Regional sourcing strategy for Trojan Technologies' supply chain

Trojan Cor

This project was different from what I expected. I did not see the flow chart, budget and other technical elements. You should indicate these items in your description to ensure that you get someone who is able to or has an interest in doing these. I tried to give you sufficient information so you could create a flow chart or a budget. I am not an expert on these topics and thus just try to do the writing for you. YOU SHOULD DELETE THE RED TEXT AND YOU WILL HAVE FIVE DOUBLE-SPACED PAGES. This site informs you that you pay for double-spaced pages so that is what I produced, plus the instructions say single or double. I added the last page for your cover sheet and I used three references as requested.

The advance work on this project suggests that it may be reasonable for the Trojan to seek to establish region suppliers. It seems that they have begun to reach some capacities at the same time that the company is growing and will need additional access to supplies. The company's support through Danaher, its parent company which has its own global supply elements, should allow it to adequately use existing knowledge and connections to confirm costs and potential supplier challenges. However, the true costs of opening global supply lines in other countries are not clear and many factors have to be considered. Care would have to be taken to ensure that appropriate start-up costs were considered and that the new suppliers (such as those in China) could meet quality and protection estimates.

What criteria would you use to select parts for low cost region sourcing?

Prioritize which products are needed first in accordance with regional demand.

Identify production time, technical challenges.

Confirm Costs/Shipping & Delivery.

Because the company has taken several steps to open region sourcing opportunities, it is necessary to make sure that the pieces can be produced at about the costs that were anticipated. The company has specific needs for new supplies relating to two of its production categories, those associated with the lamps, quartz sleeves and ballasts and those for electrical parts and panels. I would try to see if any of these items could be confirmed first in regard to their quality and the actual production and shipment time and costs. If the estimates could be confirmed, these items would be most beneficial to the company and could show additional value in the next supplies.

How quickly could you transition suppliers from China?

Because many issues often arise in starting a new supply chain, a timeline and development process would have to be developed either to move very quickly or with the idea of beginning at the start of the next calendar year (Rogers and Cooley, 2004). Since it appears the desire is to try to capture the savings quickly, procurement efforts should be based on 30 to 60 days of testing steps. This should allow for production to occur within 90 days which would allow for saving associated with half-year of supply usage. Because the company prices based on January costs, if this could not be done the true costs would have to be based on next year's projections.

What do you want to say to your current North American suppliers?

Because it seems that the company has achieved levels of production that suggest its existing supply lines have reached their capacity, I would focus on letting them know that we are checking for global convenience and access. Once the costs and quality have been established, it may be possible to offer the North American suppliers more information for competitive bidding that was able to meet saving and global accessibility, potentially as well as backup alternatives. Region sourcing allows for ensuring less supply interruption (IBM, 2006).

What are the trade-offs for domestic and global sourcing?

There are a number of do's and don'ts that can be identified with choosing to switch from domestic to global sourcing (Harton, 2010). Each of these can have important implications. Generally cost is a high savings priority in favor of making the shift. Products can be more readily available and can be accessible easier, possibly without inventory costs. On the down side, using items from other countries can bring about a number of political and financial factors that may be hard to anticipate. If the materials come from new or untested companies, it can take a substantial amount of time to ensure that the new suppliers can meet and maintain their obligations. Language, cultural and political barriers can go both ways and either be a benefit or a hindrance (IBM, 2006).

Do you agree with Trojan's method for measuring purchasing cost savings?

It appears that the cost savings estimates are overly dependent on there being a lower per piece cost. The company is already paying for Chinese operations and they have begun to identify inventory growth and other fees. These costs are not well enough documented on their own to determine if the project is reasonable. A more in-depth spend analysis would have to be undertaken to determine initial savings and fine production costs to determine if this changeover was feasible.

DESCRIPTION OF SOURCING PROCESS

NOTE: I don't understand what is wanted here. So I just made a guess. You can go online to sites like this to see what a chart might look like. I do the writing and don't really know what would be added anyway: http://photos1.blogger.com/blogger/3952/2002/1600/image001.0.gif. I wrote some text to explain it.

Trojan currently relies on seven companies for six categories of products. The identification of a China region supply component would allow for isolating product pieces that can be produced more cheaply and would recognize how the supply chain could be supported to avoid interruptions elsewhere. For this sourcing to move forward, production of the individual elements would have to be confirmed and the cost, quality and availability of supplies would have to be verified.

TIMELINE

It is difficult to know precisely what the timeline might be like, but basically there are two options. Either a verification of the costs and quality factors can be done immediately to allow for quick testing of the options. This will ensure that the costs can be checked with a single year. Otherwise, the testing can be done and the project would be started in January of the following year. It can often take much longer to work through the issues than anticipated (IBM, 2006) so this could be the best recommendation. But it seems the company wants to move as fast as possible. With this in mind, I would recommend:

Final identification of products to be supplied -- By end of March.

Confirmation of costs of production, shipping, etc. -- By End of April.

Verification of preparation time and delivery. -- April/May.

Placement of First Order -- May/June.

BUDGET & COST SAVINGS

It is anticipated that the new supply line will provide for substantial savings over the current North American options. The information provided at this time includes the cost of piecemeal production and estimates of 8% duties (taxes) in China, and 5% transportation premiums, plus a 25% increase in inventory. The costs of these would have to be factored in.

SPEND ANALYSIS

Based on the information that is provided, it appears that the individual pieces that have been isolated would generate direct savings from what those costs are through the North American suppliers. To ensure that this is correct, however, a Spend Analysis would have to be undertaken. This involved the exact costs of production, all fees, inventory requirements, taxes or other expenditures needed first to get the supply line operating and then to maintain the inventory as needed. Rogers and Cooley (2004) offer a multinational listing. In a budget I would review:

Cost of Each Good (Manufacturing Cost) from existing supplier.

Projected cost of new supply.

Taxes or related fees.

Shipping or other delivery charges.

Set-up or other one-time charges.

Misc. recurring costs.

RISK Management AND CONTINGENCY PLAN

The purpose of testing the new supply line is to ensure the production can occur and is reliable. Still, it is possible that after this testing period, the new supply chain might not be sufficient as the new companies determine their capacities or as political or cultural realities emerge. Accordingly, it is necessary to develop a backup plan that:

Recognized where problems may occur.

Identifies which other suppliers are alternatives.

Details what issues might arise in using those sources.

Contains up-to-date contact information.

Allows for estimating the costs associated with having to turn to this alternative.