Kuiper Leda Supply Chain Defense

Kuiper Leda Supply Chain Defense

Kuiper Leda is an electronics component manufacturer that produces Electronic Control Units (ECU’s) and Radio Frequency Identification Devices (RFID’s). Currently their major customers are car manufacturers and original equipment manufacturers (OEM’s), and their annual revenue is approximately $400 million. Kuiper Leda is known for the quality of their product and their quick delivery times despite their relatively small size compared to their competitors, which has given them loyal customers and good suppliers.

The company needs an effective and efficient supply chain management system that will plan their inventory management starting with the raw materials all the way to the finished product. “The idea is to apply a total systems approach to managing the entire flow of information, materials, and services from raw materials suppliers through factories and warehouses to the end customer.” (Chase, Jacobs, & Aquilano, 2006, p. 406) To do this they will need to deal with their suppliers to obtain the raw material, keep track of each stage of their production schedule, and deliver their product on time to their customers, all the while keeping their costs down. This will allow them to keep a competitive advantage and continue to grow in the industry.

Kuiper Leda Supply Chain Defense

Currently Kuiper Leda can manufacture 1,250 units of ECU’s and 250 units of RFID’s per day. Due to their own rapidly growing business, one of the Kuiper Leda’s customers, Midland Motors, has placed an order for 250,000 ECU’s and 35,000 RFID’s per year which will exceed the company’s production capacity when added to the other orders they must fill. Their current setup will not support the manufacture of an order this size. If Kuiper Leda wants to take the order they will have to meet the demand for their product to keep their customers coming back by finding new methods to operate their supply chain management. The company will have to look into a few different options, such as outsourcing, that will allow them to meet this demand. When considering outsourcing the company must take a few other points into consideration beyond just handing the production to an outside firm. “Outsourcing goes beyond the more common purchasing and consulting contracts because not only are the activities transferred, but also resources that make the activities occur, including people, facilities, equipment, technology, and other assets, are transferred.” (Chase, Jacobs, & Aquilano, 2006, p. 406) When outsourcing the price per unit, the lead time needed to manufacture the item, the delivery schedule and the quality of the product will have to be taken into consideration.

Kuiper Leda has a couple of different options when choosing to outsource the manufacturing of their ECU’s and RFID’s that can give Kuiper Leda a few benefits that could allow them a competitive advantage. Depending on the contractor that the company chooses for their outsourcing needs they would be able to obtain lower prices, which would translate to higher profits and shorter production time. The company would also save on some of the costs of inventory such as ordering costs, shortage costs and holding costs which” includes the costs for storage facilities, handling, insurance, pilferage, breakage, obsolescence, depreciation, taxes, and the opportunity cost of capital.” (Chase, Jacobs, & Aquilano, 2006, p. 591) On top of controlling some of their costs and gaining repeat orders from their customers, they will be able to better focus on their core competencies instead of attempting to increase their production capacity to meet their demand.

Kuiper Leda can determine their success I outsourcing by looking at the best strategies used by other businesses. One example would be that of Royal Dutch Shell probably best known for their gas stations, is one of the largest private sector energy corporations in the world. They are the third largest corporation in the world employing over 108 thousand employees in 130 countries. Recently the company was in engaged in a corporate restructuring in an attempt to dramatically lower their costs. “The Anglo-Dutch oil giant began studying restructuring options in 2005 to simplify operations and create greater operational efficiencies.” (Walsh, 2008, Ð'¶3)

Part of the restructuring includes laying off 3,200 IT employees and outsourcing that portion of the IT department. Shell also states the reason for the outsourcing is to shift “its operations strategy to greater reliance on "shared service centers," or regional hubs that support everything from business and human resources to IT operations for multiple countries.” (Walsh, 2008, Ð'¶3) At the time of the article the contracts for the outsourcing were still under negotiations, but if completed the company stands to reduce their pretax operating costs by $500 million each year. When deciding on ways to reduce costs Kuiper Leda Inc. can consider outsourcing to reduce some of its costs.

Another example deals with Pfizer Inc. Pfizer Inc. had noticed that their staff of Harvard MBA’s we spending much of their time doing what is considered to be support work and less time doing what they were hired to do. “These are people we hired to develop strategies and innovate. Instead, they were Googling and making PowerPoints." (Cohen, 2008, Ð'¶1) In an attempt to relieve these highly trained and paid employees of these menial tasks the company implemented their Office of the Future (OOF) where their computer will have a button linking them to two companies in India who specialized in outsourcing services such as “customer-service and computer programming for U.S. companies, as well as concierge services for executives too busy to answer email and arrange for dry-cleaning.” (Cohen, 2008, Ð'¶2)

The idea for OOF came about due to a financial crisis that Pfizer experienced in 2005 where budgets were cut and employees were laid off. Jordan Cohen, the company’s senior director of organizational effectiveness determined that the employees were spending anywhere from 20% to 40% of their time on four tasks: “creating documents, manipulating and analyzing spreadsheets, scheduling meetings, and researching.” (Cohen, 2008, Ð'¶4) After testing the program to outsource these task and fixing a variety of bugs , Cohen determined that the program would work. Although the program started with 30 people, over 200 now make use of the service.