Case Study : Ocean Blue
(This is a fictitious company)
Ocean Blue having been developing an electric autonomous pure electric vehicle and entered into the market with high levels of success and interest, due to their reduced battery consumption and long times between charging. The company was a spin off from a Berlin University research project into zero emission vehicles operating within secure non-public facilities such as airports, ports and manufacturing locations. The company started in 2012, with private financial backing from three investors, who equally own 1/3 of the company.
Currently their customers are based mainly in Germany and France, but there are interesting sales enquiries from other parts of the world including North America and China. The CEO needs to increase the business and enter into these markets, but faces major problems with the manufacturing and supply chain into the new markets.
Ocean Blue’s core competence is engineering and technology, with a strong research and simulation team constantly improving the battery life and autonomous driving capabilities. As the company has evolved the manufacturing and supply chain have slowly built up, with parts being out-sourced to different companies and a mix of different components suppliers.
Due to the restriction of finance, stock of high cost items such as batteries and chassis have been limited to weekly builds and several items for manufacturing have run out of parts causing a delay in delivery of the vehicle to the end customer. These delays are now affecting the image of the company and the CEO knows this is a major risk for the company moving forward with future orders and new customers.
There are no preferred suppliers selected for manufacturing and often change every time a vehicle is built, with parts arriving at random times, wrong parts, sub-standard parts and constant changes of parts (e.g battery cells). One recent incident was that the side door collapsed due to poor quality components, which required the vehicle to be returned to the base for repair. This incident caused a lot of embarrassment to the company and financial loss, which the CEO would like to avoid in the future.
As the company wants to expand it needs to raise financial backing and the feedback from suitable investors is the need to resolve and establish a supply chain with suppliers and current and future customer base.
The complete supply chain has just evolved from the early days of the beginning of the company with vehicles being built in the CEO’s garage. The team responsible for the supply chain are split between sales and engineering, both blame each other for problems and issues with the part ordering, lead times and delivery of the vehicles.
The sales team have provided a vehicle forecast (see below), but this changes very quickly and is never stable enough to provide an accurate ordering system. Cash flow within the company is very stable and the CEO has agreed to provide $1M of company stock to secure any orders and maintain stock levels vs. order fluctuations.
The supplier base is constantly changing and due to the short term vision of the company, Blue Ocean pays a high premium for accelerated delivery of parts which affects the overall company profit. Limited visibility of components and timing has been provided and normal process is to order the components when required rather than planning ahead.
As the company wants to expand into these new markets, it needs to consider moving its manufacturing closer to the customer base or remain within his current manufacturing base in Germany. Additional complexity could come from a customer requiring different features on the vehicle and they need to know how this will affect the ordering, suppliers and supply chain.
To meet global market demands, items such as the charging system need to meet the differing market specifications and requirements. The concern is as the company grows these country specific requirements are hard to meet and the CEO would like to understand if they could maybe fit these components in region via an out-source company.
The CTO has hired WZW consultancy to analyse the complete supply chain for Ocean Blue and provide recommendations and a strong strategy how it should establish future suppliers and an supply chain for current and future global customers. The research should consider the following:
1. What is the current Blue Ocean supply chain and how does it impact the company?
2. Does the company operate a lean and agile supply chain, if not what needs to be implemented to improve this situation?
3. How can the company manage its current and future suppliers?
4. What processes should be implemented to create a long-term strong supplier base i.e. supplier framework?
5. Investigate the complexity of manufacturing vs customer demands – how could standardisation help here?
6. How can the company implement a sales forecast system to ensure stock levels remain at the level to avoid last minute ordering and delays in vehicle builds?
7. What, if any, is the impact to manufacturing by making the product local to the customer base or expanding the current manufacturing location in Germany?
8. How can we establish a returns process to improve customer satisfaction?
Your role is to produce a written report to help Ocean Blue answer these questions above. It is expected to be supported by academic references throughout.
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