JC&R Technology Pty Ltd

Sourcing Recommendation Position Paper

[Miniature Data Projector]

Decision Required:
[Summarise here the supplier, contract value per
annum and term of contract that you are seeking
approval for]

Submitted - [14 th October 2010]

Lead Team Meeting – 18th October 2010

Procurement Manager - [Sudev SureshKumar -3736222 ]

1 Executive Summary
The basic objective of this report is to make an adequate and suitable supply
selection decision for the procurement of miniature data projector for the production
of J-touch’s. In this report we are analyzing 4 main suppliers like the JOW &
Co.,Charltech Projections, Rave technologies and tiger technologies. These
suppliers are evaluated and Ranked based on the sourcing strategy, market
research, supplier evaluation and financial and total cost analysis and risk analysis.

From the analysis we have decided to select Charltech Projections as our supplier
because they have provided us with an indicative pricing of $145 and the are very
keen and interested in responding to our Request for information. Another reason for
choosing charltech is that they are local suppliers and the logistics cost will be much
less compared to the international suppliers. There are various recommendations
researched and discussed ,which include the sourcing strategy, Financial and cost
analysis ,the ramp up time and the delivery lead time. There are number of risk
involved in the supplier selection like the quality issues, delivery time ,currency
fluctuations, economic policies etc….

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2 Table of Contents
1 Executive Summary_____________________________________________________1
2 Table of Contents_______________________________________________________2
3 Process and Timeframes_________________________________________________3
4 Sourcing Strategy_______________________________________________________3
4.1 Overall Strategic Direction____________________________________________3
4.2 Sourcing Strategy – single versus multiple_______________________________4
4.3 Sourcing Strategy – domestic versus international________________________4
There are some advantages and disadvantages while sourcing from domestic
and international suppliers. In the case of domestic suppliers, there will be less
risk in case of delivery times and the company will be able to procure in small and
desired quantities. While in international sourcing, there may risk of delivery and
quality cannot be monitored. In the case of international sourcing, the company
can obtain goods at a lower rate, there will be scarcity in local suppliers.________4
It is clear that sourcing from domestic supplier is the best choice for JC&R
which avoids them the risk of cost ,currency exchange and customs clearance.__4
5 Supplier Analysis_______________________________________________________4
5.1 Market Analysis_____________________________________________________4
JC&R technology had to conduct an extensive market study about the miniature
data projector, as it was a key component in j-Touch. It studied about the market
size, growth rate, share, trends and industry norms of each supplier. With 95%
confidence in sales, the company expects to sell about 400,000 units to 600,000
units in year one and 20% increase in the second year._______________________4
Market analysis of each of the four suppliers is as follows:-___________________4
1.JOW & Co technologies :- it is a company based in Japan, it has been a
manufacturer of electronic goods and components, with 30% share in global
miniature data projectors. _______________________________________________4
2. Charltech projections:- it is only domestic supplier of the four, it is the second
largest producer of data projectors worldwide with 12% global market share._____4
3. Rave technologies :- it is company based in New Zealand, it has got only 4%
share in global market, but it’s a new firm just one year old with a reputation for
delivery reliability and innovation. ________________________________________4
5.2 Supplier Financial Analysis____________________________________________5
5.3 Capacity Analysis____________________________________________________5
Form this table its clear that, JOW had the highest capacity among the four
suppliers. The domestic supplier Charltech has 93%, but the company can invest
in its domestic supplier so that Charltech has improve its productivity.__________5
5.4 Supplier Evaluation and Selection______________________________________5
6 Risk and Cost Analysis__________________________________________________5
6.1 Inventory Management Analysis________________________________________6
6.2 Total Cost Analysis__________________________________________________6
6.3 Risk Assessment____________________________________________________6
7 Recommendation_______________________________________________________6
8 References_____________________________________________________________ 6
9 Listing of Appendices___________________________________________________6
Appendix – 1 – Gantt Chart________________________________________________7
Appendix – 2 – Supplier Financial Analysis___________________________________8
Appendix – 3 – Supplier Evaluation and Selection_____________________________9
Appendix – 4 – Inventory Management Analysis_____________________________10
Appendix – 5 – Marking Criteria___________________________________________11

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3 Process and Timeframes
Document the process from concept requirements in June 2009 through to the point of July
2011 sales. Present this process in the form of a Gantt chart with key decision points, start
date and time required for each step clearly identified. Use the information from the case
study, and explain that your team has been through a logical process to provide your
management confidence that you have been thorough and the time allowed to JC&R’s j-
Touch production process is adequate.

Information provided here – refer to Appendix 1 – Gantt Chart

Interpretations and conclusions

4 Sourcing Strategy

4.1 Overall Strategic Direction

11 stage sourcing strategy is followed in the case of selecting a suitable supplier for the
production of J –Touch’s By JC&R technologies. Out of the 10 suppliers who had responded
4 were short listed based in the pricing,RFI and RFT response. These suppliers were then
given RFP .For making an ideal supplier selection , a section of the team visited the short
listed suppliers to collect the information directly and clarify the tender response. Time
frames are also given at most attention as they are required for smooth flow of inventory and
the product shall be released in July 2011.The suppliers were analyzed and graded
according to the production capacity, market share, quality and safety standards, ramp up
time,delivey lead time and ethical and economic standards.

Supplier selection is very much important for the company to produce high quality goods at
minimum cost. This also helps them to satisfy the demand of the products to its customers
and also helps to reduce the cost.

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Krajlic Portfolio Matrix is used as as a supply positioning matrix

4.2 Sourcing Strategy – single versus multiple

The advantages and disadvantages of single sourcing and multiple sourcing is shown on the
table above. It is clearly visible from the table that if the company intends to reduce the cost,
it should source from single supplier instead of multiple supplier. Sourcing from single
supplier also enhances value to the product as the company will be able to invest more in
the single supplier and help them in producing better components for its products

4.3 Sourcing Strategy – domestic versus international

There are some advantages and disadvantages while sourcing from domestic and
international suppliers. In the case of domestic suppliers, there will be less risk in case
of delivery times and the company will be able to procure in small and desired
quantities. While in international sourcing, there may risk of delivery and quality cannot
be monitored. In the case of international sourcing, the company can obtain goods at a
lower rate, there will be scarcity in local suppliers.

It is clear that sourcing from domestic supplier is the best choice for JC&R which
avoids them the risk of cost ,currency exchange and customs clearance.

5 Supplier Analysis

5.1 Market Analysis

JC&R technology had to conduct an extensive market study about the miniature data
projector, as it was a key component in j-Touch. It studied about the market size,
growth rate, share, trends and industry norms of each supplier. With 95% confidence in
sales, the company expects to sell about 400,000 units to 600,000 units in year one
and 20% increase in the second year.

Market analysis of each of the four suppliers is as follows:-

1.JOW & Co technologies :- it is a company based in Japan, it has been a

manufacturer of electronic goods and components, with 30% share in global miniature
data projectors.

2. Charltech projections:- it is only domestic supplier of the four, it is the second largest
producer of data projectors worldwide with 12% global market share.

3. Rave technologies :- it is company based in New Zealand, it has got only 4% share
in global market, but it’s a new firm just one year old with a reputation for delivery
reliability and innovation.

4.Tiger technologies :- it is based in South Korea with a global market share of

10.42%.
Even though JOW & Co and Tiger technologies have large market share, their distance
from the company’s production facility creates a barrier. Charltech which is the domestic
supplier is the second largest manufacturer of miniature data projectors globally.

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5.2 Supplier Financial Analysis

The financial analysis of the four suppliers were done based on their balance sheets. From it
it was shown that Rave had the highest profit margin of 12% and JOW with the least 5%.In
the case of inventory turnover Charltech showed the highest with 10.29 and JOW the least
with 5.1. The current ratio and quick ratio was highest for Rave. But Charltech showed the
highest on return on equity.
Considering the market share and financial stability ,Charltech is the most recommended
among the four suppliers because of it return on equity is highest for it,which is the ultimate
aim of any firm.

5.3 Capacity Analysis

JOW 95%

Tiger 94%

Charltech 93%

Rave 89%

Form this table its clear that, JOW had the highest capacity among the four suppliers.
The domestic supplier Charltech has 93%, but the company can invest in its domestic
supplier so that Charltech has improve its productivity.

5.4 Supplier Evaluation and Selection

Based on the supplier evaluation and selection template, Charltech has got the highest
score among the four suppliers. It was based on cost, quality, market share and financial
ratios. Procurement will give more priority to Charltech as it is a local supplier

6 Risk and Cost Analysis

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6.1 Inventory Management Analysis

JC&R expects to have an initial inventory of 20000 j-Touch by 1 st June 2011 to begin
process and production of 10,000 prototypes to provide to key business customers. It
intends to control the transportation link from the supplier to its facility. The company
decided to control the transport but not the ownership of miniature data projectors as the
inventory will be held with the suppliers only.(Appendix 4).
In the second year of production, the company estimates about to have 540,000units of j-
Touch and hence the data projectors. Every supplier offered different batch sizes. It was
found out that Rave had the least holding cost over two years. But Charltech with the second
least proves to be more beneficial to the firm because of its proximity to the company. The
additional costs discussed in total cost analysis (section 6.2) take into account transport and
delivery costs that may vary between domestic and international suppliers..

6.2 Total Cost Analysis

6.3 Risk Assessment

According to the results of the risk assessment, major problems that arises in selecting a
supplier comes in the form of management capability,quality assurance and financial stability
of the supplier. The risks also include the proximity to the manufacturing plant, the cost
associated with transport and customs and clearance duty for international suppliers. if the
company outsources to a local supplier, it can somehow ward off these risks.

7 Recommendation
What is your recommended sourcing strategy in this case? Include the supplier selection,
term of contract and specific inclusions by way of terms and conditions in a contract. Include
any negotiation topics that you intend on raising to discuss with suppliers prior to agreement.
Support your decision with quantitative and qualitative evidence gathered during the case
analysis. Also, present your plan to reduce any risks associated with your sourcing decision.

8 References
Harvard Referencing – should have a minimum of three – five sources references justifying
theoretical concepts and interpretations.

9 Listing of Appendices
Appendix 1 – Gantt Chart
Appendix 2 – Supplier Financial Analysis
Appendix 3 – Supplier Evaluation and Selection
Appendix 4 – Inventory Management Analysis
Appendix 5 – Marking Criteria

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Appendix – 1 – Gantt Chart

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Appendix – 2 – Supplier Financial Analysis

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Appendix – 3 – Supplier Evaluation and Selection

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Appendix – 4 – Inventory Management Analysis

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Appendix – 5 – Marking Criteria
LEAVE AS FINAL PAGE AT END OF POSITION PAPER. The following is evaluation
guidelines for the JC&R Technology Enterprises Pty Ltd Case Study. This is not part of the
case study but will be useful to use as a guide. I will then use for marking and provide
comments.

DESCRIPTION WEIGHT SCORE COMMENTS

Format and Exec Summary
 Business context –
professional writing style
 Executive summary has 15%
recommendation and
justification
Process and Timeframes
 Gantt chart format
 Logical order with time
allowed 10%
 Recommendation follows
process
Overall Strategic Direction
 Broad strategy development
 Theoretical concepts 10%
 Discussed procurement
Single v’s Multiple Sourcing
 Sourcing strategy considered
 Advantages and 5%
disadvantages discussed
Domestic v’s International
Sourcing
 Sourcing strategy considered 5%
 Advantages and
disadvantages discussed
Market Analysis
 Industry and Supplier
Analysis 5%
 Theoretical concepts
Financial Analysis
 Financial risk analysis
accurate and thorough 5%
 Interpreted and conclusions
Capacity Analysis
 Capacity identified
 Issues discussed 5%
 Recommendation follows
process
Supplier Evaluation and Selection
 Supplier evaluation and
selection process 5%
 Justified / comments
Inventory Management Analysis
 Analysis correct
 Issues discussed 5%
 Costing flows to total cost
analysis
Total Cost Analysis
 Total cost analysis accurate 5%
and thorough
Risk Assessment
 Risk management plan 5%
thorough
Recommendation
 Correct decision
 Terms and Conditions 15%
 Decision justified
Referencing
 Harvard System of
referencing 5%
 Evidence of research /
reading
TOTAL 100%

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