this:

Analyze existing supply chain processes

Develop high-level plan of SC

·

Network of plants, warehouses, etc.

· Define existing processes

· Identify existing IT/IS

· Identify organizational structure

· Identify any possible risk events

Assess and redesign SC by comparing
to objectives

· Simplify SC

· Reducing processes

· Improve link between activities

· Eliminate wasteful / repetition

· Reduce lead times and inventories

Introduction

On April 19, 2008, Walter A. Walsh, Supply Management Manager for Agri & Lawn Company, met with one of his buyers, Olivia Newcomb, in his office. They discussed her Agri & Lawn Company cost reduction goals for bearing #B02326620. After the meeting Mr. Walsh began wondering if changes should be made to the way suppliers were being evaluated, if price premiums should be paid to suppliers for performing at a higher level and how business should be allocated among suppliers performing at different levels.

These were issues needing further consideration. Founded in 1875, Agri & Lawn Company is one of the U.S.’s oldest industrial organizations. It manufactures agricultural and construction equipment as well as commercial and consumer lawn care equipment. Today, Agri & Lawn Company does business in over 100 countries and had sales in excess of U.S. $12 billion in 2007.

Bearings

Bearings are devices that allow constrained relative rotation or linear movement between two parts. The purpose of bearings is to allow motion with a minimum of friction. Friction creates heat and wear of adjoining parts. Bearings are commonly found in furniture drawers, all types of engines and at the intersection of moving mechanical parts.

An example of primitive bearings is the use of tree trunks laid down under heavy stones in prehistoric times. Two common types of bearing include roller (cylindrical roller) bearings and ball (spherical roller) bearings. Bearings can range in size from nearly microscopic (watch bearings) to very large (wheel bearings on large earthmovers).

Many of Agri & Lawn Company’s products require bearings. Consequently, they spent approximately U.S. $90 million on bearings in 2007. Applications of bearings at Agri & Lawn included small (approximately 0.75 inches/19 mm) in lawn care equipment through large (over 15 inches/384 mm) in large agricultural and construction equipment.

The firm has a continuing value analysis/value engineering program that, over the years, has standardized bearings in a wide range of products and applications. The results of bearing standardization include increased interchangeability among designs, reductions in repair parts system-wide inventories and increased buying leverage with suppliers. As a result, the annual requirements at Agri & Lawn for some of their standardized bearings were in the hundreds of thousands.

Part #B02326620

One of Agri & Lawn’s bearings, part #B02326620, was currently being purchased from two suppliers, New England Works and Midwest Bearings. This bearing was used in a wide range of Agri & Lawn products. Annual usage had been steady, averaging 500,000 bearings per year. The price of this bearing was approximately U.S. $1.00.

Supplier Performance

Agri & Lawn Company evaluated its suppliers on five dimensions. As shown and defined in Table 1, they were quality, delivery, cost management, technical support and wavelength. The overall evaluation of a supplier was determined by its lowest scoring dimension. The evaluation system and the 2007 evaluations of New England Works and Midwest Bearings are summarized in Table 1.

The New England Works Advantage

While both suppliers offered excellent quality, New England Works was rated higher in delivery, technical support and wavelength. Walter Walsh felt that these advantages were largely due to a highly skilled sales force comprised of professionally trained engineers at New England Works. The company responded well to Agri & Lawn’s technical needs in the areas of product and process improvements. These improvements resulted in substantial efficiency gains to Agri & Lawn in the areas of product redesign, product simplification and assembly costs. Rough estimates by Mr. Walsh placed these gains in the range of U.S. $500,000 to U.S. $1 million per year. The total of all bearing purchases from New England Works in 2007 were approximately U.S. $20 million.

The Midwest Bearing Advantage

Midwest Bearings was rated higher than New England Works in the cost management dimension. Their ability to reduce costs enabled them to consistently quote lower piece prices, usually about 2 percent less than New England Works. The total of all bearing purchases from Midwest Bearings in 2007 were approximately U.S. $8.5 million.

Simultaneous Goals

Agri & Lawn Company placed a high priority on developing long-term, close working relationships with suppliers that met its performance goals. On the other hand, Agri & Lawn also pursued an aggressive program of annual cost reduction. Currently, there was no specific company policy providing guidance on how to manage trade-offs between these two goals. Perhaps factors other than price (such as delivery, cost management, technical support and wavelength described in Table 1) should be considered when comparing competitors’ quotes, especially if this reduced Agri & Lawn’s long-term costs of acquisition due to the value added by the non-price factors. For example, would a price quote from New England Works be preferable even if it was higher than the price quote from Midwest Bearings, provided New England Works’ performance was higher in the non-price factors? And if so, what sort of price premium would be justified?

The Problems

Olivia Newcomb and Walter Walsh had to make decisions regarding three related but oncflicting issues. First, the supplier evaluation process emphasized the lowest performance on one dimension even though suppliers were evaluated on five dimensions, as shown in Table 1. They needed to consider whether or not a different supplier evaluation system would make it possible to better evaluate the strengths and weaknesses of alternate suppliers. Second, Agri & Lawn Company had two often-competing goals, namely developing long-term supplier relationships and generating annual cost reductions.

There was no clear guidance as to which goal was more important or how they could be considered together. The final problem was how to allocate the business for part #B02326620 between New England Works and Midwest Bearings. Included in this problem was the question of whether to pay a price premium and/or give volume preferences to suppliers that provided better overall performance, or to emphasize price over nonprice considerations.

Discussion Questions

1. What are the advantages of basing a supplier’s overall evaluation on its lowest performance on one of the five dimensions (Quality, Delivery, Cost Management, Technical Support and Wavelength)? What are the disadvantages? Overall, do you think that basing a supplier’s overall evaluation on its lowest performance on one dimension is a good idea or not? Why or why not?

2. Develop importance weights for the five supplier rating dimensions shown in Table 1. Should these weights be equal? Briefly explain the basis for these weights.

3. Develop a weighted-point system for evaluating Agri & Lawn Company bearings suppliers. Please keep in mind that (a) the sum of these five weighted dimensions must add to 100 points, and (b) Agri & Lawn Company has the current goals of developing long-term relationships with suppliers and generating cost reductions.

4. Make a case for paying a price premium that favors a higher overall rated supplier, such as New England Works. Make a case for not granting a price premium for a higher-rated supplier. Which would you recommend? Why?

5. Assume that Agri & Lawn Company is considering paying a price premium to the more highly rated supplier (New England Works) in this year’s buy of part #B02326620. If the only two suppliers quoting on this part are New England Works and Midwest Bearings, what percentage premium (over the lower price) would you recommend? Justify your response.

6. Should Agri & Lawn Company single source with New England or with Midwest? Or should they divide the business between the two? Briefly explain your rationale.

7. Assume that Agri & Lawn Company has decided to divide the purchase of part #02326620 between New England Works and Midwest Bearings. What percentage would you recommend be bought from each? Briefly explain your rationale.

8. Agri & Lawn Company (a) places a high priority on developing long-term relationships with suppliers that meet its goals and (b) pursues an aggressive program of annual cost reduction. If you were Mr. Walsh, what guidance would you give to Olivia regarding how these goals should be treated? Briefly explain your rationale for the guidance you gave.