Term Project $1$

Integrating Techsoft$s$ New Vision Graphics Card into the Supply Chain

Company Background

Techsoft, a leading technology company specializing $in$ graphics processing, has just developed a new version $of$ their Vision graphics card. The card $is10\%$ smaller than its predecessor and $is$ breaking new ground $incostasitis$ projected $to$ sell $at$ half the price $of$ their current card. The need for faster, more affordable graphics cards that can $be$ networked $to$ scale according $to$ processing needs, has driven both the lower selling prices and the demand for processing higher than ever before. The issue Techsoft faces now $is$ that its supply chain costs are now proportionally a much larger percentage $of$ the overall graphics card selling price.

Changing Landscape

The technology industry evolves rapidly and each day $an$ unsold graphics card $or$ other piece $of$ advanced hardware loses value $as$ new chips and versions are researched, released and retired. Techsoft $isan$ OEM and sells $to$ other manufacturers and distributors. For the Vision graphics card $in$ particular, all sales are included $in$ other consumer and industrial products and not $tobe$ sold directly $to$ consumers themselves. The challenge $is$ with rapidly changing products $in$ the market and intense competition, Techsoft has $to$ compete $on$ not only the functionality front, but cost $as$ well. Due $to$ this, its current supply chain cost $is$ unacceptable when the cost $of$ the card itself has been reduced $by50\%.$ Techsoft expects innovation $in$ all aspects $of$ its business beyond just $R$&$D.$ Therefore, Management has requested your team investigate ways $to$ reduce the per card supply chain costs $as$ much $as$ possible.

Incumbent Suppliers

Techsoft currently has four major suppliers for its raw materials. Techsoft has been looking $to$ bring down its supplier expenses through consolidation $to$ just $2$ suppliers. Flexit has been Techsoft$s$ oldest partner and has been recently awarded the Electronic Industry award for its pioneering work $in$ maintaining its quality standards. Techsoft has been the largest customer for Worldcomm which has always provided Techsoft with the best prices. Worldcomm has even designed its processes $to$ provide flexibility $in$ its services $to$ cater $to$ the changing demands from Techsoft. Maxo Inc has been recently audited $by$ ISO and has been provided with a few observations that could put their eligibility for renewal $of$ its ISO $9001$ certification $at$ risk. Nanotech $is$ relatively a new supplier but has innovative processes and customer service which initially attracted Techsoft $to$ contract with $it.$

Current Supply Chain Operations

Techsoft produces all its products $at$ its manufacturing units $in$ Singapore and South Germany. They must continue with their current manufacturing units $as$ the capital expense and risk $to$ intellectual property are too high $to$ consider outsourcing $to$ reduce costs. Techsoft does not foresee any changes $to$ production capacity $or$ set $up$ costs $at$ this time. The lead time for order processing and Quality Assurance activity $is2$ days and the lead time for manufacturing can $be$ assumed $tobe$ one week.

Techsoft manages all $of$ its own transportation and warehousing from pre$-$production $to$ final storage. The company uses a third$-$party shipper $to$ deliver the Vision cards directly $to$ customers. $As$ the Vision card $is$ just one $of$ many products that Techsoft creates, the company doesn$t$ intend $to$ adjust its transportation practices from factory $to$ warehouse $asits$ been optimized for the existing mix $of$ products. Techsoft currently supplies the North American market from its manufacturing plant $in$ Singapore. The plant $in$ Germany caters $to$ the European market.

During the $7$ weeks from initial order, Techsoft$s$ customers have the luxury $to$ often change their volumes and specifications multiple times. Each vision card remains $in$ the Singapore warehouse for $7$ weeks whereas, the actual order details are typically locked $inby2-3$ weeks before production.

$In$ North America, Techsoft does not have warehouses $to$ store finished inventory, instead they have a docking location for immediate shipping $of$ finished goods. From its California docking location, Techsoft directly ships the cards straight $to$ customers, $as$ soon $as$ the chips arrive. This docking location $is$ conveniently located for easy access $by$ ship and air.

Overall Techsoft$s$ most significant concern $isto$ retain its high quality and balance the overall availability and inventory $as$ the technology industry, particularly the graphics card industry, changes rapidly.

Looking $to$ the Future

Techsoft $is$ planning $to$ pilot this supply chain reduction program for its Singapore unit. $In$ preparation, Techsoft has started engaging all $of$ its $200$ customers affected $by$ the pilot program through interviews and questionnaires. $It$ aims $to$ gain insights into desired customer engagement levels that can impact supply chain and associated costs.

With respect $to$ this pilot program, Techsoft has $a$