Manufacturing and Packaging Line

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CASE ANALYSIS MEMO – SESSION 06

Keurig

2012.11.07

Entrepreneurial Management
Dr. Sean M. Hackett
Waseda Business School, MBA
Fall, 2012

Panjapol wariratanaroj (pe)– #35112329-5

JOanna chen (joanna)– #35112318-7

li wei– #35122327-5

kemal SADULLAYEV (kemal)– #35129403-1

Gaetano d’imprima (tano)– #35129755-8

I. Identify/Define the Key Issues/Situation Analysis
A. Key issues that will impact Keurig to survive, thrive and grow • Strong bargaining power from a supplier: MTS, being the only supplier for the K-Cup packaging line, has a control over the machine. Having no substitution plan in place, Keurig is forced to follow MTS’s request to fulfill the K-Cup manufacturing capacity. • Difficult to ‘reverse engineer’ the manufacturing technology: despite the alternatives of having new K-Cup suppliers, there is no assurance that the new suppliers could complete the project on-time and on-budget as the learning curve is hard to be built at an initial stage. • Delays in the full roll-out of the new coffee brewing system: delays in manufacturing lines (both K-Cup’s production and brewing machines) caused a subsequent delay in distributing goods to consumers. Thus, it created risk of losing market opportunity to other competitors. B. Critical Success Factors

• Quality of the final product: despite marketing efforts and distribution channels, if either the final product (coffee) tastes bad or the brewer does not perform well, it can’t be sold. • Consistent and sufficient funding prior to the product launch: in order to create an impact to the coffee market, the large amount of funding is required to support the operations. • Ability to bring a brewer’s price down in a consumer segment while keeping the good quality product: considering the high quality coffees, people are more likely to purchase a less expensive household version especially at a supermarket or grocery, which has the highest percentage for buying locations.

II. Mobilize Strategic Choices
A. Choice 1 – Work with multiple packaging line manufacturers at the same time and take advantage of the brewer that would take Keurig more seriously - Pilla.

1. Significance of choice 1
• The supplier in less favorable financial situations is more likely to pay attention to Keurig’s needs. In this case, Pilla also possesses the capability to support the brewer production. • Keurig can prepare Pilgrim and Quantum for future production while MTS is currently manufacturing the K-Cup packaging lines. This will cover the delay time needed by Pilgrim and Quantum to deliver future productions. • More risk averse, multiple suppliers will decrease Keurig’s dependency on suppliers. Delivery time and costs can be more efficiently managed. Also, Keurig can observe suppliers’ efficiencies before deciding the major supplier. • Multiple packaging lines can provide larger supply of K-cups for future expansion. 2. Reasons why choice 1 may not be optimal

• More price negotiations and work in progress varied by suppliers. Also, the working procedures may be different and buyers-suppliers relationship may be more complexed. • The standard of the final products can be varied by suppliers due to a slight difference in manufacturing capability and technology. • The financially unstable suppliers can be unreliable. For example, they may be in risk of facing bankruptcy, or they may lower SG&A expenses and it will affect the operations.

B. Choice 2 – Continue cooperation with MTS and change brewer to Pilla

1. Significance of choice 2
• Does not waste time on searching for alternative packaging line manufacturers. Hence, avoid the time to be consumed by ‘reverse engineering’ process. • MTS already has experience in making the first packaging line. Moreover, the product quality delivered by MTS is already...
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