What Should US Tech’s Sourcing Strategy be?
US Tech is considering discontinue the cooperation with its primary product supplier: TaiSource. The two main reasons that drive the company for doing so are (1) reducing cost and broaden the market by collaborating with a new Chinese supplier; (2) eliminating the threat of a future strong competitor who knows almost everything about US Tech’s products. After carefully examining the entire situation, we hold that US Tech should find an alternative Chinese supplier to cooperate while keeping the relationship with TaiSource.
Several aspects that US Tech needs to take into consideration are as follows:
First of all, the company should ...view middle of the document...
Bruce K.Riggs’ worry about that transfer is reasonable. Joe Lin, the CEO of Taisource, view Morris as a traitor. Unless Morris or Greg can smooth the relationship with TaiSource and Joe, the business will be negatively influenced. Or else, other people should replace the current position of Morris.
Weather USTech could find a qualified Chinese supplier is controversial. Some worry that the Chinese companies may don’t deliver high quality. While Bruce thinks that just saw the supply chain through TaiSource’s lens make USTech could not fairly judge TaiSource comparably abilities in the industry, if Greg explore and ask for related information from other suppliers, he may surprisingly find some Chinese companies can provide that same qualified product as TaiSource. But there’s one consensus: it is not so easy for a company to find an appropriate partner. Not only taking time and resources, but also is risky. For example, strategic information safe could be better ensured with TaiSource than it would be with a new Chinese supplier. And also consider the fact that TaiSource is expert in both design and production, can satisfy USTech’s needs, and keep improving—with further broaden and improved logistic, TaiSource can cut more cost. USTech should keep the relationship with TaiSource, at least for the existing market.
Second, like Bruce K. Riggs said, Greg should also consider alternatives to a pure ODM sourcing and fulfillment model. That is to say, USTech needs to find alternative suppliers for the Chinese market instead of solely rely on TaiSource. USTech positions itself as a “premium brand at a lower price.” Therefore it seeks suppliers who manufacture products with low costs and good qualities. As we know, China is famous for its manufacturing industry, so it is not hard to find a supplier that can deliver the same level of quality as TaiSource. The company also noticed that they could capture the middle-market space of the Chinese market. However, TaiSource shows that they want the market too. If they do so in the near future, USTech will be in a crisis. To avoid the potential threat, US Tech should consider cooperating with a Chinese supplier as an alternative. Another aspect is about Chinese policy, it’s complex, changeable and kind of lean the balance to domestic enterprises. Although TaiSource currently hold the mainland resources and relationships, to have USTech’s own Chinese suppliers could better ease the burden of policy issues and polices to the business if USTech want to explore and expand Chinese market.
If US Tech decides to find an alternative supplier while remaining cooperation with Tai Source, it has to think about the costs.
Paul Gaffney, the executive vice president for supply chain at Staples, refers that after sourcing a new line of products bearing the Staples barn, Staples had to weigh the costs of taking on a new range of tasks -product design, packaging design, product life cycle management- that...