OPS FPX 5630 Assessment 1 Selecting a Supplier

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Capella University

OPS-FPX5630 Strategic Supply Chain Sourcing

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Date

Introduction

This report explores the supplier selection process for JM Manufacturing, which is looking for a supplier of power supply components, batteries, circuit boards, drill bits, and plastic casings for their power drill product line. The company has decided to outsource these components due to the specialized manufacturing requirements for each. This report evaluates the market, analyzes supplier practices, and outlines the ethical and legal considerations involved in the supply chain process between JM Manufacturing and its chosen supplier.

Market Assessment

The global power tools market is expected to grow significantly, with an anticipated increase of 8.80% by 2028, reaching a total of $54.75 billion (Grandview Research, 2020). This expansion is driven by the construction, automotive, and DIY sectors, which heavily rely on power tools for the construction of homes, vehicles, and other components. The COVID-19 pandemic has further boosted sales in the home improvement sector, with companies like Lowe’s seeing sales exceed $96 billion in 2021, resulting from 19 million weekly customer transactions (Lowe’s, 2022).

The growth in these industries and the DIY market has created a demand for flexible, battery-operated, and mobile power tools. JM Manufacturing has identified this trend and opted to outsource the production of key components such as circuit boards, batteries, power supplies, and plastic cases. A strong supply chain is essential for providing affordable, reliable components that meet customer expectations in terms of price, quality, and quantity (Grandview Research, 2020).

Analysis

Global supply chains strengthen relationships between businesses and countries through international trade. JM Manufacturing has already decided to outsource and has determined that the total cost of ownership (TCO) is more favorable when procuring supplies from a Chinese supplier rather than manufacturing them internally. TCO takes into account a variety of expenses including raw materials, assembly, quality assurance, storage, finance, forecasting, planning, and shrinkage costs (Drake and Sabbaghi & Sabbaghi, 2014 & 2004).

Outsourcing the production of these components requires adhering to the seven “R’s” of logistics: the right product, time, quantity, cost, quality, location, and customer. JM Manufacturing’s best practices emphasize selecting a supplier that can meet customer needs by delivering high-quality products at a reasonable cost and in the required quantities. These practices should be implemented across all channels to ensure successful supplier partnerships (Redwood, 2020).

Best Practices

To manage global suppliers effectively, JM Manufacturing will implement several key practices, including familiarity with supplier processes, standardization, relationship building, regular updates to product specifications, audits, compliance checks, and quality assurance measures. The process begins with a thorough evaluation of potential suppliers, such as Ennopro Group Limited, Shenzhen TL New Energy Company Limited, and Yangzhou Kele Power Tools Company Limited. After a supplier is selected based on its practices, JM Manufacturing will collaborate to ensure that the necessary standards are put into place. Building long-term relationships with suppliers is important for mutual growth, and regular updates to product specifications will help maintain innovation, quality, and customer satisfaction. JM Manufacturing will adopt a “trust but verify” approach, conducting regular audits and quality assurance inspections to ensure compliance with contractual terms and consistent product quality (UT Haslam News, 2021).

Supplier Evaluation and Knowledge

In order to thoroughly assess potential suppliers, JM Manufacturing has held discussions with Ennopro, Shenzhen TL New Energy, and Yangzhou Kele Power Tools. These discussions covered various topics such as accountability, production capacity, expertise, culture, communication, record-keeping, ethical and regulatory compliance, and research and development (Knack, 2018).

References

Derry, T. (2020). “Principles and Standards of Ethical Supply Management Conduct with Guidelines.” Institute of Supply Chain Management. Retrieved from https://www.ismworld.org/globalassets/pub/docs/210_ethics_book.pdf

Drake, M. (2014). Global Supply Chain Management. [Chapter 3]. New York: NY. Business Expert Press.

EnnoPro Group Limited. (2022). “About Us.” Made in China. Retrieved from https://ennopro.en.made-in-china.com/company-Ennopro-Group-Limited.html

Grandview Research. (June 2020). “Power Tools Market Analysis Report.” Grandview Research. Retrieved from https://www.grandviewresearch.com/industry-analysis/power-tools-market

Knack, O. (October 2018). “Looking for Suppliers? 10 Qualities for the Best Suppliers.” Intouch. Retrieved from https://www.intouch-quality.com/blog/5-qualities-of-a-good-supplier

Lowe’s Home Improvement. (February 2022). “Lowe’s Reports Fourth Quarter 2021 Sales and Earnings Reports.” [Press Release]. Lowe’s. Retrieved from https://corporate.lowes.com/newsroom/press-releases/lowes-reports-fourth-quarter-2021-sales-and-earnings-results-02-23-22#:~:text=With%20fiscal%20year%202021%20sales,and%20employ%20over%20300%2C000%20associates

Michigan State University. (February 2021). “Why Companies Should Consider Global Sourcing.” Michigan State SCM. Retrieved from https://www.michiganstateuniversityonline.com/resources/supply-chain/why-companies-should-consider-strategic-sourcing/

Pierce, F. (May 2020). “Quality Assurance: Cut Risk with an Aligned Supply Chain.” Supply Chain Digital. Retrieved from https://supplychaindigital.com/logistics/quality-assurance-cut-risk-aligned-supply-chain

Redwood. (2020). “What are the 7 R’s of Supply Chain Management?” Redwood. Retrieved from https://www.redwoodlogistics.com/what-are-the-7-rs-of-supply-chain-management/#The_Right_Customer_-_Building_up_for_the_long-term