Bergerac Systems

Supply Chain Risk and the Build Versus Buy Decision–The Bergerac Case AssignmentIntroduction

Utilizing the Bergerac Systems Case, we will explore the concept of risk and its impact on a firm that is considering a backward vertical integration acquisition that centers on a “build versus buy” decision. Bergerac systems manufacture in clinic diagnostic equipment for the veterinary market. Its products include a device that analyzes the blood samples of animals right in the vet’s office. This process allows for much timelier analysis, diagnosis, and treatment of the animal…a win-win situation for all involved.

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The company not only manufactures the actual analytical device but also the cartridges that contain the sample and are placed in the diagnostic machine. The company has chosen to only manufacture a small percentage of these disposable cartridges and purchase the vast amount of them from outside suppliers.

The build versus buy decision revolves around this opportunity:

  1. Continue the status quo
  2. Acquire GenieTech, one of its suppliers of the cartridges
  3. Increase capacity and manufacture additional cartridges themselves within the existing plant
  4. Other alternatives can be considered, but we will limit to the three above

The analysis of these cases presents several thought-provoking concepts on:

  1. The use of Kuku/Kamrad framework for exploring the firm’s decision.
  2. The quantitative and qualitative analysis of the build versus buy evaluation and the impact on the firm
  3. The value of the previous five modules and how many of the dots tie together (see the chart below)

Key Tie Backs To The Previous Course Module

  • What inventory implications might there be associated with this decision? Will quantity discounts play a factor in this scenario? Does the bullwhip effect have any impact?
  • Will there be any impact on the organization from any other metrics previously discussed?
  • Can any aspects of S&OP be utilized to improve the sourcing of the cartridges in the present arrangement and going forward? What supply chain lessons might be learned from Red Wing Shoes that could be used if the acquisition of GenieTech goes forward?
  • What techniques developed in this course can be utilized to help folks understand this decision better for example impacts on working capital?

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