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Case Study: Value Chain Strategy - Computer Industry

Determining the Optimal Value Chain#

Determining the value chain strategy that maximizes the return on assets by providing the highest level of serviceability with the lowest end-to-end cost


  • Determined the value chain strategy strikes the right balance efficiency and responsiveness
  • End-to-end supply chain cost reduced by 4%
  • Supply chain responsiveness improved by 30%
  • Sensitivity analyses carried to prove the robustness of the chosen strategy to changes in critical supply chain factors

Background#

DeskPC*, a large OEM specialized in desktop computers, realized the critical need to understand, predict and proactively adapt to changing global value chain trends. Executives at DeskPC sought to determine the best value chain strategy by understanding and comparing the trade-offs between Asian, North American and European sourcing, manufacturing, and distribution strategies for their worldwide markets.

Challenges#

Razor-thin margins, forecast errors, supply shortages, escalating freight rates and intense price competition are all associated with the operating environment of DeskPC. The challenge was to design a supply chain that strikes the right balance between efficiency and responsiveness to provide the highest level of serviceability with the lowest end-to-end cost.

Solution#

SimFlex quantifies any potential value chain strategy from multiple perspectives, including cost, finance, service, time, inventory and capacity to determine the optimal value chain strategy.

Results#

DeskPC considered three potential strategies, each with distinct pros and cons. SimFlex quantified these scenarios from multiple perspectives, and the best fit was identified in a strategy combining Asian manufacturing with regional configuration and distribution. Although this strategy was not the lowest cost solution, it still delivered 4% total cost savings and, more importantly, improved supply chain the responsiveness by 30%. Sensitivity analyses were carried out on all potential strategies, including one to ascertain the impact of expedited shipments on total cost. Compared to full regional manufacturing, the chosen strategy remains cost competitive as long as expedited shipments are less than 10%.



*Company name disguised to retain confidentiality