Spin Master Toys
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Question 1: In order to evaluate the two manufacturers Wai Lung (WL) and Wah Shing (WS), we use the weighted point method. (Trent p.24). The advantages of this methodology include the ability for the firm to include numerous evaluation factors and assign them weights according to the organization’s needs. (Khaled, Sanjoy p.3). We allocate an amount of “weight” to the different criteria based on importance. We choose the following criteria to select the supplier: Responsiveness and experience – As a growing company and with this being the first time they ship product for a planogram, Spin Masters needs a reliable manufacturer with a proven track record to keep up with the high expectations and tight tolerance needed for this project. Quality – Competition in China, “pushes suppliers to over promise quality of products just to get the order” (Huang p.6). It is difficult for companies to control the supplier sources of raw material in China. Spin Master is concerned about the possibility that this material could be coming from mainland China, where generally quality assurance is known to be inferior to those of Hong Kong. Any issues with quality will affect the viability of the project.
Expertise/tooling – Spin Master has four months to complete something that would normally take five to six months and their product requires precision engineering in order to stay within a tight design requirements. Strong technical Knowledge on the product by the manufacturer would facilitate the process; also, the supplier must be able to make the 50 parts needed for the product in addition to prototype moulds and other tooling required for mass production. Capacity – Qualified and experienced personnel is critical for this project. Due to time crunch position Spin Master was in, they required a manufacturer with enough available capacity to be able to dedicate time and resources. Total Cost –The Canadian company is promising high performance at a low price. In order to keep that promise they need to keep their cost of production low. Cost of lost sales, late deliveries, product quality, field recalls, and bad communication should all play a part. Question 2: To evaluate and score each supplier, four main categories have been created based on the selection criteria previously explained and are found on the Supplier Scorecard (Exhibit 1). The main categories are: Supplier Responsiveness and Experience (time to market): a combined weight of 55% was assigned.
The supplier must reflect enough flexibility in its complete product offer (engineering, quality production, and shipping process) so the E-chargers are delivered within the tight timelines established. The vendor’s expertise, experience and ability to work collaboratively are required to ensure the time-to-market metric won’t be at risk at any time. Total Cost: accounts for 10% of the total score and captures the traditional purchase costs for the goods plus “other costs”. The latter subcategory represents the potential impact and risk on Spin Masters’ Supply Chain by deficiencies and errors committed by the selected supplier. Technological capabilities: We gave 20% to this category. The complex nature and BOM requirements of the E-chargers, requires a supplier to provide proven and superior standards and skill in Engineering, tooling and Quality. Supplier operational capabilities: it represents 15%. Available production capacity, personnel and equipment, geographical node location, and sound financial health are critical to the operation as well. Additionally we also evaluated both manufacturers (WL and WS) based on their strong and weak attributes, found on the Evaluation Chart (Exhibit 2).
Question 3: Considering the former analysis; we recommend that Spin Master selects WL because they already had a positive experience delivering past orders on time. They worked at break-neck pace to successfully fulfill the BMX bikes order in six weeks when other manufacturers took ten week to perform this task. Furthermore, they were able to build the tools in the allotted time but also increase production with little lead time. Furthermore, the high level of commitment showed from the CEO –owner and their energetic staff with a get-it-done attitude would definitely go to great lengths to achieve their goals. The managers and employees of WL displayed a high level of commitment in the BMX bikes project. On other hand, a company like WL could help Spin Master to succeed solving mechanical and product development issues from an early stage and then manufacture the electric toy plane with high product quality level as they showed in their previous association with Spin Master.
Also, the Chinese firm has an impressive production capacity size with 2000 workers and 100,000 square foot factory located close to Hong Kong; which would help to reduce the lead time of the order. In addition the company has about 60% production capacity available. It means they can dedicate enough time and resources (employees and equipment) for the E-charger’s order. Finally, WL presented a very competitive and attractive offer beating his competitor quote with a 9 % lower cost estimate. Not only that, but the CEO is willing to give favorable credit terms with a simple wire transfer of funds, versus a formal credit letter from their competitors, resulting in competitive and substantial cost savings. Based on our choice of WL, we identified 3 main risks:
Financial Stability Distress: WL has recently lost business to competitors and created flexible payment terms which infer potential financial distress. A mechanism to mitigate the risk is: using the Supplier Risk Management (SRM) methodology and conduct an assessment of the supplier’s financial viability with other relevant metrics for a composite rating that can be weighted and adjusted to suit the business environment (Finley, p20). Spin Master would also define an audit and escalation team, who react on contingency planning around business continuity, to avoid a single point of failure in the selection of a single supplier. Technological Limitations: they have only manufactured non-electronic toys, which is a “paradigm shift”. With only 3 newly hired engineers, they will need to collaborate effectively and expeditiously to meet aggressive deadlines, develop strong working relationships early on leveraging their engineering expertise. The mechanism to mitigate this is to select leadership teams, and have available expert electronic application engineers, and project managers to monitor the aggressive deadlines and complexity of improved target dates. Quality of finished product: Spin Master would setup a supplier quality management program focused on continuous process improvement by employing any one of several Quality Management techniques, and TQM (Cavinato p.570). They should audit the source of raw materials and inputs, supplier’s quality systems and processes to meet regulatory standards (Hanfland p.58). Also they should measure and monitor on-time service performance.
Khaled A.A, Paul Kumar sanjoy, Chakraborty Kumar Ripon and Md. Salahuddin Ayuby, “Selection of Suppliers through Different Multi-Criteria Decision Making Techniques.” Global Journal of Management and Business Research, Global Journals Inc. (USA), 2011.
Huang, Judy and Mi Nguyen, “Relief for china’s quality headaches “, Supply chain management review. 13(8). Nov. 2009. pp. 6-7.
Finley, “How to spot and help an at risk supplier”, Supply chain management review, 13(5). July/August 2009. pp. 18-25. Trent, Robert,” Creating the ideal supplier scorecard”, Supply chain management review, 14(2). March/April 2010. pp. 24-29 Hanfland, David,” Supply quality: today’s pressing priority”, Supply chain management review, 12(7). Oct. 2008. pp. 58-59 Cavinato, Joseph L, “Quality Management. Supply Management Handbook”, New York. McGraw-Hill. 2006. 0071445137. Ch. 27. pp. 563-586