Assuming that you are a manufacturing company that make a medical device to meas
ID: 467733 • Letter: A
Question
Assuming that you are a manufacturing company that make a medical device to measure a heart rate and blood pressure. You are looking for an opportunity to export your product. Answer the following questions:
Operations and Procurement Strategy
1. What is your procurement strategy?
2. In-source/out-source?
3. Where is your product sourced from?
4. Explain the customization process and where should it be done?
5. What terms of sale; INCO terms
6. Explain your inventory strategy
7. How will customer service be set-up?
8. What other risks and liabilities exist and what can be done to mitigate them?
Explanation / Answer
1. Procurement strategy is based on cost and quality optimisation. However, considering that are higher profit margins in export than domestic sales, the focus is more on quality of the product, so that service and repair claims are minimised, and product meets the quality standards as per export market, as well as Internaitonal industry Standards. Meeting quality standards and standards of hazardous material used in manufacturing of product is important for exporting a product. As well as packaging, labeling, pricing and other statutory information as per export requirement need to be fulfille.
2. For export, we need to exercise more control on the various aspects of product quality, including quality of the core product itself, testing, packaging, labeling, warranty. Therefore procurement strategy will be based on in-sourcing, as it is easier to exercise more control on sourcing within the organisation.
3. The product is sourced from production department.
4. Customization includes making changes in the product features as per requirements of the export customer. IT also includes putting the labels of product information, maximum retail price, and other statutory informaiton. These customisations should be done in the production and packaging stages.
5. Terms of Sales should be Ex-Works, so that organisation cost and liability are limited to loading the product on to the container from the factory premises. and all costs and liabilities are of the buyer thereafter.
6. As the product is a customised, and there's a new market. So depending upon the customer, the initial inventory strategy is to make to order.
7. For customer service, We need to have partnership with local vendors/dealers who have capability to service the product as well as necessary level of customer service capabilities including call centre.
8. Other risks include safety issues, environmental regulations, liabilities arising from claims of defect or use of product resulting in injuries. To mitigate these risks, the company needs to adopt appropriate preventive measures and follow the local (of export market ) & domestic guidelines established for environmental, safety aspects. Non-hazardous material will be used in manufacturing of the product and there will be disposal guidelines to comply with the local regulations for usage and disposal. Also the company will sign a contract with the customer to limit the liabilities in case of any claim or dispute.