Business Operations Strategy the Company

Business Operations Operations Strategy The company is going to outsource manufacturing of the materials used in the production of the waterproofing system. There are three reasons why outsourcing has been chosen as the production method. The first is that outsourcing allows us to be cost-competitive immediately. The high cost of starting our own production line would make it difficult for us to bring our product down to the target average price of $1,500 per house.

Not only would a high price hurt our chances of gaining a foothold in the market but it would also invite competitors to enter the industry. By outsourcing the manufacturing of the components of our system, we can leverage the economies of scale that our suppliers already enjoy in purchasing and manufacturing. The second reason for outsourcing production is to allow the business to be scalable. We intend to grow the business from the Northeastern U.S. To the entire country, then into Canada and Mexico as well.

We have a target of 7-14 days from order to deliver. If we produced centrally on the East Coast, we would be 4-6 days from West Coast markets. This risks creating bottlenecks as a result of tight turnaround on West Coast orders. Thus, it is important that we decentralize our production to at least two or three sites nationwide, so that all customers are within 2-3 days of our distribution center.

The third reason for outsourcing production is to allow the company to focus on the marketing aspect of the product. Our team is more specialized with respect to marketing, compared to high-tech manufacturing. Perhaps more importantly, because this is a new product and our customer base is highly-diffused, substantial effort and expense will be required to build our marketing infrastructure. By outsourcing production, more of the firm's capital is free to pursue the marketing infrastructure buildout that we feel is required for the company to succeed.

There are a number of potential suppliers, some of whom could be potential competitors. Therefore it is important to analyze the potential suppliers carefully and organize them according to their fit with our needs. The first potential supplier is Dupont Tyvek. Tyvek is a division of Dupont that specializes in barrier technology. The Tyvek product itself has been around since 1955 and for the past thirty years Dupont has used it in the housing construction industry.

Tyvek performs much the same function as our product, providing air and water protection for new homes, and increasing the energy efficiency of buildings (Dupont.com, 2011). Dupont has the technology capability to produce our barrier to our specifications. The main issue with Dupont is that Tyvek is a direct competitor to our product. If we contracted with Dupont, they would have our patents.

While we can protect ourselves to some degree, the reality is that we could not survive a court battle with Dupont should they decided to take our technology and compete against us. There are significant risks, therefore, associated with dealing with Dupont. If we only used Tyvek for part of our product, Dupont can be expected to be an excellent partner, because of its substantial production and distribution capabilities and reputation within the home construction industry. Butyl rubber is another product that can be used in the product.

First developed in the 1930s, butyl rubber is a commodity product that is easy to obtain. It is currently used in roof repair for its robust, airtight qualities. There are no problems anticipated in obtaining butyl rubber (from Exxon, for example, or Lanxess, or others). Another potential supplier that has been identified is WR Grace. Grace is a chemical and material conglomerate with a major construction division. They produce air and vapor barriers. Thus, as with Dupont they are both a potential supplier and a competitor.

They produce structural waterproofing systems (Grace.com, 2011). Grace has the production capability to produce components of our system but as with Dupont may be a risky partner. Lastly, Pecora is another firm in the industry that can produce components to our specifications. They specialize in sealants, and can be used strictly for that product rather than for entire systems (Pecora.com, 2011). They are also a potential competitor. The inbound logistics would involve bringing together the sealant from Pecora, Tyvek, butyl rubber and materials from WR Grace to our assembly facility.

Initially, this facility will be in the Northeast, but more facilities are expected to open as we expand westward and southward, to bring us closer to our customers. We expect to keep 1-2 weeks worth of inventory on hand, then produce to order. The assembly process will be partially done at our facility -- cutting in particular - then the.