Futronics Case

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Introduction

Background of the Case

FUTRONICS Inc. is a private company located in Lexington mainly categorized for modems, monitors, disk drives and terminals. It is moreover in to sales and services. This case is about the replacement of Futronics’s central office stores by an outside service provider. In this case supply management manager have an opportunity for investigating selected outsourcing in-house services. Cost Status of the Company

Description| Making Cost in Total| Buying cost in Total| Size of company: Raw | 2 Billion Dollar| |
Cost of Goods sold| $ 900,000| |
Average Inventory (500 items in stocks)| $ 140,000| |
Cost of Personnel and Space| $ 200,000| |

Period of performance (Time Line)
Description| Year| Target Serving Areas|
Central Store Created| 1950 (middle of)| 21 area sites|
| Present| 42 area sites|

Place of performance
Futronics Inc. is located at Lexington, Massachusettes.

Stakeholders Analysis:
1. FUTRONICS Inc.
2. Central stores
3. Supply Management Department
4. Manager of Supply Management
5. Employees
6. Consumers
7. Government bodies
8. Vendors
9. Financial department
10. Outside store services
11. Litton
12. Boise-Cascade
13. L.E. Muran
14. Bay state office
15. New England supply
16. Other firms in Boston

Focus areas
1. Make or buy decision
2. Multi-functional team
3. Risk analysis
4. Cost Estimate
5. Time Estimate
6. Ethics

Scope of work

The company has been into the supply chain management business for more than 60 years but in the recent years there has been decrease in sales due to heavy competitions. So the company is thinking of outsourcing central office stores as a part of their cost reduction programme.

Now the company is in the initiation and planning stage of procurement and contract management. The procurement division manager is into the through research and analysis on the all the external and internal factors to see whether this outsourcing step would be beneficial for the company in terms of cost, time schedule, risk, quality and ethic

The case shows that the company still is in the Plan Procurement Phase and has been doing a deep analysis and research from different perspective and angle to see whether outsourcing is a good strategy to move ahead to increase sales and cost reducing mechanism. Plan Procurement Management

Plan Procurement Management deals with two phases of procurement management –initiating and planning.

Initiating
* The company came up with an initiative (idea) on how to reduce the overhead corporate cost to increase the profit margin. * Carried out some research to analyse how other competitors are addressing this issue.

Planning
* Develop vendor analysis comparative chart with selection criteria – Scoring Framework. Refer Annex 1. * Analysis on Risk Management Areas such as risk identification, risk involvement in the process, etc. * Analysis on quality management areas – whether they could get the same quality or not. How much they need to compromise on the quality * Developed the comparative analysis chart on decision making process based on the focused areas:

Advantages and Disadvantages analysing from both perspective

Make Decision| Buy Decision – Outsourcing|
Advantages | Advantages|
Cheap price of goods when bulk buy| Less overhead cost|
Quality Control| More concentration on other portion of the work| Transparency| |
Good quality raw materials – quality output| |
Chances of getting more business| Faster delivery service| Good name and reputation – Goodwill| |
Product price – less expensive| |
| |
Make Decision| Buy Decision – Outsourcing|
Disadvantages| Disadvantages |
High operating cost| Conflict might arises with vendors|
Lay off of staff| Less Transparency|
Unethical (as one...
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