Acacia is a major producer of graphic plotters
Marketing forecast estimated annual volume to exceed 60,000 units Management determined that the newest unit, 440A, is an excellent choice for JIT process Supply Managers w/ technical backgrounds were assigned new product development Suppliers were requested to use bar-coded labels for inventory and kitting purposes Delivery for most JIT parts = 1 week (instead of usual monthly delivery) Parts considered for outsourcing = 4 integrated circuits (IC’s), 7 diodes, 3 transistors Monitor Inc selected as single-source for 14 PC components During the production process, Monitor was not able to comply w/ JIT requirements Monitor-supplied components were mislabeled, out of spec and often behind schedule 5 diodes can not be resourced, Monitor is the sole manufacturer 2 alternate suppliers have been identified; capable of supplying 4 IC’s and 3 transistors Alternate suppliers equipped to have deliveries ready in approx. 1 month Alternate suppliers’ costs are 10% higher than Monitor, Inc.
Monitor Inc has struggled to meet required specifications and has not delivered shipments on time. (MAJOR PROBLEM) Management realized that Monitor’s focus was on high-volume production. Monitor is the sole source for a majority of the diodes needed. Why was Monitor selected as a single source for all 14 PC components, when they’ve never supplied parts to a JIT customer before? What are the risks of using other sources for the transistors and IC’s? Deliveries MUST be highly reliable to prevent stockouts and line shutdowns.
If Monitor is a small biz, Acacia could consider entering into a Mentor Protégé agreement and assists Monitor with process development and lean manufacturing. Acacia could transition a portion of the orders for the IC’s and transistors to alternate suppliers that are...