Abstract:
The paper below examines the Pacific Systems Corporation case study. From the case, Pacific Systems Corporation is a technology manufacturer. The company outsources different parts and assembles them in its factory. This paper therefore provides the recommended sourcing strategies for the company. From the case, four suppliers have been shortlisted as possible suppliers for this case. Of the four possible suppliers, two are located in the United States and two are located in Asia. Pacific system wishes to source for DVD dries for its new line of computers. It is estimated that 500,000 pieces will be sourced in the first year alone. This is an important factor in determining the sourcing strategy. The number of pieces needed is not very large, meaning that one supplier would be able to comfortably accommodate all the orders. The paper will also examine issues relating to multiple and single supplier sourcing as well as the importance of supplier capacity.
What is your recommended sourcing strategy in this case?
The recommended sourcing strategy for this case is the single supplier sourcing. This method involves carrying out an evaluation of suppliers using financial analysis, cost analysis for each supplier, as well as, a balanced score card.
The table below shows some of the financial ratios calculated for each supplier in order to assess their financial position.
The table below shows the cost analysis carried out for each supplier. The table shows the per unit costs involved in sourcing the DVD drives from each of the suppliers
The table below shows the balanced score card developed for the purpose of supplier evaluation and selection.
Step 1: Identify supply evaluation categories
The categories selected for supplier evaluation are volume capacity, cost competitiveness, quality performance, location, previous history and performance and information systems capability.
Step 2: Assign a weigh to each evaluation category
The assigned weights for each evaluation category are:
Volume Capacity = 20%
Cost competitiveness = 20%
Quality Performance = 30%
Previous History and Performance = 10%
Information systems capability = 15%
Step 3: Identify and weigh subcategories
No subcategories exist within each broader performance category.
Step 4: Define a scoring system for categories and subcategories
Each category is scored between 0% and 100% with 0% being poor and 100% being excellent. The entire scoring system is based on five points as shown below
0% - 25% - 15% less than the average
25% - 50% - 10% less than average
50% - 75% - Average performance
75% - 100% - 5% above the average
Step 5: Evaluate supplier directly
Step 6: Review evaluation results and make a selection decision:
Step 7: Review and improve supplier performance continuously
Constant assessments will be carried out on Park technologies performance over the period of cooperation. The firm should ensure periodic site visits to Park technologies in order to review its performance and inspect the quality of products. Quarterly financial statements should also be reviewed in order to assess the supplier’s financial position. Lastly, the supplier will be required to complete quarterly appraisals on its own performance based on quotas agreed upon during the contract signing.
Risk management:
In order to manage risks associated with Park Technologies a risk analysis will be carried out on the supplier. Any identified risk will be listed down. A risk rating will be assigned to the risk based on its impact and likelihood of occurrence. Furthrmore, mitigation strategies will be liad out for all the risks identified. This will provide the company guidance in case any risk arises during its cooperation with the supplier.
How important is the issue of supplier capacity in this case? How did your group evaluate supplier capacity? What level of attention or importance should supplier capacity receive during the sourcing decision? Why?
Supplier capacity is very important in this case. The personal computers developed by pacific systems cannot be shipped without the DVD drives. This means that the supplier selected must be in a position to supply all the pieces required by pacific systems. The figures used in this scenario are based on the projections for sales of the computers. If there is a significant difference between the projections and annual sales, the company must still be able to handle the changes. The supplier selected should have surplus capacity. This is important in ensuring that in case of an increase in demand, they will be able to produce the additional units needed. If the demand is low, the supplier must also still be able to handle the less demand. This can be done by redirecting the freed up capacity into production for other customers. This ensures that the costs to the company are kept low. If the supplier does not have sufficient capacity, it can lead to losses for pacific systems.
The issue of single versus multiple sourcing is an important consideration during supplier selection. Identify the potential advantages and disadvantages of single and multiple sourcing (not only as they relate to this case).
Single and multiple sourcing are different strategies for sourcing for suppliers. Each of the methods has their own advantages and disadvantages. The major advantage of single sourcing is that the company only deals with a single supplier. This means that the quality of the products can be approximated. However, single sourcing also has a number of disadvantages. In case of the supplier being unable to deliver, the customer has no immediate alternative. This also applies in case of delivery of a batch of defective items. If the customer needs to scale up numbers quickly, a single supplier might also not be in a position to supply.
Multiple sourcing has its advantages. In cases where one supplier cannot handle demand, two or more suppliers will be able to meet the demand. Competition between the suppliers also acts to keep prices low and quality high. However, multiple suppliers can also have disadvantages. A significant difference in the quality of products between two suppliers means that the customer will be offering products of different quality to the end customer.
