CASE STUDY: A STRATEGIC SHIFT FOR XENIA ON PROCUREMENT

In 2000, Xenia was the leading producer of transducers worldwide. The company took pride in its

marketing, product innovation, and assembly excellence. By 2017, Xenias Asian competitor was selling

its transducers for what it cost Xenia to produce comparable units. At that time, Xenia engineers

designed virtually all of Xenias components, which then were purchased from one or more of the firms

4,000 suppliers. The widespread competition was used to obtain the best price. The selected supplier built

to Xenia drawings and specifications.

Management at Xenia responded to the competitive threat. The corporations strategy shifted to a new

set of core competencies: marketing, product innovation, assembly, and supply management. The

progression to supply management was enhanced by the establishment of an executive position: the

Chief Procurement Officer. The CPOs organization was retitled Supply Management. The CPO

became a member of the executive committee, allowing for greater input in developing corporate

strategy. Equally important, supply management was able to ensure that its strategies were aligned with

those of the corporation. Over a period of three years, Xenia reduced its supply base from 4,000 to 400

suppliers. Xenia worked with those suppliers to bring them to world-class status with long-term

contracts. The suppliers became involved in the development of Xenias new transducers.

As a result of the above changes implemented, the cost of goods sold was reduced 50 percent. Incoming

quality problems virtually disappeared. The time required to move a new product from concept to

customer was reduced 45 percent. Production lead times were reduced 65 percent. All those results were

achieved in only three years!

Review the content of the above case study and answer the following questions using the information

given in the case study. You may also use any other study materials related to the concepts and theories.

1. What was the most important shift in Xenias set of core competencies?

2. What impact did the appointment of a CPO at the executive level have on the supply management

function?

3. What is the impact of reducing the supply base? Explain how this can be achieved?

4. What might be some benefits of getting suppliers involved in the development of Xenias new

transducers?

5. What is the benefit of reducing cost of goods sold, time to market, production lead times, and

quality problems?