In 2011, an American company for consumer electronics named Tibo Inc. introduced its first generation of smartphones, Tibo V10. The smartphone has become very popular since then, such that it has seen over 140 million sales. Tibo has had a strong network of suppliers, which has made it one of the world’s largest technology companies. However, Tibo has not been manufacturing its phones by itself. Instead, they have outsourced the manufacturing and assembling of the phones to the largest contract manufacturer company in the world, Wolftan, based in China. Wolftan’s factory is located in Songxia, and it has over 120 000 factory workers. Wolftan has, however, found itself on the wrong side of the media reports after being accused of unethical labor practices such as low wages, excessive overtime, and dangerous and unsanitary working conditions, claims which they have denied. Tibo has also been faced with the same claims as Wolftan, which has led the CEO, Chez Goodman assemble a team of executives to discuss the strategies for responding to these claims. Some of the claims addressed by the executives as highlighted by the media included the outsourcing of over 800 000 jobs in 2020, leading to loose of jobs by thousands of Americans, and implementation of a supply chain code of conduct which is not favorable to the Chinese suppliers. The executive team found these allegations to be accurate. Therefore Tibo should take necessary measures to bring back the jobs in the U.S. loosen the supplier’s restrictions and code of conduct. Tibo has consequently decided to diversify their supply chain risk by contracting other two manufacturers, cutting down the number of suppliers from 100 to 24 to negotiate for better prices, and looking into finding their parts rather than outsourcing.
The decision of Tibo to add new suppliers comes along with its benefits and costs. Some of the benefits include Efficiency in delivery; because of the strict rules of selecting the suppliers, Tibo can select suppliers with exceptional delivery capabilities, reducing the cost incurred during delivery delays. Also, Tibo will be able to choose suppliers who are very flexible in terms of last-minute changes. To win this contract, the suppliers must offer very fair prices to help Tibo cut down on expenses and maximize their profits. These suppliers would also provide quality products to maintain their contracts, and these would save Tibo the costs of reducing sub-standard products and save on time. However, these benefits can be associated with some costs. For example, for Tibo and the suppliers to work well, the two parties must put in more collaborative efforts, which might be costly and time-consuming. Also, the more the suppliers, the more the risk of inside information being leaked to competitors. However, before contacting the two new international manufacturers, Tibo should do their due diligence. These include: evaluating the current state of the supplier, the compliance of the supplier with law and regulations, and any other undisclosed information about the supplier that might pose a financial risk (Pramatari, 2007).
Even though they are many supplier interaction models, Tibo would fit incredibly in the partnership and integrated model. In a partnership model, Tibo and the supplier would not require a lot of investment for both time and money. And also, Tibo would enjoy extra benefits like marketing and cost-effectiveness. In an integrated model, the relationship between Tibo and the supplier would not be based on the transactions only but also on the collaboration and communication efforts between the two parties to form an integrated relationship.
The decision of Tibo to reduce its supplier base from one hundred to twenty-four has its advantages and disadvantages. However, the benefits seem to be more than the disadvantages. Some of these advantages include The gain of more financial visibility. It would be easy to manage and track the billing process, i.e., the amount of money moving out of the business to the suppliers when you have a consolidated supplier base. Another advantage is how easier it becomes to manage a small base of suppliers. It is easier because there is reduced paperwork and administration, creating more time to focus on the business.
Additionally, working with a small base of suppliers reduces the waste of resources like money and time. For example, it is hard for one to pay for a service or product they no longer use. A reduced supplier base also helps the business establish better relationships with the suppliers, which is only possible when the suppliers are few. However, with all the advantages, a reduced supplier base may have some disadvantages, such as supply interruptions due to over-dependence on one supplier. However, it’s good for the business to determine what works for it best before making any decisions.
Furthermore, if Tibo decides to compel companies like Wolftan to improve their working conditions and reduce overtime for factory workers, they might run into a crisis. For example, there would be increased cost, passed to Tibo, and a hike in the smartphone’s price. This would also lead to delays in the V10 delivery; however, they would impress the community which cares about social responsibility (Gopal, 2016).
In conclusion, Tibo’s effort to implement pleasant changes to the community is reasonable. Still, they should consider the same implications for their business and weigh on their options.
References
Pramatari, K. (2007). Collaborative supply chain practices and evolving technological approaches. Supply chain management: an International Journal.
Gopal, P. R. C., & Thakkar, J. (2016). Analysing critical success factors to implement sustainable supply chain practices in Indian automobile industry: a case study. Production Planning & Control, 27(12), 1005-1018.
write