1. Take a particular industry – perhaps one that you are working in or have work

Question

1. Take a particular industry – perhaps one that you are working in or have worked in, or one that you would like to know more about – and answer the following questions related to sourcing and sustainability. In your responses, use a combination of concepts illustrated in the chapters and your own knowledge (or research) of the particular industry.

a. What is one way that this industry could (or is required to) focus on sustainability? Why? Which of the three pillars of sustainability does that effort fall under? Which supply chain driver is it most closely linked to? What are the primary barriers to the industry implementing that sustainable focus?

b. For this particular industry, what is one product or service that would be good to keep in house and one that would be good to outsource? Why? In which categories on the “Product Categorization by Value and Criticality Matrix” would you put these two products/services? (Matrix available on page 463 of version 6 or slide 25 in the module) In which specific ways can the supplier increase supply chain surplus for the product/service?

c. For this and the following questions, consider the outsourced product/service only: What type of supplier should be used? (Think about capabilities, responsiveness vs. efficiency, and location)

d. What are the risks of outsourcing this product/service? (Be specific.)

e. Beyond the purchase price, what are some other factors in the total cost of ownership for this product/service?

Subject: Supply Chain

Explanation / Answer

The chosen industry is smartphone manufacturing.

a. For nearly a decade, smartphones have come to dominate the lives of people globally. With ever changing needs, improvements in product design, features and functionalities have benefited the users. One way in which the industry can focus on sustainability is by introducing products that are more energy efficient. With less consumption of energy, the smartphones could reach markets that have energy shortages and at the same time leave a smaller carbon footprint. With bulk of the weight of a smartphone being the heavy batteries, introducing efficient cells or solar panels will significantly alter the design and weight of the smartphone. The three pillars of sustainability - economic, social and environmental will all be positively affected by this effort, but the environmental impact will be the highest.

b. For the smartphone industry, the product design, the associated research and development must be kept in-house. Since it involves intellectual property, patents and rights, it is prudent to do this in-house. The core value of the business will be derived from the product development process. Based on criticality, the components and semiconductors can be outsourced. On the product categorisation matrix, low value parts and components will be classified in General items, whereas the procurement of specialised energy efficient batteries and solar panels will be classified as strategic items. Since the strategy of the smartphone maker is based on the energy efficient batteries and solar panels, these become critical to the business and are also of high value due to their early stage in the lifecycle.

c. If we consider outsourcing of solar panels for smartphone, the supplier will be a strategic Tier-1 supplier. The supplier must have proven capabilities in solar product manufacturing, ability to make products as per specification meeting quality standards, have enough capacity to meet the demand and deliver the committed orders in time. The location must be optimally selected for lower costs and abundance of material.

d. The risks of outsourcing the solar panel batteries for a smartphone are: over-dependence on the supplier, leakage of designs in the market, critical product may also be supplied to competitors, poor protection of intellectual properties and need for higher management control.

e. Apart from the purchase cost, the total cost of ownership will include costs of warranty, post sales services, taxes and legal compliance, design change implementation and upgrades.

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