Harvard Case - Sattva eTech: Supplier Selection for Component Sourcing
"Sattva eTech: Supplier Selection for Component Sourcing" Harvard business case study is written by Tarun Jain. It deals with the challenges in the field of Operations Management. The case study is 13 page(s) long and it was first published on : May 1, 2023
At Fern Fort University, we recommend Sattva eTech adopt a multi-pronged approach to supplier selection for component sourcing, prioritizing strategic partnerships with suppliers who demonstrate quality, reliability, and innovation. This involves a robust supplier evaluation process, leveraging technology and analytics for data-driven decision making, and implementing a continuous improvement framework for ongoing supplier performance management.
2. Background
Sattva eTech is a rapidly growing electronics manufacturer facing challenges in sourcing critical components for its products. The company operates in a competitive market with demanding customer expectations for quality and timely delivery. The case study highlights Sattva's current supplier selection process, which is primarily based on cost and availability, leading to inconsistent quality and supply chain disruptions.
The key protagonists are:
- Rajiv Kapoor: CEO of Sattva eTech, seeking a more strategic approach to supplier management.
- Anjali Sharma: Head of Operations, responsible for implementing the new supplier selection process.
- Rahul Singh: Head of Procurement, tasked with sourcing components at the best possible price.
3. Analysis of the Case Study
The case study reveals several key issues hindering Sattva's growth:
Supply Chain Management:
- Lack of strategic supplier relationships: Sattva relies on transactional relationships with suppliers, leading to inconsistent quality and unreliable delivery.
- Limited supplier evaluation: The current process focuses primarily on cost and availability, neglecting other critical factors like quality, innovation, and sustainability.
- Inefficient communication and collaboration: Poor communication and lack of collaboration between Sattva and its suppliers create bottlenecks and delays.
Operations Strategy:
- Reactive approach to sourcing: Sattva responds to immediate needs, neglecting long-term planning and strategic sourcing.
- Limited capacity planning: Insufficient capacity planning leads to production delays and missed deadlines.
- Lack of process improvement: Sattva lacks a systematic approach to identifying and addressing operational inefficiencies.
Technology and Analytics:
- Limited use of data: Sattva does not leverage data effectively to analyze supplier performance, identify trends, or optimize sourcing decisions.
- Inefficient information systems: Lack of integrated systems for managing supplier information and tracking performance hampers decision-making.
Competitive Strategy:
- Price-driven strategy: Sattva's focus on cost minimization limits its ability to differentiate itself based on quality, innovation, and customer service.
- Limited focus on innovation: Sattva's reliance on existing suppliers restricts access to cutting-edge technologies and innovative solutions.
To address these issues, a comprehensive framework is needed, incorporating elements of:
- Operations and Supply Chain Management: Implementing a robust supplier selection process, building strategic partnerships, and optimizing logistics and inventory management.
- IT Management: Leveraging technology and analytics for data-driven decision making, improving information systems, and enhancing communication and collaboration.
- Change Management: Effectively communicating the new strategy to stakeholders, providing training and support, and fostering a culture of continuous improvement.
- Competitive Strategy: Differentiating Sattva through quality, innovation, and customer service, while ensuring cost-effectiveness.
4. Recommendations
1. Develop a Robust Supplier Evaluation Process:
- Define clear criteria: Develop a comprehensive list of criteria beyond cost and availability, including quality, reliability, innovation, sustainability, and financial stability.
- Implement a multi-stage evaluation process: Utilize a multi-stage process involving initial screening, detailed assessment, and site visits to evaluate potential suppliers.
- Leverage technology and analytics: Utilize data analytics tools to assess supplier performance, identify trends, and predict potential risks.
- Develop a supplier scorecard: Create a standardized scorecard to evaluate and rank suppliers based on the defined criteria.
2. Build Strategic Partnerships:
- Focus on long-term relationships: Develop long-term partnerships with suppliers who share Sattva's vision and values.
- Collaborate on innovation: Encourage joint R&D initiatives and knowledge sharing to develop new technologies and products.
- Foster open communication: Establish clear communication channels and regular meetings to ensure transparency and collaboration.
- Implement supplier development programs: Provide training and support to suppliers to enhance their capabilities and improve their performance.
3. Implement a Continuous Improvement Framework:
- Regularly review supplier performance: Conduct periodic performance evaluations to monitor progress and identify areas for improvement.
- Implement a feedback mechanism: Establish a feedback mechanism for suppliers to provide input and suggestions.
- Conduct supplier audits: Conduct regular audits to ensure compliance with quality standards and ethical practices.
- Foster a culture of continuous improvement: Encourage a culture of continuous improvement across all departments, including procurement, operations, and engineering.
4. Leverage Technology and Analytics:
- Invest in a robust ERP system: Implement an integrated ERP system to manage supplier information, track performance, and optimize sourcing decisions.
- Utilize data analytics tools: Leverage data analytics tools to identify trends, predict demand, and optimize inventory levels.
- Develop a supplier portal: Create a secure online portal for suppliers to access information, submit bids, and track their performance.
- Implement a digital supply chain platform: Explore the use of digital supply chain platforms to improve visibility, collaboration, and efficiency.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core competencies and consistency with mission: The recommendations align with Sattva's mission to deliver high-quality products and services while fostering sustainable growth.
- External customers and internal clients: The recommendations aim to improve customer satisfaction by ensuring reliable delivery of high-quality products.
- Competitors: The recommendations enable Sattva to differentiate itself from competitors by building strategic partnerships, fostering innovation, and leveraging technology.
- Attractiveness: The recommendations are expected to improve operational efficiency, reduce costs, and enhance profitability.
Assumptions:
- Sattva is committed to investing in technology and infrastructure to support the new supplier selection process.
- The leadership team is willing to embrace change and empower employees to implement the new strategy.
- Suppliers are willing to collaborate with Sattva and participate in joint initiatives.
6. Conclusion
By implementing these recommendations, Sattva eTech can transform its supplier selection process, building a robust and agile supply chain that supports its growth and enables it to compete effectively in the global market. This will involve a shift from a transactional approach to a strategic partnership model, leveraging technology and analytics to drive data-driven decision making and fostering a culture of continuous improvement.
7. Discussion
Alternatives not selected:
- Sole sourcing: While this approach can offer stability and cost savings, it increases risk exposure and limits innovation.
- Single-source sourcing: This approach can be cost-effective but lacks flexibility and increases the risk of supply chain disruptions.
Risks:
- Resistance to change: Employees may resist the new supplier selection process, requiring effective communication and training.
- Supplier dependence: Building strong partnerships with a limited number of suppliers could create dependence and limit flexibility.
- Technology adoption: Implementing new technology solutions can be challenging and require significant investment.
Key assumptions:
- Sattva's leadership team is committed to implementing the new strategy.
- Suppliers are willing to collaborate and participate in joint initiatives.
- Sattva has the financial resources to invest in technology and infrastructure.
8. Next Steps
Timeline:
- Months 1-3: Develop a comprehensive supplier evaluation process and identify potential strategic partners.
- Months 4-6: Implement a pilot program with selected suppliers to test the new process and gather feedback.
- Months 7-9: Roll out the new supplier selection process across all departments.
- Months 10-12: Continuously monitor and evaluate supplier performance, identify areas for improvement, and adjust the process as needed.
Key milestones:
- Develop a comprehensive supplier evaluation process.
- Implement a pilot program with selected suppliers.
- Roll out the new supplier selection process across all departments.
- Establish a continuous improvement framework for supplier performance management.
By taking these steps, Sattva eTech can transform its supply chain, paving the way for sustainable growth and success in the global market.
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Case Description
The case provides an opportunity to analyze sourcing decisions in a firm. Specifically, the case illustrates the development of a supplier scorecard system in an organization involved in new product development, where the technology of component design may change over time. The case also attempts to link the design of the scorecard mechanism to that of the incentives (or reward mechanisms) for various players.
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