Case Study of Stryker Corporation

Case

Study

of

Stryker

Corporation

1. (1) Option #3 was for Stryker Instruments to manufacture its own PCBs in its own facility near  company ead!uarters. (")Benefits for option 3 $ Better control te !uality% deli&ery and cost' $ aintain aintain te usiness usiness staility' $ Supply Supply PCBs to oter Stryker usinesses' usinesses' $ Be ale to implement implement cost sift and a&oid ta*' (3) +isks for option 3 $ Carry te in&entory' $ Incur lar,e capital outlay and sunk cost' $ Increase eadcount% payroll and oter e*penditures (materials% infrastructure% +-% maintenance% PP-/ and depreciation) of Stryker' $Bear te risk tat te e!uipment may e outdated' (0) Compared wit option #1 $Benefit no capital outlay' to some e*tent can protect future a,ainst disruptions wit lower cost' fle*iility' $+isk $+is k instaility in !uality% cost% deli&ery and responsi&eness' Compared wit option #" $Benefit can impro&e !uality of te supplies y increasin, usiness wit te supplier' $+isk te possiility of ankruptcy and weak financial performance of supplier' te sole supplier

can

stron,ly

affect

Strykers rs

performance'

coordination

prolem.

". (1) 2ollowin,s are te key assumptions of our write up $ Stryker Instruments incurred all capital e*penditures includin, (construction and impro&ements% furnisin,s and nonmanufacturin, e!uipment% communication e!uipment and I4 infrastructure and capital e!uipment) in year "553%  efore te implementation of te pro6ect. $+e&enue 7e use te pro6ected PCBs purcases as te re&enue% ecause we can cut te amount of purcases y implementin, insourcin, production. $CO8S efore year "559% CO8S contains te purcases of PCBs and raw materials. :fter tat CO8S solely consist of te cost of raw materials. $S8: S8: of eac year consists of &ariale costs and fi*ed costs wit one e*ception. In "550% Stryker e*pensed arcitecture and en,ineerin, fee in addition to &ariale and fi*ed costs. $4a* ta* rate is 39; $epreciation :ll te capital e*penditures mentioned ao&e will e depreciated o&er teir respecti&e lifetime. $Capital e*penditures 7ene&er  te capital e*penditures wear out% tere will e a new purcase (year "559% "55< and "51" for I4 e!uipment and oter furnisin,s% year "515 for capital e!uipment). $7e consider te =Can,e in :>P% new &s. old? as our incremental @7C. 4us te can,e of incremental @7C sould e calculated usin, te numers from =Can,e in :>P% new &s. old?. Based on te ao&e discussion% we arri&e at te followin, conclusions of 2C2. Cart 1 Aear "553 "550 "55 "559 "55 "55D "55<

2ree Cas 2low 9%55<%"D 9D3%50D 351%3D3 1%D35%<5< 3%5D3%905 3%9
till

"55<

wit

/*cel

function.

Cart 0 Aear "553 "550 "55 "559 "55 "55D "55< 2C2 9%55<%"D 9D3%50D 351%3D3 1%D35%<5< 3%5D3%905 3%9
companys products. Conse!uently% te company is continuously findin, new suppliers one after  anoter for te manufacturin, of teir products. :noter ma6or prolem found in contract manufacturers was tat tey operate on tin mar,ins alon, wit limited capital. Options a&ailaility +i,t now% tere are tree options a&ailale for te companies to make its supply cain stron, from te suppliers side. 4e first alternati&e tat is a&ailale to te company is to maintain te current  asic sourcin, policy y makin, sli,t can,es in it. 4e ne*t alternati&e a&ailale to Stryker  Corporation is to enance consistency y de&elopin, stron, relationsip wit a sin,le supplier% and tat supplier will sell teir products to Stryker Corporation only. In addition% te last option will e manufacturin, of company facility tat is insourcin, PCBs near ead!uarter of te company. O6ecti&es :s te company as to decide weter tey sould insource or outsource te manufacturin, facility' terefore% tey can make teir decisions ased on te o6ecti&es set y te company. 4e companys initial o6ecti&e is to reduce te purcase of Printed Circuit Boards and to ma*imiKe profit. 2urtermore% anoter o6ecti&e of te company is to reduce te risk wit respect to suppliers of PCBs.  @e*t o6ecti&e of te company is to ,ain control and empowerment o&er te supply cain% deli&ery and !uality of products. :noter most important o6ecti&e of te company is to impro&e te cas in terms of li!uidity. :nalysis It can e seen tat option tree will e te est alternati&e for Stryker Corporation to adopt ecause of  &arious reasons. 2irst reason is tat y adoptin, insourcin, option% te company will e ale to e*ercise full control in teir supply cain% wic will increase te de,ree of !uality alon, wit te deli&ery of products in turn. :noter reason is tat transportation and cost related to lo,istic will reduce as te facility will e located near te companys ead!uarter. In addition to tat% te manufacturin, cost associated wit inousin, manufacturin, of PCBs will e ta* deductile% wic will enale te company to make its ta* oli,ation lower durin, te early years of manufacturin,. oreo&er% te depreciation applied on capital and I4 e!uipments wit respect to te initial in&estment will also e ta* deductile. 2urtermore% te company will a&e elasticity wit respect to te accounts  payale span tat will increase for te company from 35 to 1"5 days. 4is will ,i&e an ed,e to te company as te company will e ale to earn more efore e&en ,i&in, payments to teir suppliers. Besides tat% if te company ,oes for option numer tree% ten it will e ale to acie&e efficiency in terms of production tat will increase te profitaility of Stryker Corporation in turn. In addition to tat% if te company ,oes for te tird option ten mana,ement of te company will e ale to make its &ertical inte,ration stron,% wic will elp te company to reduce its cost alon, wit  price. 4rou, tis% te company will e ale to focus more on its customer  ser&iceLLLLLLLL This is just a sample partial case solution. Please place the order on the website to order your own originally done case solution.

Considers te proposed in&estment in te aility to produce printed circuit oards (PCB) at ome instead of uyin, tem from a tirdparty contract. Business intelli,ence tools Stryker Corporation is considerin, a proposal in response to te difficulties wit e*istin, suppliers. +e!uires students to formulate and carry out asic !uantitati&e analysis of te ud,et of te capital% in particular% to calculate te net present &alue (@PG) Internal +ate of +eturn (I++) and te payack period. =Hide  y 4imoty :. Fuerman Source Har&ard Business Scool 9 pa,es. Pulication ate ay "% "55. Prod. # "51"1P2/@8