Case Study Background Pure Vision Manufacturing’s Sourcing vs. Inventory Challen

Question

Case Study Background

Pure Vision Manufacturing’s Sourcing vs. Inventory Challenge

It is no secret; the economy has been pretty tough in the last few years. Pure Vision Manufacturing

produces vision systems used in a variety of industrial manufacturing applications. These systems help

manufacturers check for quality specifications on high speed manufacturing lines. Even though Pure

Vision Manufacturing was the first to market with their vision systems and still maintains the largest

market share many overseas electronics companies are entering the market with newer versions of ABC

Manufacturer’s technology. In order to compete in the changing global competitive environment the

company has realized that the only way to revamp the company’s competitiveness is to invest in the

supply chain organization. As a result, the company’s President has decided to hire a group of recent

GGU gradates with graduate degrees to pioneer the new Strategic Sourcing Program reporting directly

to the Procurement Manager. The President hopes that establishing a strong Strategic Sourcing

Program that the company can reduce their cost of goods sold resulting in increased profit margins

while holding prices stable for their customers.

The supply chain is fairly stable and contains many legacy suppliers that have become accustomed to

consistent blanket purchase orders, getting little push back on price increases as long as they could

explain the increase effectively and not having to manage their outbound logistics to Pure Vision

Manufacturing’s facility in Livermore, California. As the Strategic Sourcing Team it is your task to find a

new source for a component the company has been buying for years. The current supplier is going out

of business, so the decision to re-source this product needs to happen as soon as possible. The

following provides more detail that will help you answer the questions in the case study.

The component you are trying to source is an electrical connector that connects the vision

system camera to the display used by the operator. It’s fairly simple connector with a two pin

connection with a two wires wrapped in conduit to protect from them from the elements. The

Harmonized Tariff Schedule used to classify this product is 8536.90.8085.

The annual usage for this component is 30,000 units. They are used on first fit applications

(complete new systems), in replacement kits and in warranty repairs. Due the high demand for

this component Pure Vision Manufacturing holds at least two weeks supply of inventory on

hand at all times.

One of your teammates has worked industrial manufacturing prior to being hired at Pure Vision

Manufacturing and has a few sourcing options your group can consider; two domestic suppliers,

one German supplier and one supplier in Japan. Depending on the transit mode and time

inventory may need to be added/subtracted from the current inventory stocking level.

Supplier Options

Supplier #1 – Reno, NV

A well known distributor with multiple distribution locations

Stocks many different types of connectors, ranging in price and complexity from all over the

globe

Local representative available to work on new projects and issues

Willing to do consignment/vendor managed inventory

Supplier #2 – Charleston, South Carolina

Experienced electronics company with primary US location in Charleston

Major customers are from the automotive industry

Non-union workforce

Recently received their ISO9001:TS16949 Certification

Various models already on the shelf

Global engineering team located in Germany, with domestic account representatives

Supplier #3 – Taiwan

Relatively new company (within the last 5 years)

Customers in the medical industry

Specializing in simple connectors and electrical components (sensors)

English speaking

Labor costs are the lowest and raw materials sourced from China

State of the art engineering programs with quick prototyping capabilities

Supplier #4 – Frankfurt, Germany

Well established company with a reputation for quality and efficiency

Primary customers are some of the worlds top high performance car manufacturers

English speaking Customer Service and Engineering teams

High labor costs and raw materials sourced from India

Quick Engineering turn-around time for new projects

1. What advantages if any exist for sourcing the component in the United States? Transit times, tax

advantages or none.

Explanation / Answer

1. What advantages if any exist for sourcing the component in the United States?

Transit times

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.