Case Study on Supply Chain Management

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Case 9
Eastern Waves, Inc.

Summary

Mr. Patton, vice-president of purchasing for Code C, Inc., is concerned about a price increase from a Malaysian supplier. Last summer Code C was celebrating a 60 percent cost reduction based on replacing their major specialty steel supplier with Eastern Waves, in Kuantan, Malaysia. Eastern Waves is a small steel manufacturing company in Malaysia. It has several plants in Malaysia and China and produces various downstream steel products such as angle steel, I-beam, and round bar. The angle steel plant is located in Kuantan, Malaysia. The production method of the angle steel is called continuous rolling, and the key raw material ingredient for angle steel production is billets. When operating at full efficiency, the annual capacity of the angle steel production is 10,000 MT.

Suggested Assignment Questions

1. As Jon James, please write a critique analyzing the situation in Malaysia for Mr. Patton. What recommendations do you suggest?
2. How can Code C avoid future sourcing disruptions?
3. How should Code C critically analyze future global sourcing alternatives?

Analysis

1. As Jon James, please write a critique analyzing the situation in Malaysia for Mr. Patton. What recommendations do you suggest?

The global sourcing arrangement between Code C and Eastern Waves is extremely complicated from a quantitative and qualitative viewpoint. The total cost of sourcing is perhaps the most important variable. For instance, the associated qualitative risk profiles were (1) the impact of national interest and (2) the political conditions in Malaysia. The quantitative costs were (1) direct labor costs, (2) materials shortages and (3) indirect governmental costs. Moreover, the general uncertainty associated with Malaysian governmental business practices makes this sourcing deal a risky proposition. The purchase risk perception (PRP) is based on the perceived associated risk with alternative

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