This sourcing strategy report represents the result of our analysis of four potential suppliers both domestic and international in an attempt of the company to outsource many key product components and subassemblies, including the 9000x series DVD drives. The identified suppliers include: -
Elecom Technologies: a global firm with solid reputation, and has price as a competitive edge. Their net sale is 1.5 times more than the other three suppliers combined. -
SureTech is a small firm, but located in the US, which will ensure shorter lead time, but has PSC would be their largest contract. -
E-Drive is a large firm and located locally, but has some issues lately with quality and technologies. -
Park Technologies is an excellent supplier with lots of great capacities, but it would take 10 weeks for products to be delivered. The analysis covers a review of each of the four suppliers’ financial situation, their estimated per unit total cost, evaluation as well as a sourcing risk management plan for the supplier selected.
Terms of reference
To prepare sourcing strategies for key purchased items for Pacific Systems Corporation (PSC), starting with selecting the most appropriate supplier for potentially the next few years
After carefully considering the estimated per unit total cost, SureTech did come out with the lowest cost at $162.5 per unit for year one of PSC needs.
A 7-step supplier evaluation and selection analysis, followed by a weight-point supplier evaluation assignment indicated that E-Drive had the highest score of the scorecard and deserved as the winner of the selection pool.
Sourcing risk management plan for E-Drive was conducted based on all the concerns provided when the team visits. Although quality and management has some issues that needs to be fixed before PSC can negotiate and sign a contract, E-Drive is a large player in the industry and has promised to solve the problem before PSC placed an order. Long-term contracts will be awarded if quality as well as performance issues are fixed.
Pacific Systems Corporation Inc., a high tech company located north of San Francisco is a producer of component parts and subsystems for PCs and engineering workstation. The company is a fast growing manufacturer with strong reputation for manufacturing high quality products with on time delivery. Due to forecast of the company that demands for PCs will increase in the future, PSC decided to outsource its DVD drive to four potential suppliers after the company’s commodity team visited their facilities.
Since the company knows that they need a long term supplier, as well as a trusted one for quality since the order is large (500,000 units) and will demand is 20% growth the next year (600,000). In addition, a partnership would help cutting the costs down. Out of the four suppliers, Elecom Technologies is the largest, and would consider the order of 500,000, the company feels underwhelmed, but they offer the lowest price of $127 per unit. On the other hand, SureTech never handled a large order such as PSC’s, the company would not sure if they can take such large order, but has $144 per unit. E-Drive is the second largest player in the industry, and is ten minutes away from the company. Park Technologies has the lowest quality defects and industry experts viewed Park as one of the most promising and dynamic in the industry.
Supplier Financial Analysis
This is the largest supplier in term of sales, its current asset is almost 1.7 times of the other three suppliers’ combined. -
The average time to collect receivables is 49 days, which ranked 3rd among the suppliers considered, but the average time it takes the company to pay its vendors is as quick as 29 days (quickest of the 4). -
This is a large size supplier, who was hesitated about the smaller sales volume SureTech
Receivable Days, SureTech has the lowest,...
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