case study- gcs

8/8/2019 Case Study- GCS

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Case study –1

Thinking globally and buying locally at Sony

At Sony, the basic global procurement strategy has been to procure local parts (PLP) wherever possible and to produce in those countries where the products are sold.

In Europe, approximately 90 % of the company’s value is localized; in Asia30 to 50 % is localized.

When production is shifted to new area, local suppliers are developed,wherever possible. As a back up, Sony often negotiates with Japanesesuppliers to set up local production in the new country of operation. Sonydoes not contribute capital to suppliers to set up offshore productionfacilities but will help them with training of personnel at new locations.

Thus the general policy is to produce as many parts locally at each locationas possible. The only exception involves optical parts and semiconductors,

which are shipped from Japan to its worldwide production locations.

Question:

Discuss about benefits of the strategies adopted by Sony?



Case Study - 2

Cost management

Let us look at the income statement of the imaginary automotive supplier Venus Auto.

Revenue from sales - Rs. 2.5 Crores.

Cost of goods sold (COGS):

Cost of purchased goods and services -- Rs. 1.375 Crores (55 % of sales).

Manufacturing in house --- Rs. 0.825 crores (33 % of COGS).

Engineering and R&D --- Rs. 0.15 crores (6 % of COGS).

Selling and general administration – Rs. 0.15 crores (6 % of COGS).

Profit - 0

The Chairman of the company wants to start making profit. He would like tosee a solid 10 % margin that is Rs. 0.25 crores over five years time.

Venus Auto has two choices:

1. Simply raise prices by 10 % across the products.

2. Second possibility, resorting to lay-offs, steep cut in salary- enough to

produce 0.25 crores of savings.

Both the above options are unrealistic. Are there any other optionsavailable?



Case Study-3

In the late 1990’s John Deere, the global agriculture and heavy equipmentmanufacturer, was doing quite well for itself. With sales of $ 13 billion andworldwide employment of more than 45,000 people, the company was ableto weather periodic sector down turns and continue to show nice profits.

Deere could have done better, however, because the supply managementoperation was not structured to yield optimum profit. Highly decentralizedwith more than 14,000 active suppliers worldwide, it was hard, if notimpossible, for the company to get a handle on its spend- what the companywas buying in raw materials and production components and where it was

buying. No single system summarized exactly what the company was buying in raw materials and production components, and from whom, and

how often.

Individually, Deere’s decentralized plans could point to very successfuloperations, but centrally, it was impossible for Deere to leverage its globalsize and optimize supply chain power. Global operations numbered seventy-two, each of which maintained a separate supply chain, with different pricesand specifications.

And, the redundancies appeared in global product distribution as well. For example bearings that were used in production in Sweden, Japan and Koreawere each sourced locally to a different supplier. Steel another heavy hitter and a denominator in many of Deere’s globally produced products, wascontrolled and bought by a highly decentralized group of supply chains. Andyet, with a $ 13 billion spend, even a savings of 1 % per year would haveresulted in $ 130 million to corporate coffers, more tan enough to fund a runof new products or a couple of new plants.

Question:

1. Suggest various strategies for streamlining the procurement so that thecompany can save at least 5 % saving each year?



Case study- 4

Respironics, which has its Head Quarters in Pittsburgh, Pennsylvania, is a$ 470 million producer of medical products such as breathing equipment.The company knew its margins were eroding, despite a booming annual17 % growth rate and a long series of successful new products.

Benchmarking excellent supply chain performers, including Dell, Honda andIBM, convinced Respironics executives that a supply chain managementiniative consisting of best practices, especially supplier development wouldshow strong results fast. With a nearly $200 million spend spread over some1500 suppliers, the executives knew tremendous opportunities lay untouchedin the supply chain.

By creating a new strategic sourcing function, and adding two dedicated professionals to work with costs and supplier development, the companydeveloped a plan designed to show results in a matter of months. A $10million privately held key plastic facemask supplier was chosen for Respironic’s first supplier development project. A few weeks of training andexperienced guidance from Dave Curry, a Honda purchasing veteran, thingsstarted to look better. Team members picked a team name- TAT- for “ Takeaction today”- and started to gather baseline data.

For five weeks, Dave Curry’s team observed and gathered data. Respironicsneeded more production in the hospital facemask area, a product groupgrowing at ever increasing rate. But this key supplier was experiencing 18 %rejections. So, four Respironics and four supplier process improvement teammembers got to work and noted the following:

S No. Actual Goal

1. Production per day 2636 pieces. 34002. Line balance 81.3 % 90 %

3. Cycle time 77 sec 15 sec4. Rejects 18 % or 300 pieces per day 150 or less5. Wait time on assembly line 9 secs 5 secs.6. Travel distance 527 feet under 4007. Floor space 7153 sq.ft. 6500 sq.ft.8. Inventory of raw material 20 days. 3 days.



A suggestion system received 50 responses from which 20 were found to beuseful.

The team established quantitative goals and set targets. Rejection levelswere high at about 18 % complicated by a difficult layout and ergonomicschallenges. With good margins but too much waste, the company was ripefor transformation.

Question:

1. How will you transform the company?



Case Study - 5

Honda of America, with production locations in Ohio, strongly commits tolong-term relationships and supplier development. Honda purchases 80 % of the total cost of its car parts from outside suppliers- the highest percentagefor an automaker in the world. It has also has a policy of developing sourcesof supply near its plants. This policy supports a close relationship betweenHonda and its suppliers, makes supplier development easier, and supportsJIT. Honda’s plant keeps less than three hours worth of inventory on handfor most items.

A strong local supply base has been important to Honda’s success. Hondacommits a significant amount of resources towards developing localsuppliers, an approach that ensures that Honda has access to suppliers

capable of meeting the company’s stringent performance standards. Honda’sgoal is that its purchase volume be at least 30 % and sometimes 100 % of suppliers total output. The company tries to create a sense of mutualdependence between itself and its suppliers. It has, on occasion, pursuedsmall equity ownership with suppliers as a way of demonstrating itscommitment and be recognized as an important customer.

Honda has high respect for its suppliers. As a result, long-term mutualloyalty exists between and its suppliers. A supplier who meets Honda’s

performance standards becomes a lifetime partner.

Honda will remain loyal to a supplier even if the supplier experiencestemporary performance problems. Supplier development and improvement,which covers a wide range of areas, has one primary objective: to create andmaintain a dedicated supply base that supports Honda’s USA requirements.Honda commits varied resources to support and develop its supply base intoworld-class performance.

Question:

1. Comment on the supplier development strategy of Honda?



Case study- 6

Honda of America, with production location at Ohio, believes in long-termwin-win relationship with its suppliers. Honda provides technical support tosuppliers in a number of technical areas-like plastic technology, welding,stamping and aluminium die-casting.

Honda forms special teams to help suppliers on as needed basis. For example, on one occasion a supplier experienced problems resulting fromrapid growth, Honda formed a four-person team that moved to the supplier’sfactory for three months to help correct the problem.

A “Quality Up” programme targets suppliers with lower quality. Hondamakes sure that the supplier produces 100 % quality product.

Honda’s representatives regularly visit suppliers ‘s facilities. Among other things, Honda examines each supplier’s financial and business plans.

Honda has a “Loaned Executive Programme”- where it sends its executivesto work at the supplier’s location. This supports greater understanding andcommunication between Honda and its suppliers.

While Honda’s supplier development approach seems extreme to someobservers, few can argue with the company’s success in the US car market.The cars at the Ohio assembly plants have consistently been the best sellingcars in the US, with higher customer loyalty. In fact, Honda now exports a

portion of its US production back to Japan. The success of Honda’s supplier development and improvement efforts is one reason the company has suchloyal customers.

Question:

1.Comment on the Honda’s supplier development efforts?

case study- gcs

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