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 subgenus Chen (joanna) 35112318-7 li wei 35122327-5 kemal SADULLAYEV (kemal) 35129403-1 Gaetano dimprima (tano) 35129755-8 I. Identify/Define the trace Issues/Situation Analysis A. Key issues that allow for involve Keurig to survive, thrive and grow Strong dicker major powerfulness from a provider MTS, being the only supplier for the K-Cup advancement atmosphere, has a control over the appliance.Having no substitution architectural forge in place, Keurig is forced to get along MTSs request to fulfill the K-Cup manufacturing competency. Difficult to plagiarise engineer the manufacturing technology despite the alternatives of having young K-Cup suppliers, in that delight in is no assurance that the new suppliers could have intercourse the throw off on- sequence and on-budget as the learning trim back is hard to be built at an initial stage. Delays in the wide of the mark roll-out of the new deep brown brewing system delays in manufacturing barriers (both K-Cups convergenceion and brewing machines) caused a ensuant delay in distributing goods to consumers.Thus, it created happen of losing market hazard to other competitors. B. Critical Success Factors Quality of the concluding product despite marketing efforts and distribution channels, if each the final product ( coffee berry) tastes bad or the beer maker does non perform well, it sightt be sold. Consistent and sufficient funding prior to the product launch in order to create an mend to the coffee market, the large heart and soul of funding is involve to swan the operations. Ability to bring a beer makers price down in a consumer segment while keeping the good smell product considering the high quality coffees, people be to a greater extent likely to purchase a slight expensive househol d version especially at a supermarket or grocery, which has the highest percentage for buying locations. II. rebound Strategic creams A. alternative 1 Work with doubled encase groove manufacturers at the same beat and acquire gain of the brewer that would take Keurig more(prenominal) than seriously Pilla. 1. Signifi hindquartersce of choice 1 The supplier in little favorable financial situations is more likely to pay attention to Keurigs ingests.In this case, Pilla overly possesses the capability to support the brewer return. Keurig sight situate Pilgrim and Quantum for afterlife production while MTS is currently manufacturing the K-Cup box lines. This will cover the delay term mandatory by Pilgrim and Quantum to deliver future productions. More risk averse, twofold suppliers will decrease Keurigs dependence on suppliers. Delivery time and costs can be more efficiently managed. Also, Keurig can find out suppliers efficiencies before deciding the major supp lier. Multiple packaging lines can provide larger run of K-cups for future expansion. . Reasons why choice 1 whitethorn non be optimal More price negotiations and run in progress varied by suppliers. Also, the on the job(p) procedures may 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 abase SG&A expenses and it will affect the operations. B. Choice 2 Continue cooperation with MTS and change brewer to Pilla . meaning of choice 2 Does non waste time on searching for alternative packaging line manufacturers. Hence, avoid the time to be consumed by renounce engineering process. MTS al defecate has experience in devising the first packaging line. Moreover, the product quality delivered by MTS is alrea dy known and acceptable. Good communication with MTS would envision on-time delivery of future packaging lines. Enjoy cost-benefits from guess of lower price from Pilla. 2. Reasons why choice 2 may not be optimal MTS pipe down have very large bargaining power for future productions.Thus, the cost for K-Cup packaging line activities could be driven up significantly. Pilla, being financially insecure, can be a risk for the roll-out schedule in case there is a conundrum 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 limit Keurigs future expansion plans to go into the consumer market. C. Choice 3 Internalize brewer production and work with multiple packaging line suppliers 1. Significance 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 al ready have the people and the capabilities that it pauperizations. Finally gaining the learning curve product brewers will service Keurig to reduce its production costs and thanks to this reduction itll be easier to make out more brewers to distributors at less price and less defected products. Working with multiple suppliers on the packaging line side will strain them less bargaining power making us more unconditional. 2. Reasons why choice 3 may not be optimal A big number of investment required in terms of silver 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 hazardous at the starting signal due to possible delays in the delivery of the complete brewer system (K-cup+Brewer), will ensure Keurig not to rely too much to only wholeness supplier with a lot of bargaining power. 2. Relying on many suppliers will give Keurig much more control over their suppliers prices, unleashing a competition between them to gain more and more orders. Itll also help Keurig to draw up more precise budgets and profession plans that will not be affected by suppliers whims. 3. Thinking on a future expansion, Keurig need to find 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 building the company reputation.Delays and other on-the-road problem with the new suppliers could be fatal for Keurig. 2. Some o f the new suppliers suffer financial problems that, if not solved, can sure affect Keurig. A. Recapitulation of why this choice is the adept 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 penetrate the market K-cups will be sold to the Office Manager at a price of 0. 0$, with no charge to the coffee machine. The price of a cup of coffee is higher(prenominal) than our direct competitors but compared to other premium coffee (as Starbucks) the quality is very high and the people who time-tested our coffee loved it. The wholesale price to the OCS distributors and to the feed Service suppliers will be at 0. 25$ 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 i ntroduce it indoors the market.The free machine plus high strand (100%) per K-Cup will help us penetrate the market. in time to do so we need an efficient supply chain that could grow with us and not take advantage of us. We need to take the risk and branch out 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 demand will grow. We cant manage such changes in our business plan if we are to haggle with insolent suppliers.