International University of Japan

Supply Chain Management 2018 Spring Group 6

2B6031 Lkhagva, Ochgerel

2B7038 Ouahabi Al Hassani, Yousra
2B7044 Rijal, Khagendra Prasad
2B7045 Mohamed Reda Saleh Ahmed
2B7313 Nihei, Atsushi
2B7314 Seu, Siphan

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Supply Chain Management 2018 Spring Group 6

COCA COLA’S SUPPLY CHAIN RISK MANAGEMENT

1. Introduction P.3-4
1-1. Brief Introduction to the Company and Products P.3
1-2. Coca Cola Supply Chain P.3

₪ Developed by Lkhagva Ochgerel & Ouahabi Al Hassani Yousra

2. Industry Analysis P.5-7

2-1. Porter’s Five Forces Analysis P.5-6
2-2. SWOT Analysis P.6-7

₪ Developed by Nihei Atsushi

3. Supply Chain Management and Critical Suppliers of Coca Cola Company P.7-11
3-1. Critical Suppliers P.7-8
3-2. Supplier diversity of Coca Cola Company P.8
3-3. Risk Assessment & Mitigation of Critical Suppliers P.8-12
3-4. Risk Mitigation Strategy P.12-13

₪ Developed by Ouahabi Al Hassani Yousra & Lkhagva Ochgerel & Mohamed Reda Saleh

Ahmed

4. Other Threats and Risks P.14-16

₪ Developed by Mohamed Reda Saleh Ahmed & Seu Siphan

5. Conclusion P16

₪ Developed by Rijal Khagendra Prasad

6. References P.17

NSK’S SUPPLY CHAIN RISK MANAGEMENT

₪ Developed by Nihei Atsushi

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Supply Chain Management 2018 Spring Group 6

COCA COLA’S SUPPLY CHAIN RISK MANAGEMENT

1. Introduction
1-1. Brief Introduction to the Company and Products
The Coca-Cola Company is one of the top manufacturer and distributer of various types of non-

alcoholic beverages worldwide. It was founded in 1886 by Dr. John Styth Pemberton. The

average serving per day was 9 in 1886. It grows 1.9 billion in 2017. It makes coca cola as the

most widely distributed product on the earth. As of today, it would take 9 years to try all products

if one-person drinks one type daily.

The name of Coca cola comes from its 2 main ingredients: Kola nuts and coca leaves. The main

ingredients and formula remains secret, although many types of recipes published. The resources

of Coca cola are carbonated water, sugar, caramel color, phosphoric acid, caffeine, and natural

flavors. All these ingredients and materials are supplied by 22616 suppliers.

The coca cola is worth $56.4 billion by Forbes which is the 5th most valuable brand in

the world. As of 31st of Dec 2017, the total revenue of Coca cola is $35,410 million, gross profit

is $22,154 million and total operating expense is $25,363 million.

1-2. Coca Cola Supply Chain:

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Figure 1: The Coca Cola System (Supply Chain)

The Coca Cola System comprises of following key activities and stakeholders: production and

supply of syrup, bottling, distribution, marketing and sales. Basically, The Coca Cola Company

and subsidiaries produce syrup or concentrate (Concentrate Producers) that is being distributed

to Bottlers around the word which is the 1st key activity. And then Coca cola franchise bottlers

bottles and produces finished product which is the 2nd stage. 3rd key actions include selling,

distributing and merchandising products to Retail stores and service distributors. The final

products are also distributed to Restaurants directly from the distributers in order to be served

as Fountain Drinks. Moreover, Coca Cola distributes and sells its products through the

employment of Vending Machines. Lastly marketing and sales is conducted by Coca Cola

Company which is the most well-established activity in the system.

The main focus of our report is on the relationship between the Bottlers and their suppliers the

Concentrate Producers.

The Coca Cola Company employs two models for its bottlers; Company-owned Bottlers and

Franchise Bottlers. Our risk analysis focuses on the main franchise bottlers in the United States

and its relationship with the concentrate producers under the Coca Cola Company. The picture

bellow illustrates big bottlers of Coca cola Company:

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Source: https://www.coca-colacompany.com/maps/coca-cola-bottlers-map

Figure 2: The Coca Cola Bottlers in the United States

2. Industry Analysis

2-1. Porter’s Five Forces Analysis

If we analyze the external environment of the concentrates producers (CPs) such as Coke

and Pepsi, and bottlers, we can say the following two things from the Porter’s five forces analysis:

CPs’ industry is still attractive, but bottlers’ industry is not so attractive.

CPs’ industry is still attractive because there are not so many threats for CPs. First of all,

in terms of rivalry, there are only two CPs. Hence, we can say this industry is not so competitive.

Secondly, threat of new entry is very low because CPs should have economy of scale. It is quite

difficult for the new entrants to capitalize like Coke and Pepsi. Thirdly, CPs have bargaining

power to their suppliers such as sweeteners because they are huge purchasers. CPs can control

their suppliers easily. Fourthly, CPs also have bargaining power to Bottlers because they are huge

providers. Moreover, CPs acquire some bottlers; hence, they definitely can control bottlers easily.

Even if the other bottlers are independent from CPs, they still can be controlled by CPs. Fifthly,

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however, CPs’ substitutes are a little bit dangerous. Recently, there is a trend that the customers

more like non-carbonated soft drinks (Non-CSDs) and waters than CPs. In sum, CPs’ industry is

still attractive.

On the other hand, bottlers’ industry is not so attractive because there are many threats for bottlers.

First of all, in terms of rivalry, there are many bottlers; hence, the market is very competitive.

Secondly, CPs as suppliers have bargaining power to bottlers. Thirdly, buyers such as Walmart

and some huge supermarkets have bargaining power to bottlers because they are huge purchasers.

Fourthly, threat of substitutes such as direct fountains is huge. Fifthly, however, threat of new

entry is not so high because the new entrants will need a lot of capitalization. In sum, bottlers’

industry is not so attractive. Although buyers such as Walmart have bargaining power to bottlers,

CPs sometimes cooperate with bottlers to get the space of shelves in the huge retailers. In that

sense, we can say CPs and bottlers have bargaining power to buyers as a whole. Our overall

assessment of CPs and bottlers’ business is still attractive.

Figure 3: Porter’s Five Forcers for Carbonated Soft Drinks

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2-2. SWOT Analysis

Below is our SWOT analysis of Coke business. Coke has brand equity, company

valuation, vast global presence, largest market share, customer loyalty, and distribution network

as strengths. Also, it has competition with Pepsi, low product diversification, and absence in

health beverages as weaknesses. Moreover, it has product diversification, developing nation, and

supply chain improvement as opportunities. Finally, it has indirect competitors as threats.

Figure 3: SWOT Analysis for Carbonated Soft Drinks

3. Supply Chain Management and Critical Suppliers of Coca Cola Company

3-1. Critical Suppliers

The suppliers of Coca Cola divided into 2 main tiers: 1st and 2nd tier suppliers. The 1st Tier

suppliers normally supplies basic raw materials used for production which are generally vanilla

flavoring, cherry flavoring, and carbon dioxide, glass and aluminum factory. As for 2nd Tier

suppliers, they deliver syrup and packaging facilities.

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Figure 3: Coca Cola Supply Chain Design Network

3-2. Supplier diversity of Coca Cola Company

Kraljic’s supply matrix

High
Critical Items: Strategic Items:
- Vanilla flavoring - Secret syrup
- Cherry flavoring
- Sugar

Critical
General Items: Bulk Purchase Items:
- Office supplies - Water
- Carbon dioxide

Low High

3-3. Risk Assessment of Critical Suppliers

TABLE 1: RISK FACTORS OF SUPPLY CHAIN SOURCING

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Rate
Risk Factors
(1~10)
1. Inability to meet your purchase demand on
time because any of the following reasons:
 Supplier’s lead time fluctuations
 Supplier’s products cannot be delivered
on-time
 The frequency of products delivered to
your company is not satisfactory
2. Higher procurement costs because any of the
following reasons of your supplier:
 The price of supplier’s product fluctuates
 Transportation cost fluctuates
 Risks on negotiation of pricing terms
(allowable time delay before your
payment, discounts offered for large
orders etc)
 Currency exchange rate fluctuations
 Taxes, duties fluctuations
3. The Quality of Supplier’s products is not
satisfactory
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Group 6
Comments Mitigation
- Monitor the compliance with supplier
The bottlers have to sign the agreement to
guidelines.
procure from the regional Concentrate
- Nurture long-term bilateral supplier
producers, which makes them very vulnerable
relationships.
5 to any lead time or delivery time fluctuations.
- Have extra stock as a safety (safety stock)
But Coca cola has strict guideline for the
- Set buffer time for delivery or schedule
suppliers which include the specific procedure
ample time for products’ procurement.
of delivery.
The bottlers have to sign the agreement to
procure from the regional CP which gives the
- Nurture long-term bilateral supplier
latter a high bargaining power and a higher
relationships.
9 ability to control prices, and seeing as the
- Renegotiate contracts to allow procurement
concentrate is the main component in the final
from other CP
product, changes in the price of the concentrate
would affect the bottlers’ profit margin greatly.
The concentrate producers take care of the
4 marketing and branding activities and - Monitor quality control measures
associated costs, therefore maintaining a high
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4. The supplier is not able to deliver the amount
of products you want to buy.
5. When you have a sudden change of your
order amount, the supplier is not able to handle
it.
6. Risks on communication and with your
supplier.
For example, your company cannot contact
your supplier on time.
7. Supplier is not willing to share its
information (e.g. changes of supplier’s product
availability, changes of supplier’s production
schedules, delivery schedules etc.)
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Group 6
quality is very important, that’s why they have
very strict quality control measures and make
sure to supply only good quality products.
Backlog risk is very low. Seeing as the
- Share forecasting data with Concentrate
concentrate is made using very cheap and
3 producers so as to ensure the availability of
ordinary ingredients, the concentrate producers
products needed.
tend to keep a relatively high safety stock.
- Put a big emphasis on forecasting.
- When a growing customer demand is
Risk of sudden change in the order is very low.
observed or in periods of high demand
3 Even if there is sudden change, there is safety
(holidays…) order maximum amount of
inventory.
supply needed when factory runs in
maximum capacity.
There is strong relationship between the
bottlers and concentrate producers, as they also
- Fix a schedule for meetings, testing, etc.
3 share other business activities like Marketing
- Establish emergency contact channel
and advertising. And also they have sound
policy and procedure.
Cooperation between the bottlers and
2
concentrate producers
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8. Natural disaster risks
For example, earthquake, flooding etc. disrupt
the supply of raw materials to your company.
9. Single supplier risk (if you have only one
supplier to purchase your raw materials and
that supplier fails to deliver, your company’s
schedule may be disrupted and you cannot find
alternative suppliers quickly)
10. Collaboration risks (your partnership with
the supplier is not stable)
11. Supplier financial viability (the risk of the
bankruptcy of your supplier)
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Group 6
The most concerning natural risk in USA is
- The bottlers’ resiliency plans should
flooding and hurricanes, which could destroy
include provisions to protect against
inventory and disrupt the supply. Even though
5 potential damage from flooding and
it has close production factory, they still need
hurricanes.
to have risk management plan of natural
- Insurance system
disaster.
Bottlers are obliged to get their concentrate - Nurture long-term bilateral supplier
supply from the regional concentrate producer, relationships.
therefore there is high single supplier risk, - Renegotiate contracts, at least allowing
6
although to the high safety stock, there is less bottlers to get their supply from other
risk of this leading to backlog or disruptions in concentrate producers in case of inability of
the regional producers to supply the bottler.
The bottlers are part of the Coca-Cola system,
with Concentrate Producers taking on the
Marketing and Advertising activities among - Nurture long-term bilateral supplier
others, therefore collaboration risks are relationships.
3
generally high. The only exception would be if - Engage into more discussions, meetings, or
the Concentrate Producers abused their supplier any collaboration activities.
bargaining power and increased prices too
much.
Seeing as the profitability margin of the
3 Concentrate Producers is very high, the risk of
bankruptcy is quite low, unless the Concentrate
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12. Labor unrests (the employees of your
company or your supplier’s company go on
strike etc.)
13. Risks from your supplier’s suppliers.
For example, when the supplier of your
supplier cannot deliver products to your
supplier on time, as a consequence, your
supplier also cannot deliver its products to you
on time.
14. Intellectual property (IP) risk.
The leakage of IP of any form to your supplier.
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Producer endeavors into too many investment
projects or acquisitions.
- Respect labor laws and regulations.
- Focus on Employee Satisfaction
Coca cola has very good social and
Management and ensure higher Job
3 environmental policies for example disability
Involvement through organizational
people etc.
behavior techniques.
- Monitor supplier’s labor condition
Risk of these criteria is low. The concentrate
producers’ suppliers supply commodity
3 products that can procured from diverse - Diversify the network of the suppliers
suppliers. Risk is much diversified between the
large number of suppliers.
- Intellectual Property issues and protection
The risk exists on the other side, seeing as the
should be written specifically in the
concentrate’s formula is secret. But in terms of
2 contract. Likewise, the certain penalties or
any IP of the bottlers, there is none, as it is a
possible lawsuits in case of breaching the
simple bottling process.
contract.
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3-4. Risk Mitigation Strategy

TABLE 2: RISK MITIGATION OVERALL STRATEGY:

Risk mitigation Weight
1. Corporate Governance
over critical suppliers
2. Compliance by supplier
3. Risk Management
4. Ongoing Assessment,
Monitoring and
Evaluation
5. Communications and
Information sharing
6. Training and
Workshops to Main
suppliers
7. Technologies and R&D
8. Audit function
TOTAL CONTOL
c 1
Risk
mitigation Comments
rating
Company should ensure good governance
25% 2 over its critical suppliers and run sound
risk management system
All suppliers follows the guideline of
10% 4 suppliers. So it is important to follow and
ensure its compliance.
RM program should include periodical
15% 4
risk assessment, Risk mitigation,
Reporting of risk through its supply
15% 6 chain, managing of risks. Also it should
be reviewed frequently and developed.
Smooth information sharing in whole
5% 6 supply chain will decrease the risk of
failures.
Frequent training and workshops to its
5% 6
suppliers and employees are needed.
New technology and R&D will save the
15% 8
cost and follow the industry’s example.
This huge SCM requires appropriate
10% 4 audit function to ensure implementation
of all policies and regulations
4.6
2 3 4 5

Risk Management Very

Very Good Good Acceptable Deficient
Quality Deficient

From 0 2 4 6 8
Ranking
To 1.99 3.99 5.99 7.99 10

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4. Other Threats and Risks

Suppliers may provide unhealthy materials (not natural, non-zero-calorie sweetener) this became

the most important and high risk face Coke (Coke’s 2009 annual report identified obesity and

health concerns as the number one risk factor to its business) because of the new federal nutrition

guidelines, issued in 2005, which identified regular CSDs as the largest source of obesity-causing

sugars in American diet. In addition to a market research study showed that 53% of Americans

were concerned that the ingredient posed a health hazard in 2010 compared with 40% in 2004.

Environmental risk refers to possible occurrences in the environment in which Coke’s bottlers

operate. This category comprises a high diversity of risks, which we have grouped into three sub-

categories:

 The first sub-category of environmental risk consists of the most visible or dramatic risks,

such as terrorist activities, natural disasters and global warming.

 The second sub-category consists of the more ‘subtle’ risks – for example, the risk that the

company’s reputation will be damaged through exposure of intellectual property or a social

responsibility issue.

 The third sub-category consists of the threat of strikes, blockades, unreliable transportation,

government actions and regulatory changes.

Inherent risks are risks that have an impact on the financial statement which will increase the

probability of error or misstatement. These risks are inherent to Coke’s business nature and thus

are unavoidable. Therefore, when dealing with business with high inherent risk greater care must

be placed when checking the relevant affected accounts in the financial statement.

 Coca cola operates in many overseas countries. With foreign currency constantly

fluctuating there are high chances of misstatement to be found within the conversion

of overseas sales to the USD dollar

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 One of the Coca cola’s biggest assets, is its inventory. Its sheer volume increases the

risk for misstatement to occur. For example, it would be difficult to check if everything

stated on the balance sheet actually exists.

 Coca cola has many employees. Employee benefits can be extremely complicated and

difficult to calculate. Therefore, the risk of error or misstatement in associated accounts

such as expenses are at greater risk.

Coca cola regularly purchase other companies. This will involve calculation of goodwill which

involves the risk of being overvalued.

TABLE 3: OTHER RISKS

Rate
Risk Factors Mitigation
(1~10)
1. Providing unhealthy materials Coke must control this important issue by:
- Manage high restricted quality control system
9
- Put it as top restrictions and terms in the contracts
with its suppliers
2. First sub-category of - Make contracts with insurance companies to
environmental risk transfer those kinds of risks
5
- Continuous external environment information
updating
3.Second sub-category of - Increase Cokes’ social responsibilities activities
environmental risk 5 - Increase the advertisements especially on social
media.
4. Third sub-category of - Continuous cooperation with the governments and
environmental risk 5 continuous updating of new governmental rules
that are related to Coke’s business
5. Inherent risks - Contracting with insurance companies to transfer
those kinds of risks
3 - Contracting with strong Financial auditors to
discover those financial risks and get the required
consultations to solve them

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5. Conclusion

Coca-Cola Company, established with the mission of inspiring moments of optimism and

happiness, creating value and make a difference, and refreshing the world, now, has been one of

the world's largest and renowned companies. About 94% people in the world know about the Coca-

Cola in these days. Because of its competitive (affordable) price and variety of products, it has

been established as one of the most popular or leading soft-drinks in the world. It has more than

500 brands in over 200 countries/territories in the world.

Coca-Cola Company have created an efficient and more reliable global supply chain and the whole

Coca-Cola system now. The company has been operating a franchised distribution system for a

long time, where the Coca-Cola produces syrup concentrate only and sells to the Bottlers

throughout the world and the Bottlers perform the remaining parts.

They have been managing their supply chain with a good information system, well-managed

warehouses, and paying adequate attention to facility and delivery. The key-focus areas in Coca-

Cola supply chain management are reducing inventory, minimizing the waste and cost, and value-

maximizing system. With their hi-tech technology and facility, they have been able to expand their

market rapidly. If we talk about their inventory management system in the supply chain, they

always keep attention on emergency inventory management, try to avoid the stock-out problem

and control the over-excess inventory at the same time. They have been managing their

transportation system by distributing the right products with right quantity and right quality, to the

right place at the right price. They are using international airports, ships, and also the highway

transports for the transportation.

In short, Coca-Cola have been using the following strategies to manage their supply chain:

 They are mostly using the push strategy. They forecast the customer demand first and

produce their items. They forecast the demand based on market pricing decision.

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 Inventory handling is done by using ABC classification.

 They are focusing on aggressive market expansion. To hold the market shares, they also

produce some of the energy drinks, tea, juice, and water along with the soft-drinks.

 They are using the web-based platform.

 By applying JIT and TQM system, they are being able to manage the supplier-buyer

customer relationship.

Finally, although the supply chain of Coca-Cola has proved itself as one of the most successful

supply chain in the world, still there might be some rooms for improvement. They could do

something more for the further betterment and exploit all the business opportunities. They can still

improve their information system by using latest technologies and in-house R&D team and get the

proper feedback from the suppliers and vendors, explore more business tools to shorten the

purchasing process, and measure the performance of the employees and partners as well. Also,

they need to think about the risks on the supply side, demand side, inventory risks, and sustainable

collaboration with the partners too.

6. References
- Cola, C. (2017). Coca cola annual review.
- Yoffie, D. B. (2006). Cola Wars Continue: Coke and Pepsi in 2010. Boston, MA, USA: Harvad
Business School Publishing.
- Hitesh Bhasin, (May 25, 2018), SWOT of Coca Cola, <https://www.marketing91.com/swot-
coca-cola/>, Accessed on June 8, 2018.
- http://www.mobiusuk.co.uk/media/blg/1090/1377159784/supply-chain-risk-management-a-
unique-function-or-simply-one-of-the-supply-chain-managers-tasks.pdf
- https://www.studocu.com/en/document/university-of-sydney/auditing-and-assurance/other/risk-
business-and-inherent-risks-case-study-of-coca-cola/1633076/view

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NSK’S SUPPLY CHAIN RISK MANAGEMENT

Contents

7. Another company to study: NSK Ltd. (NSK) P.19-29

7-1. Introduction of company and product P.19

7-2. Industry analysis P.20-21

(1) Porter’s five forces analysis P.20

(2) SWOT analysis P.21

7-3. NSK’s supply chain management and suppliers P.22-29

(1) Manufacturing processes for bearings P.22

(2) Critical suppliers P.22-23

(3) Risk assessment and mitigating strategies P23-29

7-4. Conclusion P.29

7-5. References P.29

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7. Another company to study: NSK Ltd. (NSK)

7-1. Introduction of company and product

NSK is a Japanese ball bearing manufacturer. It has the largest market share in Japan.
Also, it has the third largest market share in the world. Its net sales were ¥949.2 billion in the fiscal
year of 2017. It has following two businesses: industrial machinery business and automotive
business. Industrial machinery business occupied 23% of its whole net sales. The customers in the
business are various because most of machines need ball bearings. Another business, which is the
main business of NSK, is automotive business. It occupied 77% of its whole net sales. In this
business, NSK produce the automotive ball bearings and automotive parts. The main customers of
this business are automotive manufacturers such as Toyota, General Mortars, and Volkswagen. The
ration of sales in the overseas was 65% in the fiscal year of 2017.
NSK’s main products are ball bearings. Basically, ball bearings have four main
components: outer rings, inner rings, balls, and cages. If you put balls between outer rings and
inner rings, inner rings can revolve inside outer rings smoothly. To fix the position of balls, we use
cages inside outer rings. When an axis put into inner rings, ball bearings can reduce the friction
because of the rotation of the axis. Ball bearings are mainly used inside the cars around tires and
engines.

7-2. Industry analysis

(1) Porter’s five forces analysis

Recently, bearings industry has threat from electric vehicles (EVs). This is because EVs use lower
number of ball bearings than gasoline cars. However, from the five forces analysis, the ball
bearings industry is not so unattractive industry. The buyers will have the bargaining power to

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NSK because there are too many new manufacturers for the electric vehicles. NSK has to improve
the sales division. The substitutes are strong enough because the electric vehicles need not the
engines but the motors. This will decrease of the demand of the ball bearings. In terms of the new
entry, the rivalry, and the supplier, this industry is not unattractive. NSK still has the leading
technology in this industry. It has the strong suppliers in terms of technology. NSK can make the
next generation ball bearings and the new components needed by the electric vehicles.

(2) SWOT analysis

From the SWOT analysis, NSK should reform itself by following new strategies. It should create
the new products for the electric vehicles such as the automated brake system and the new
generation steering system. NSK should implement the new technologies to reduce the ball
bearings weight. NSK should go into the new businesses such as the wind power generation, the
robotics for the medical and nursing industry, and the aftermarket business. NSK should reform
itself by the idea of Internet of Things including the smart factory and the 3D printings.

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Strengths Weaknesses
- The ball bearings are needed as long as - NSK has to improve its sales capability for
there are the components which are rolling. overseas especially in the aftermarket
- The ball bearings are necessary to connect business.
the power from the motors to the tires. - NSK has to reduce the labor cost, also it
- The ball bearings can be lighter by the has to improve the productivity.
ceramic balls and the plastic cages. - NSK has to make good connections with
the new electric vehicles manufacturers.
Opportunities Threats
- The electric vehicles need the new - The electric vehicles will reduce the
components that not needed for the gasoline demand of the ball bearings.
cars.
- The electric vehicles will introduce the
automation technology.
- The electric vehicles will accelerate the
components will be electrized.
- Wind power generation will be popular in
the future.
- Robotics in the medical and nursing
industry will be popular in the future.
- Industrie 4.0 including the idea of the
smart factories can reduce the cost of the
plants.

7-3. NSK’s supply chain management and suppliers

(1) Manufacturing processes for bearings

The picture below is the manufacturing process for bearings. First of all, suppliers turn
the outer rings and inner rings material. Secondly, they forge those materials. After that, they send
the materials to NSK factories. Thirdly, in NSK factories, we heat-treat the materials. Then,
fourthly, we grind the material. Finally, we assemble the bearings. After the quality inspection, we
send them to the customers.

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(2) Critical suppliers

We identified Kuribayashi Seisakusyo Co., Ltd. (Kuribayashi), which supplies rings to NSK, and
Toshin Seiki Co., Ltd. (Toshin), which supplies rollers to NSK, as critical suppliers. NSK has
outsourced turning and forging processes to Kuribayashi because it needs to focus on its core
processes such as heat treatment and grinding. Kuribayashi needs long lead time to finish turning
and forging processes. Also, NSK has outsourced rollers production to Toshin because it does not
have enough facilities to fulfill the demand. Toshin also needs long lead time to deliver the rollers
to NSK.

(3) Risk assessment and mitigating strategies

Risk Factors Rate (1-10)

Q1. Inability to meet your purchase demand on time because any of the
following reasons:
 Supplier’s lead time fluctuations 7
 Supplier’s products cannot be delivered on-time
 The frequency of products delivered to your company is not satisfactory
Q2. Higher procurement costs because any of the following reasons of your 3

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supplier:
 The price of supplier’s product fluctuates
 Transportation cost fluctuates
 Risks on negotiation of pricing terms (allowable time delay before your
payment, discounts offered for large orders etc.)
 Currency exchange rate fluctuations
 Taxes, duties fluctuations
Q3. The Quality of Supplier’s products is not satisfactory. 7
Q4. The supplier is not able to deliver the number of products you want to
3
buy.
Q5. When you have a sudden change of your order amount, the supplier is
3
not able to handle it.
Q6. Risks on communication and with your supplier.
1
For example, your company cannot contact your supplier on time.
Q7. Supplier is not willing to share its information. (e.g. changes of
supplier’s product availability, changes of supplier’s production schedules, 1
delivery schedules etc.)
Q8. Natural disaster risks.
For example, earthquake, flooding etc. disrupt the supply of raw materials to 7
your company.
Q9. Single supplier risk. (if your have only one supplier to purchase your
raw materials and that supplier fails to deliver, your company’s schedule may 3
be disrupted, and you cannot find alternative suppliers quickly)
Q10. Collaboration risks. (your partnership with the supplier is not stable) 1
Q11. Supplier financial viability. (the risk of the bankruptcy of your supplier) 7
Q12. Labor unrests. (the employees of your company or your supplier’s
5
company go on strike etc.)
Q13. Risks from your supplier’s suppliers.
For example, when the supplier of your supplier cannot deliver products to
3
your supplier on time, as a consequence, your supplier also cannot deliver its
products to you on time.
Q14. Intellectual property (IP) risk.
3
The leakage of IP of any form to your supplier.

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International University of Japan
Supply Chain Management 2018 Spring Group 6

Q1. Inability to meet your purchase demand on time.

Rate: 7
Reasons:
As both Kuribayashi and Toshin utilize the limited resources such as workforces and facilities,
they sometimes cannot deliver their products to NSK on-time.
Mitigating strategies:
NSK already implement the strategy that it has more inventory than the necessary. We think this
strategy can improve flexibility of supply chain. However, it increases the cost of inventory at the
same time. Hence, NSK has to deal with providing the flexible production plans to its suppliers
eventually.

Q2. Higher procurement costs.

Rate: 3
Reasons:
Since NSK and suppliers work together to reduce the cost of production, the risk of higher
procurement costs is not so high. For instance, NSK and Kuribayashi cooperate to develop the new
production system for turning and forging processes to reduce the cost dramatically.

Q3. The Quality of Supplier’s products is not satisfactory.

Rate: 7
Reasons:
The products from both Kuribayashi and Toshin sometimes contain defects. Therefore, NSK
implements the inspection before they go through the processes in NSK.
Mitigating strategies:
NSK has to guide its suppliers to improve their inspection processes. Also, it can provide some
suggestions to its suppliers to improve the quality of their products.

Q4. The supplier is not able to deliver the number of products you want to buy.

Rate: 3
Reasons:
The raw materials both Kuribayashi and Toshin use are steels, which means commodity. It rarely
happened that they cannot get enough raw materials to produce. Hence, this risk is not so high.

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International University of Japan
Supply Chain Management 2018 Spring Group 6

Q5. When you have a sudden change of your order amount, the supplier is not able to

handle it.

Rate: 3
Reasons:
NSK has a lot of items; moreover, some items use the same raw materials. Hence, if NSK suddenly
change the order, the suppliers can utilize the raw materials to the other items.

Q6. Risks on communication and with your supplier.

Rate: 1
Reasons:
Kuribayashi is located in Nagano prefecture. Also, Toshin is located in Ishikawa prefecture. Since
the biggest plant of NSK in Japan is in Saitama prefecture, NSK can easily contact with its
suppliers. In fact, NSK and suppliers cooperate to create the production plan. Hence, this risk is
very low.

Q7. Supplier is not willing to share its information.

Rate: 1
Reasons:
Kuribayashi is NSK’s subsidiary. Also, NSK has maintained strong relationship with Toshin.
Hence, this risk is quite low.

Q8. Natural disaster risks.

Rate: 7
Reasons:
Since both Kuribayashi and Toshin are located in Japan, they always have the risk of earthquake.
Mitigating strategies:
As Toshin already has its plant in China, Kuribayashi also can have its plant in overseas. This
strategy can increase the transportation cost. However, NSK also has a lot of production sites in
overseas. Hence, the suppliers can deliver their products to NSK in the other countries. If some
natural disasters happen, they can deliver the products to NSK in Japan.

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International University of Japan
Supply Chain Management 2018 Spring Group 6

I think it is improve the flexibility of whole supply chain.

Q9. Single supplier risk.

Rate: 3
Reasons:
NSK has another supplier for the rings. Also, NSK produces the rollers by itself. Hence, this risk
is low.

Q10. Collaboration risks.

Rate: 1
Reasons:
As we mentioned above, NSK, Kuribayashi, and Toshin have maintained good relationships for a
long time. Hence, this risk is quite low.

Q11. Supplier financial viability.

Rate: 7
Reasons:
NSK’s suppliers are relatively small companies. Hence, financial risk is high.
Mitigating strategies:
To reduce the risk, NSK has to communicate with suppliers frequently.

Q12. Labor unrests.

Rate: 5
Reasons:
As NSK has a strong labor union, there is a risk of employees’ strike. Also, NSK’s labor union has
a relationship with the labor union in Kuribayashi. Hence, there is also a risk of employees’ strike
in Kuribayashi. As of June 2018, the company can maintain a good relationship with its labor
union.
Mitigating strategies:
The company has to make a effort to improve its working environment, and give its employees the
flexible working style.

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International University of Japan
Supply Chain Management 2018 Spring Group 6

Q13. Risks from your supplier’s suppliers.

Rate: 3
Reasons:
As both Kuribayashi and Toshin by their law materials from the huge steel manufacturers such as
Nihon Steel & Sumitomo Metal Corporation, we cannot see this risk is high. Also, their raw
materials are commodity. Hence, it is easy to by from the steel manufacturers.

Q14. Intellectual property (IP) risk.

Rate: 3
Reasons:
NSK sometimes share its technology to its suppliers to improve the efficiency of whole supply
chain. Hence, it does not care much about IP risk.

7-4. Conclusion

NSK has a threat by the EVs appearance; however, the ball bearings industry is still

attractive. Also, NSK has some technologies to create new products for electric vehicles and

automatic driving systems. Moreover, it can develop the new business field.

In terms of risk factors, NSK does not have huge risks. Even though some factors have

high ratings, NSK has the clear strategies to mitigate those risks.

7-5. References
- NSK Annual Report 2017, <http://www.nsk.com/investors/library/nsk_report.html>

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