Manufacturing and Packaging Line

CASE ANALYSIS MEMO SESSION 06 Keurig 2012. 11. 07 entrepreneurial Management Dr. Sean M. Hackett Waseda Business School, MBA Fall, 2012 Panjapol wariratanaroj (pe) 35112329-5 JOanna chen (joanna) 35112318-7 li wei 35122327-5 kemal SADULLAYEV (kemal) 35129403-1 Gaetano dimprima (tano) 35129755-8 I. Identify/ fixate the Key Issues/Situation Analysis A. Key issues that leave alone impact Keurig to survive, grow and grow Strong talk terms power from a provider MTS, organism the only supplier for the K-Cup publicity marge, has a control everywhere the gondola.Having no substitution plan in place, Keurig is forced to follow MTSs gather up to fulfill the K-Cup manufacturing capacity. Difficult to reverse engineer the manufacturing technology despite the alternatives of having rude(a) K-Cup suppliers, there is no assurance that the new suppliers could complete the project on-time and on-budget as the knowledge curve is hard to be built at an initial stage. Delays in the full ro ll-out of the new coffee brewing system delays in manufacturing lines (both K-Cups harvest-feastion and brewing machines) caused a subsequent delay in distributing goods to consumers.Thus, it created risk of infection of losing market opportunity to former(a) competitors. B. Critical Success Factors prize of the last(a) product despite marketing efforts and distribution channels, if either the final product (coffee) tastes bad or the beer maker does non perform well, it devote the axet be sold. Consistent and sufficient funding prior to the product launch in order to create an impact to the coffee market, the extended amount of funding is required to moderate the operations. Ability to bring a brewers charge down in a consumer component while keeping the good timbre product considering the high quality coffees, people are more than likely to purchase a little expensive household version especially at a supermarket or grocery, which has the highest percentage for bu ying locations. II. Mobilize strategical Choices A. Choice 1 lock with multiple packaging line manufacturers at the same time and suck up advantage of the brewer that would catch Keurig more seriously Pilla. 1. Signifi raftce of pickax 1 The supplier in little favorable financial situations is more likely to pay attention to Keurigs asks.In this case, Pilla also possesses the efficacy to support the brewer production. Keurig can prepare Pilgrim and Quantum for future production while MTS is soon manufacturing the K-Cup packaging lines. This go out cover the delay time needed by Pilgrim and Quantum to deliver future productions. More risk averse, multiple suppliers will minify Keurigs dependency on suppliers. Delivery time and cost can be more efficiently managed. Also, Keurig can observe suppliers efficiencies before deciding the major supplier. Multiple packaging lines can provide larger provision of K-cups for future expansion. . Reasons why choice 1 whitethorn no t be optimal More price negotiations and work in progress alter by suppliers. Also, the working procedures whitethorn be different and buyers-suppliers relationship may be more complexed. The standard of the final products can be varied by suppliers due to a slight difference in manufacturing capability and technology. The financially unstable suppliers can be unreliable. For example, they may be in risk of facing bankruptcy, or they may lower SG&A expenses and it will impinge on the operations. B. Choice 2 Continue cooperation with MTS and change brewer to Pilla . signification of choice 2 Does not waste time on hard-hitting for alternative packaging line manufacturers. Hence, avoid the time to be consumed by reverse engineering process. MTS already has experience in make the archetypical packaging line. Moreover, the product quality delivered by MTS is already known and acceptable. in effect(p) communication with MTS would encounter on-time delivery of future packag ing lines. Enjoy cost-benefits from chance of lower price from Pilla. 2. Reasons why choice 2 may not be optimal MTS still have very large bargaining power for future productions.Thus, the cost for K-Cup packaging line activities could be operate up significantly. Pilla, being financially insecure, can be a risk for the roll-out schedule in case there is a problem in the manufacturing processes as it links to the packaging line. Single packaging line supplier and brewer means lower production capacity compared with Choice 1, this would term Keurigs future expansion plans to go into the consumer market. C. Choice 3 internalize brewer production and work with multiple packaging line suppliers 1. import of choice 3 Keurig will gain more control over the production because itll be easier to forecast production capacity and therell be more inventory control. Kuerig already have the people and the capabilities that it needs. Finally gaining the learning curve product brewers wil l help Keurig to reduce its production costs and thanks to this reduction itll be easier to sell more brewers to distributors at less price and less defected products. Working with multiple suppliers on the packaging line side will retrovert them less bargaining power making us more independent. 2. Reasons why choice 3 may not be optimal A big amount of investment required in terms of money to internalize the production Keurig need to buy new assets and it will need time to set-up the production in the new factory. Keurig will face the risks concerning the manufacturing activity. III. Recommend a Specific Strategic Choice Recommendation . Choice 1 Work with multiple packaging line manufacturers at the same time and take advantage of the brewer that would take Keurig more seriously Pilla. 1. Keurig will be much more independent and itll not face again another situation as those encountered with Vandelay and MTS.This choice, even if could be unassured at the beginning due to affirmable delays in the delivery of the complete brewer system (K-cup+Brewer), will ensure Keurig not to rely too much to only one supplier with a lot of bargaining power. 2. Relying on many suppliers will prepare Keurig much more control over their suppliers prices, unleashing a competition amidst them to gain more and more orders. Itll also help Keurig to draw up more precise budgets and line of reasoning plans that will not be touched by suppliers whims. 3. Thinking on a future expansion, Keurig need to palpate new suppliers who can easily support the capacity it needs. Risks/Limitations . Even if it is a good time to find new suppliers, the moment is very risky because we have a schedule that we need to respect to start edifice the company reputation.Delays and other on-the-road problem with the new suppliers could be fatal for Keurig. 2. round of the new suppliers suffer financial problems that, if not solved, can surely affect Keurig. A. Recapitulation of why this choic e is the right recommendation We have a marketing plan that can be fulfilled only if everything on the supply side goes as it was supposed to. In order to get into the market K-cups will be sold to the Office Manager at a price of 0. 0$, with no charge to the coffee machine. The price of a cup of coffee is higher than our direct competitors but compared to other premium coffee (as Starbucks) the quality is very high and the people who act our coffee loved it. The wholesale price to the OCS distributors and to the Food Service suppliers will be at 0. 25$ per cup and initially we will give them the machine for free if they buy a certain amount of cups. Thats the real marketing strategy, because distributors play a central role in this industry, so we need to be able to offer (actually fill them up with) machines so theyll push hard to introduce it inside the market.The free machine plus high margin (100%) per K-Cup will help us infiltrate the market. However to do so we need an eff icient supply image that could grow with us and not take advantage of us. We need to take the risk and diversify our suppliers so we will be able to give our machines for free to distributor. We also need to get ready with our capacity for when the beg will grow. We cant manage such changes in our business plan if we are to haggle with insolent suppliers.