Stryker Corporation

Topics: Costs, Cost, Economics Pages: 2 (804 words) Published: October 29, 2014

Case 1: Stryker Corporation: In-sourcing PCBs
State the business case for option #3, the PCB In-sourcing proposal. What is the benefit? What is the risk? How do you compare this proposal to option #1 and #2? (2 points) Option #3 is the project for Stryker to manufacture its own PCBs in its own facility. Benefits:

This option allows Stryker to control over the products’ quality and delivery in highest degree. The company can supervise every process of the production line to get every product qualified. Due to the reason that PCBs is a useful electronic component for many divisions under Stryker, the in-sourcing of this component can expand the supplying for other Stryker business. Building its own facility to produce PCBs means that Stryker has no dependence on other manufacturers any more, in this way the transaction costs can be deducted and the outflow from Stryker will be decreased as well. Risks:

This proposal may generate a large quantity of cost, which includes the construction fee, equipment outlay and increasing employee wages. There is a risk that the sales may not cover the costs. Since Stryker will have a large input into the project, it will lead to a high exit barrier if facing an excessive market competition. The option might generate imbalance between supply and demand that can only be undertaken by the company itself. When manufacturing PCBs in its own facility, it might face a problem that adequate components cannot be produced on time. If this situation happens, Stryker has to find other manufacturers again, which will increase unexpected cost and will result in the risk that the instruments may not be made without delay. On the other hand, if the sales of instruments goes wrong, PCBs will be overproduced. Stryker has to find new buyers for it, otherwise it will lead to overstock. Option 1 is still the basic sourcing policy added by safe stock and dual sourcing. Option 2 is to build partnership with a single supplier. Option 3 is an...
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