Logistics and Supply Chain Management (SCM1)

Lawrence Kinlin School of Business

Course Code: MGMT6082 Domestic an International

Sourcing.

Individual Case Analysis

Date: July, 2019

Submitted by:
JK T

Robots Everywhere Corporation Case

1. Identify the immediate issues

Ans1. The immediate issues are as follows:

 Robotics Everywhere Corporation which is a well-established company located north of

Boston has a strong reputation for manufacturing robots used in space exploration and
bomb detection. The company now had decided against entering the home residential
cleaning market in the year 2001 and intends to outsource key product parts including
Advanced Power System NiMH Battery for their robotic vacuum cleaner assembly sites.
 The company narrowed down four specific battery suppliers based on testing product
samples giving preliminary insight, the competitive price offered over product and closeness
to company facility. The company needs to make the final decision regarding supplier
selection to begin the negotiation at earliest date possible based on detailed information
gathered through the direct visit of supplier's facility considering it must have stock by
January of next year and right now it is early August.

Some other basic issues are as follows:

 The company need to ensure defect-free quality control standards for its product as it
adversely affects profit margins and customer goodwill.
 As the product is fairly new and sales estimates for next two years denotes volatility in
market conditions, the company is also seeking some assurance in terms of supplier’s
capability within one month notice in increasing the supply of components based on market
conditions.

2. Perform three situational analyses (SWOT, PESTLE & Porter’s 5)

Ans2. In the Robotics Everywhere Corporation case study the aim is to identify internal and external
factors that have an impact on achieving the desired benchmark of selling the number of units of the
robotic vacuum cleaner at affordable price having high quality for residential cleaning purpose. To
review REC business operation strategies the SWOT analysis for an internal factor such as strengths
as well as external available opportunities and PESTLE analysis for external factors are the useful
analytical tool for situational analysis which is as given below:

SWOT analysis:

It stands for Strengths, Weakness, Threats and opportunities enabling the company to scan the
environment properly to manage everything more efficiently.

Now SWOT Analysis of REC as given below:

Strengths

Since 1990, Robots Everywhere Corporation has been recognized as well established leading robotics
company because of its reputation as a manufacturer of high-quality robots for military and research
segments. They have a remarkable sales growth from $180,000 (annual sales) to $50 million multi-
product maker firm in a span of little over 10 years. The company also have a strong and effective
marketing team as we can see there marketing department strategy of entering home residential
cleaning market through large retailers with keeping their vacuum cleaner price affordable. Their
reputation as a firm offering premium quality of customer experience is validated by their on-time
customer delivery.

Weakness

The company have a dependency on procuring key product such as Advanced Power System 3000
mAh Battery for their manufacturing facility through outsourcing as they lack expertise in the
production capability of this product on their own. There is also a mixed bag of opinions regarding
the prediction of precise growth of vacuum cleaner market considering the volatility of the
electronics market and strategy of exploiting this booming market based on shipping low-cost
vacuum cleaners.

Opportunities

There is a rising demand for upgrading conventional vacuums with robotic vacuums as it allows
people to achieve more in daily lives be it time-saving or improved productivity. The company have
the opportunity to develop long term strategic relationship with carriers to support their inbound
logistics for this new project. There is also the undiscovered potential for tapping reasonable market
pricing for their outsourced mAh battery considering market well beyond robotic vacuum cleaner
industry and availability of suppliers in countries such as China which has one of the lowest labour
costs.
Threats

As customers demand defect-free product a defect in a new product can wipe out any profit on
product sales considering low-profit margins and can also cause huge damage to its reputation.
Furthermore, as per the case study, REC is not the only company to enter this residential cleaning
business, so to counter challenges posed by competitors the company is compelled to introduce high
quality and affordable robotic vacuum cleaners.

PESTLE Analysis

It stands for Political, Economic, Social, Technological, Legal and Environmental external factors
analysis to make constructive decisions for the company.

Now PESTLE Analysis of REC as given below:

Political Factors

In case of selecting supplier for procurement purpose, country specific risk plays major role in
forming a strategic alliance with the concerned supplier. The trade war with China and then United
States strategic relations with Japan and South Korea will strongly influence China policies towards
United States.

Economic Factors

As per case study the company also needs to consider effect of currency fluctuations while
evaluating supplier financial data as US dollar has shown indication of weakening in comparison
against many Asian currencies in last months of 2001.

Social Factors

Due to globalization various factors have contributed in growth of demand for household smart
gadgets such as present lifestyle, status symbol etc. So, REC has a huge scope apart from United
States to expand its potential market share for its robotic vacuum cleaners in market such as Europe,
Middle east etc.

Technological factors

The spectacular design of the robotic vacuum cleaner named Zumba is REC’Ss unique selling point. It
works as efficiently or in a better way as compared to conventional cleaner by picking up dirt
through spinning brushes and a vacuum.

Legal Factors

As legal aspects are concerned REC becomes quite vulnerable as it has a variety of intellectual
property like navigation, artificial intelligence etc. to build robots which makes it susceptible to
piracy as well as litigation.

Environmental factors

The company revenue can be affected due to disposing of electronic junk which is not in the
condition of usage such as 3000 mAh Battery which can create massive hurdles while discarding
them. Price of final product may also grow up because of many countries such as China and Korea
are taking initiative to cut green house gases thereby, it could possibly shoot up utility rates in those
countries and REC company may need to readjust its expected pricing for robotic vacuum cleaner in
near future.

Porters 5 forces (Monczka, Handfield, Patterson, 2009)

Michael Porter’s 5 forces is about determining profitability of firms within various industries and are
discussed as follows:

Competitive rivalry:

It describes about extent of competition and as per case study we know apart from REC company
there are more players in this home residential cleaning market. In order to overcome this factor
REC has to adopt strategies such as affordable prices, improve product quality, building strategic
long-term relationship with suppliers and buyers (large retailers) and use of efficient channels to
streamline inbound logistics as well as outbound distribution channels.

Bargaining power of Suppliers:

As REC have option of 4 potential suppliers that too from location of Asia apart from 2 suppliers of
United States for 3000 mAh batteries, the REC company can easily bargain for the best price.

Bargaining power of Buyers:

The bargaining power of buyer depends upon concentration of buyers, order size etc. As we can see
in case study the Supplier Oynas representative from China indicated low interest when he found
out that the order value is around $30million per year, which also somehow gave strong signal in
negative terms regarding buyer further desire to alter quoted price in subsequent negotiation.

Threat of New Entrants:

Like for example as per case study one of the challenges company faces is threat of new entrants
such as producers of video game joysticks, competition robots etc. for use of similar NiMH batteries
as are used in Zumba vacuum cleaner which sum up to conclusion that REC must share its NiMH
battery market with these other entrants.

Threat of Substitute products:

REC will also have to consider availability of other similar products which can be substituted in place
of their robotic vacuum cleaner which is based on relative price of the option and ease of switching
in perspective of buyer.
 Q3. Supplier Evaluation analyses

Ans3. 1. Supplier Evaluation and selection analysis (Monczka, Handfield, Patterson, 2009)

Supplier Evaluation Process

Assigned Category Measurement and Sub Batteries R Us & Oynas & Sanaso K-Power
weight weighted score weighte nic &
weight &
d score weighte weighte
d score d score
.35 % Quality Quality performance (.25%) 3 & (W. Score- .75) 2 & (W. 1 5 & (W.
Score- .5) Score- 1.25)
Ramp- up time performance 4 & (W. Score-.4) 5 & (W. 4 3 & (W.
(.10 %) Score- .5) Score- .3)
.30 % Delivery On-time delivery record 5 & (W. Score- 1) 3 & (W. 4 5 & (W.
(.20%) Score- .6) Score- 1)
Flexible and lead-time 5 & (W. Score- .5) 2 & (W. 4 3 & (W.
(.10%) Score- .2) Score- .3)
.25 % Cost Structure Costs relative to industry 3 & (W. Score- .6) 5 & (W. 2 4 & (W.
(.20%) Score- 1) Score- .8)
Early design involvement 4 & (W. Score- .2) 5 & (W. 4 3 & (W.
capability (tooling costs) – Score- .25) Score- .15)
.05%
.20 % Financial Liquidity (.10%) 4 & (W. Score- .4) 5 & (W. 2 3 & (W.
condition Score- .5) Score- .3)
Debt to equity (.10%) 3 & (W. Score- .3) 2 & (W. 4 3 & (W.
Score- .2) Score- .3)

Total weight of categories = 1

Score of suppliers is from 1-5 with 1 – unacceptable, 5 – excellent
2. Evaluate single sourcing option versus multiple sourcing option (Monczka, Handfield, Patterson,
2009):

Single Sourcing: Single Sourcing: Multiple Sourcing: Multiple Sourcing:

Potential Advantages Potential Advantages Potential
Potential
1. Single sourcing 1. The most significant Disadvantages
Disadvantages
provides significant benefit of the multiple 1. As a result of having
1. Single sourcing
influence and control sourcing is that it multiple suppliers
biggest advantage is
over the supplier provides improved many times there are
regarding vulnerability
thereby, creating assurance of the reduced efforts from
of supply in case of any
opportunities over supply. Thus, avoid supplier end to match
strikes, emergencies at
better pricing and complacency on part buyer service
supplier side.
reduce lead time. of single supplier. expectations.
2. it gives advantage of 2. The advantage of
building stronger and having multiple
long-term supplier is also
relationships. regarding better
buyer’s negotiation
power in terms of price
and quality due to
intense competition
among suppliers.

For example, as per

case study K-Power
which is a Korean
company showed
immense commitment
in terms of fulfilling
required production
capacity as per REC
contract.
3. Evaluation of short-term contracts versus long term contracts.

Short-Term Contracts: Short-Term Contracts: Longer-Term Longer-Term

Potential Advantages Contracts: Potential Contracts: Potential
Potential
Advantages Disadvantages
Disadvantages
1. When buyer and 1 When buyer and 1. potential
1. As somehow both
supplier have short supplier intend to have disadvantage is about
parties want to see
term goals which is relationship parties not having
results immediately,
limited by budget and considering long term much flexibility during
the bigger picture is
timescale short term goals such as in this contract stated tenure.
lost somewhere.
contract is most case study where
suitable. strategic planning is
required considering
long term mutual
benefits, the long-term
contract is most
suitable.
Q 4. 3 alternatives based on situational analysis?
Ans4. 1. Based on supplier evaluation analyses I would like to recommend K- power supplier
as it scored maximum rating of 4.4 as compared to other suppliers.
2. I am in more favour of single sourcing with the recommendation of k-power as my
supplier considering opportunity of further alteration in the quoted price as well as because
of the expert reviews as the one of the most promising companies in the industry.
3. I am in more favour of long term contract and K- power also had shown willingness to
commit required production capacity as per contract requirement of REC.

References
1. R. Monczka, R. Handfield, L. Giunipero, Patterson. (2009). Purchasing & Supply Chain
Management (4th edition). Mason, South-Western Cengage Learning.