Xbox Supply Chain Case
MIS 3537 Internet and Supply Chains
Due Date: March 27, 2017
Refer to the case “Evolution of the XBox Supply Chain”.
Answer the following questions briefly (6-7 lines each):
- Why do companies outsource production?
- List at three ways in which information technology can help in this outsourcing?
- What are five critical metrics which companies should use to evaluate the performance of suppliers (contract manufacturers)? Explain.
- What supply chain changes did Microsoft make between XBox and XBox 360? What was the motivation for these changes?
- Microsoft planned to use three EMS firms for XBox 360, all manufacturing in China. What are the benefits and pitfalls of this approach?
All groups (expect the group making the presentation) are required to submit a printout of their answers to the instructor at the beginning of the class. Also, be prepared to discuss the case in the class.
Team #6 Correct Answers
1. Why do companies outsource production?
· Cost – cheaper
· Leverage other’s expertise
· Higher capacity
· Less risk – no fixed assets
2. List at three ways in which information technology can help in this outsourcing?
-Link ERP systems together
-Communicate/coordinate info
-Automating transactions/processes
-Assures valid data
-E-Design – collaboration, multiple parties involved
-Analyze options for outsourcing – data and research
-E-Procurement
3. What are five critical metrics which companies should use to evaluate the performance of suppliers (contract manufacturers)? Explain.
-On time delivery – meeting goals
-Sales – available to sell
-Quality – using best materials
-No defects in final product (marketplace)
-Cost per Item
-Flexibility – dealing with unexpected demand
-Actual is not expected plans
Capacity – what you have vs. what you are using
% of transactions processed electronically
4. What supply chain changes did Microsoft make between XBox and XBox 360? What was the motivation for these changes?
-Outsourced design – Xbox was too ugly and controller was too bulky, went to sleeker design, used design firm
-Motivation: better product
-Chip Contracting – Intel and Nvidia at negotiated prices to IBM and ATI to do design, manufacture using contract manufacturer
-Motivation – lower costs (multiple supplier competition) and control their destiny because they no longer rely on high cost manufacturing and captured manufacture cost efficiencies over time
-Changed manufacturing locations – went from close to customer (Hungary, Mexico) to China
-Motivation – lower costs
-Number of Suppliers – 2 to 3 suppliers
-Motivation – increase capacity, diversify risk, increases competition
5. Microsoft planned to use three EMS firms for XBox 360, all manufacturing in China. What are the benefits and pitfalls of this approach?
Benefits:
-Lower costs
-Competition, lower labor costs
-They have the knowledge to know how to do it
-Capacity
-Spread risk and manufacturing across larger suppliers capacity
Limitations:
-Cost of coordination among suppliers
Concerns:
-Consistent & good quality,
-How to leverage leaning across suppliers
-Defective products
-Quality
-Apportion production
-Allocate the components correctly