- Pages: 3
- Word count: 723
- Category: Investment
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(1) a one-paragraph summary of the case setting/background
The case is set in the auto parts supply industry. Automek is a supplier to Ford, the OEM in this case. Agile Electric, located in southern India, is a supplier to Automek. Automek has invested significant time and resources into the development of Agile due to its low cost of manufacturing capabilities. Agile has been asked to manufacture an actuator assembly for Automek. Agile is concerned about their ability to supply the assembly without assistance from Automek but their CEO is pushing them to step up to the challenge. Agile is also concerned about their downstream suppliers that Automek has chosen. During development at the OEM, actuator assemblies from Agile were rejected as failures twice. This has lead Automek and Agile to try and find a root case of the failure and try and develop a solution so it does not happen again.
(2) a one-sentence description of the primary decision problem/issue;
.The issue here is the quality standards and processes in place at tier 2 and tier 3 suppliers within the supply chain and the problems it has created upstream leading to a decision of whether to invest in improving quality standard at these points or source elsewhere.
(3) a list of the key protagonists and their roles, possibly also their opinions and viewpoints;
Suresh Kumar: Vice-president of operations at Agile Electric. Responsible for addressing the quality concern received from their customer Automek. He believes Automek needs to deal with the quality issues identified with the suppliers supplying Agile because Automek chose them. Raj Reddy: CEO of Agile Electric. He is pressuring Suresh to act fast on the most recent quality complaint from Automek. Tom Smith: Automek Supplier Quality manager. Was concerned about going with Agile citing they had no experience with manufacturing this critical part. John Aurthur: Automek Purchasing manager. Supported the decision to go with Agile feeling that Automek had developed them enough over the year to handle supplying the assembly. Arun Rao: Agiles Electric Development lead. His primary concern was that the company has no idea where they get some very critical parts for the actuator assembly. Automek: Supplier to Ford (OEM).
ECPL: Supplier to Agile. Does not hold a strategic interest in their business with Agile. Financials do not show a high contribution margin. BIPL: Supplier to ECPL. Agreed to their contract because of the big names involved. Their financials do not show high margins.
(4) possible alternatives going forward, including constraints;
I believe a preferable alternative going forward would be to stay with the existing supply base but increase the margin for the teir-2 and teir-3 suppliers. Automek has room to spear on per piece cost with Agile as compared to local North American suppliers. The increase in purchase price would be an effort to make their business to the teir-2 and teir-3 suppliers more profitable resulting in an increased focus on quality improvements. Right now the tier-2 and teir-3 suppliers are not focused on supporting Agile and Automek because their business with them is not very profitable. The visits by Automek were not received by upper management and the changes of proposed improvements were left with line personnel to implement. It cannot be expected that those improvements will last long. This can be seen as an investment in the future for Automek. They are developing their supply chain within India which should result is lower future cost. Future cost reductions can be pursued to get the purchase price down to the original target.
(5) any additional thoughts or assessments that came to mind when reading the case, on how the issue could be dealt with best.
I really think that an investment in the Indian supply base will yield future benefits. If Automek is willing to invest the time and money in bringing its tier-2 and teir-3 supplies up to QS 9000 standards as it did with Agile, they will have a dependable sourcing stream from a low cost country. This could be a significant competitive advantage for them. After developing the tier 2 and 3, Automek can ask Agile to take a larger role in managing their sub-suppliers. A move by Automek in this direction would make them a strategic partner for these tier-2 and teir-3 suppliers.