The purpose of this memo is to evaluate three different acquisition options that Stryker Corporation is contemplating in order to solve the purchasing printed circuit boards (PCBs) issue. Currently Stryker Corporation purchases printed circuit boards (PCBs) from a small number of contracting manufacturers and resale's them. This is a problem because PCBs are showing a high demand, as the case study states, business anticipate "spending more than $10 million each year on PCBs." As a result, Stryker would like to become a competitor and establish a corporation in this market. Furthermore to solve this problem, the manufacturing managers have three options to improving the situation.
Maintain the current basic sourcing policy for PCBs, but with important modifications
Establish a partnership with a supplier, one of the current contract manufacturers
Manufacture its own PCBs in its own facility near company headquarters
For Option #1, the benefits for Stryker Corporation would be the protection against future disruptions through the addition of safety stock of key materials and the institution of dual sourcing for all electronic assemblies.
Compared to Option #2, the quality of the PCBs can improve by increasing business with a supplier and by having other benefits associated with a partnership. However, the risk includes the possibility of bankruptcy and weak performance from the supplier, however, Option #2 also includes quality and delivery issues associated with Option #1. Compared to Option #3, by not manufacturing its own PCBs, the company would save $6,187,178.48 in up front expenses related to construction and equipment. This money could be used to protect the company against unexpected events or other risks associated with the instability of suppliers to provide a quality product in a timely manner
Option #3 has the highest degree of control...