Xox Supply Chain

Answer the following questions in coincidence to Xbox drive Lee, Hau Hoyt David W. and Holloway, Chuck, Evolution of the Xbox Supply orbit * Who argon the non-homogeneous s manoeuvreholders for Xbox that frameed the Microsoft eco trunk term find the fork out chemical orbit chore system for Xbox? * What were the challenges face by Xbox when it lift offing lay dumped Xbox? * How did this compare to the ground of Xbox 360? * Did they consider whatsoever budges in the add on set up? render Xbox S fruitholdersMicrosofts Xbox project was started by a group of jeopardizers in 1999 so that they peck alike develop a period of play console which threatened the performance of the base PC merchandise. The Xbox project consisted of twain(prenominal) insepar qualified and external s back awayholders who had either a straight off or indirect stake in the project. These stakeholders include the Microsoft employees (i. e. , Xbox project team, Microsoft executives), shareholders, suppliers (e. g. , Intel, Nvidia), baffle bring uprs (i. e. , Flextronics, Wistron Corp, Celestica), game developers, material bodyers (i. , Astro Studios), distri justors, wideband sufferrs, retailers and customers. The stakeholders of the Xbox project rear be visualized in legal injury of their military posture in Microsofts across-the-board sum up grasp, shown in take in 1. 0 below. Figure 1. 0 Microsofts Xbox confer chain Challenges with Original Xbox Microsoft encountered many challenges when ingress the trustworthy Xbox in 2001. To go a descendst understand the challenges in the maestro Xbox, we post see the SOSTAC (Situation analysis, clinical Setting, Strategy, Tactics, Actions and Control) approach.Situation Analysis. Microsoft did non go through a carriage in the manoeuvre console merchandise and was up against strong competitors which already had constituted merchandises such as Sony (Playstation) and Nintendo (GameCube). This co mpetitive landscape painting intentionate them in a smudge wherein they beg to develop a convergence that offered features that were compar adequate to(p) to existing growths in the grocery which was perfectly impairmentd to establish themselves in the marketplace. More all over, Microsoft accepted that it was critical to launch in term for the 2001 holi day cartridge holder eason to go forth them to ingest a presence in the marketplace beforehand they became up against the neighboring- genesis reaping. Thus, Microsofts too soon challenges came at a price of naughty turnout r antiophthalmic factor up approachs, where they motiveed to produce 100,000 consoles in a calendar week in order to launch the impertinently Xbox in clock time for the Christmas. Objective. The short-term objectives of developing the original Xbox was primarily aimed at take a shit in the period of play console market, scholarship from the come across and paving way for the next gen eration of products. Strategy. Microsoft adapted a push sum chain scheme using an extended write out chain.They exceedingly-developed their products establish on existing game consoles with added features, most of which were build to compete against Sony PS2. In addition to a having features similar to opposite(a) gaming consoles operational in the market, the Xbox had new(prenominal) features such as renounceing Xbox to play videodisks, and a built-in modem which in 2002 was used to launch Xbox live. Tactics. Microsoft lacked the competency in building hardware neither did it guide exposure to externalizeing and manufacturing hardware that back end be used as a game console nor did it wealthy person any roll in the hay with the game console market.Hence, Microsoft pertinacious to form strategical take offnerships with preferred contract manufacturers who stern deliver the products for them because they did not wee the time to fare with unproven vendors and i dle designs. Actions. Microsoft excessively took into account the mess of manufacturing facilities in their selection of contract manufacturers to allow to take into account the logistics of to shipping products promptly to the US and European markets and decided to find plants in Mexico and Hungary.Logistics is the time- link up positioning or resource, or the strategic wariness of the total grant chain. The supply chain is a sequence of plaints intend to satisfy a customer It rump include procurement, manufacture, distri besidesion, and waste disposal, together with associated transport, retention and tuition technology(Chaffey, 2002). Microsofts Xbox had over wizard thousand (1000) components and forty-five (45) of which were critical components that was completely oper fit from a single supplier. The Xbox withal required several take offs with in laid-backschool spirits technical performance requirements (e. . , covering speed, artistic production resolution, memory requirement and internet access). The high dependence on Microsofts suppliers do it indispensable to integrate the information central with its key suppliers. Thus, Microsoft decided to require co-investments from its suppliers and electronics manufacturing work (EMS) to repair the coordination among the heterogeneous groups. This suggests that Microsoft recognized the drive for using technology to improve the fuse of information and adapted some form of technology to manage the affinity with several(a) intermediaries.Control. While the baptismal font did not provide enough data to conform to how Microsoft measurable the outcome, it abide be inferred from the changes they top to the launch Xbox 360 that they did some reviews internally so that they evict make the necessary changes. Unfortunately, Microsoft had very circumstantial time to jibe to how to manage the supply earningss &8212 the coordination of all supply activities of an physical composition fro m its suppliers and partners to its customers(Chaffey, 2002, p. 335).While they choose a push approach to supply chain management, which is typically suggests that the production processes are aimed at monetary value and efficiency, Microsoft was up against probatory challenges that make it difficult to be cost effective. In the end, Microsofts investment in the Xbox is higher than the expected sale price of the product &8212 i. e. , the be for producing the Xbox hardware were estimated to be at $450, when retail price for the Xbox was totally at $299. 00. Profitability was therefore reliant on driving the be down for the Xbox console and sales from selling games.Differences amidst Original Xbox and Xbox 360 and Supply string Changes Situation. When Microsoft launched Xbox 360, gaming had already become a freehanded part of the home entertainment and broadband access was substantially higher. Microsoft also had a better understanding of what games were needed in distributi vely country because they had already formal a presence in the market. Objective. Microsofts conclusions on developing the Xbox 360 was no all-night based on their desire to get into selling hardware and simply pass a gaming console, but to a greater extent on their goal of increasing software system sales.So, Microsoft developed the rising system in such a way that flock be a central part of home entertainment thereby incorporating other features such as internet access. Strategy. In launching Xbox 360, Microsoft planned a spheric launch, which no other troupe had through before, so that Xbox 360 bum be do purchasable in all study markets before Sony would have a contingency to launch PS3. Implementing a global outline posed two large chances for Microsoft. To moderate this jeopardize, Microsoft also implemented some risk management techniques. Risk management is intend to identify potential risks in a range of situations and thus take actions to play down risk ( Chaffey, 2002, p. 599). It involves several stages which include the ac friendshipment of risks, possible solutions, implementing the solutions that target high-impact risks and monitoring them for the future. First, was link up to the fact that the Xbox required complementary products for it to be enjoyed and their biggest concern was whether there would be fitting game titles available at the same(p) time. Thus, Microsoft lined up game developers who could develop tonic games.For this task, Microsoft had a better taste sensation of game types needed in each(prenominal) country based on the original Xbox experience, nonetheless ensuring that the games were ready had different quantify issues. The unavailability of games in a situation country would mean a diminish of sales of consoles and would have a pregnant impact on the profitability of Microsoft. Second, Microsoft faced the risk of success where the supply of gaming consoles would not be sufficient to withstand up with demand. Foreseeable, this can manifest itself in different ways but both negatively impacting their ability to acquire new customers.This suggests that Microsoft recognized the implication of complementary products to allow them to take advantage of the mesh topology effects. For Microsoft, the worse guinea pig scenario is for Microsoft to miss customer expectations and put them at risk for losing their customers. Another scenario is if their demand calculations were off and end up with an over/under supply of gaming consoles in one area. Tactics. As soon as the original Xbox was launched, Microsoft started working on the next generation of Xbox and required the new sit to have high definition capability, high storage readiness and access to the internet.Unlike the primitively launch of the Xbox, where Microsoft delivered a superior product whose features that came at the expense of cost, Microsoft included cost considerations as part of their new strategy. This time, Mic rosoft also wanted to take advantage of the timing, set and exploiting the relationships with complementary product. Actions. Microsoft made three changes in its supply chain management to beat back down costs (1) change the location of its manufacturing facilities (2) increase the bite of EMS suppliers and (3) piece contracting.First, when launching the original Xbox, Microsoft decided to select manufacturing facilities that were geographically near the customers in order to quickly deliver the products to facilitate fast product introduction. However, in launching Xbox 360, Microsoft decided to take advantage of a less pricey option by switching the instalment location from Mexico and Hungary to China. While this meant an change magnitude risk in fulfilling orders in time for a global launch, the unwavering was able to leverage lower labor rates from a place where the infrastructure was already available for electronic manufacturing.Second, by permitting multiple EMS suppl iers, Microsoft was able to ensure that they had enough manufacturers who would be able to fulfill the orders. This also provided the ability to act as compared with being dependent on a single supplier at Xbox launch. This helped Microsoft manage the supplier vender lock-in that they had primarily and arrest the possible increase in switching costs such as search costs, specialized suppliers, contractual perpetration (Shapiro & antiophthalmic factor antiophthalmic factor Varian, 1998).Third, Microsoft decided that it was surpass to take ownership of the design of the chip (which was previously owned and designed by Nvidia and Intel) and source its move from the supply chain. This disintermediation strategy in their supply chain made it possible for Microsoft to be in a better position to control costs over the products lifetime. Moreover, this strategy is consistent with what is normally referred to as an outside-in outsourcing practise so that they can build up skills inte rnally and manage this area.Microsoft was also able to compress the design cycle by engaging in concurrent design development activities which included a finishingr link between and manufacturing, regular exam and iterative redesign. This was a change from Microsofts original Xbox strategy which had significant system and supplier level lock-in effects for Microsoft because Nvidia and Intel owned and designed the chips. While the dual sourcing strategy minimized the risks of lock-in at the supplier level, they were good-tempered locked-in at the system level where Microsoft had to have intercourse with any enhancements or changes in the design of the chips.Microsoft also used HDTV technologies that was available in the market, while Sony (being a hardware company) decided to bet on Blu-Ray to allow it to establish it as the new DVD standard for high-definition. In hindsight, Microsofts decision provided them a one- social class head start in third generation consoles because S onys Blu-Ray decision caused a significant appreciation in Sonys PS3 launch. By c melt down on Blu-Ray, Sony was betting on standards change to increase their competitive advantage. Control.As discussed previously, the case did not provide enough data to see how Microsoft measured control. Japanese Automakers Supply Chain Structures The disintermediation strategy that Microsoft took gives some insight to definitive make or buy arguments that companies make in determining where to source their supplies. In contrast to Microsofts decision to do things themselves, Japanese automakers apparently assume that feature, delivery, inventories, and related costs can be better governed by the purchasing department in a buy situation, than by do it yourself. (Deming, 1982, p. 7). However, for them to control the quality they require perpetually have demanding expectations from their suppliers. The expectations include (1) exceptional quality requirements (2) reliable just-in-time deliver (3) exact quantities no over- or under-runs and (4) continuously improving productiveness resulting in long cost reductions (Deming, 1982, p. 48). In return for the high investments on the part of their suppliers, they have production contracts that are usually long-term (as long as sixer years), and may include requirements for product design and testing.For the Japanese automakers, they have arms almost relationship where they embrace the lock-in effects with their suppliers instead of arms- distance transactions which rely on the spot-market. The Japanese auto manufacturers are more promising to engage in vertical dissolving and outsourcing of processes to a network of suppliers. For archetype, in the case of Honda, they engage in strategic h antiophthalmic factorers with jump tier suppliers whom they are said to have a strong close relationship through shared history (Choi & international adenosine monophosphateereamp Hong, 2002, p. 78). They are said to have approxi mately 400 core suppliers and a number of indirect suppliers which all add to the production of 400,000 units of Accord models each year (Choi &amp Hong, 2002). Another example is Acura, where the structure of their network is very compound with 76 entities in the supply network (i. e. , 1 first-tier, 20, second-tier, 28 third-tier, 17 fourth-tier, 9 fifth-tier, and 1 six-tier) to produce their Acura CL/TL center console alone (Choi &amp Hong, 2002).Another example is Toyota, a company that is recognized worldwide for adopting lean management principles in its supply chain. Toyota has motley stakeholders that contribute to the success of the supply chain namely Domestic Suppliers Overseas suppliers Parts Centers Toyota Plants Distributors Kyohans Dealers rectify Shops Parts Jobbers Customers. SOSTAC Analysis of Toyota To better advise how supply chain strategies differ, we can also adopt the SOSTAC model to explain Toyotas strategy. Situation Analysis. Toyota is an establ ished car manufacturer that has been in existence since 1937.Toyota offers a undecomposed range of models from mini-vehicles to trucks. Toyota believes that their long-term success is based on loyal customers. Toyota manages using the Toyota Way, which is underpinned by two pillars, continuous improvement and notice for people. Toyota believes that the Toyota Way should be used in interactions because they believe that their success is not created by individual efforts but rather as a team. Objective. Toyotas supply chain objective is to establish strong link up to its customers, dealers and channels. Strategy.Toyota created an efficient network so that it can deliver excellent service to its customers. Their close interrelationship between various part of the chain suggests that they engage in a pull strategy and their supply chain can be viewed in terms of Figure 2. 0 below. Figure 2. 0 Toyotas supply chain Tactics. Toyota developed its own Toyota Production System where they introduced various manufacturing techniques such as Just-In-Time, Kaizen (continuous improvement). Toyota makes strategic alliance with its partners and puts an emphasis on long-term relationships.Toyotas manufacturing processes is also developed so that each plant serves a local market and at least another market across the world. While this tactic can be seen as a logistic decision, it is also driven by various risk considerations. It is driven by a financial consideration so that it can hedge transmute-rate risks and shift production when exchange rates increase (Chopra &amp Sodhi, 2004, p. 345). It is also driven by capacity considerations so that idle capacity is rationalize by ensuring that more than one market are supported by the plants to deal with demand fluctuations(Chopra &amp Sodhi, 2004).Action. Toyota ensures that both the upriver and downriver supply chains are extremely efficient networks. For its upstream supply chain, Toyota not wholly engages in acti vities that ensure that information flows across its suppliers, but also engages in various activities pitch toward promoting a shared network individualism among its suppliers. More specifically, Toyota created network-level processes to ensure that they share a social community, network norms and knowledge (Dyer &amp Nobeoka, 2000, p. 352).To implement this, Toyota has established various supplier associations (kyohokai) since 1943 so that they can have (1) information exchange between particle companies and Toyota, (2) mutual development and training among appendage companies, and (3) socializing events(Dyer &amp Nobeoka, 2000). For its downstream supply chain, Toyota is dependent on its dealers to faint new and used vehicles, as intumesce as servicing for its profitability. Toyota manages its dealers with three principles (1) independence of dealers as outside investors (2) Winning jointly (3) Encouraging competition among channels.This approach encourages their de alers to make independent decisions and be proactive in making improvements. Toyota help the dealers make decisions toward investing in areas necessary to improve so that they can be both successful. Toyota embraced lean manufacturing techniques to keep costs down. Not only do they expend these principles in their manufacturing of cars, but they also apply this in other areas of their supply chain. For example, they use kyohans to allow their dealers to corroborate a low level of part supply.The use of an intermediary to have a central control of parts allows the network some flexibility so that parts do not sit idly at dealers at the same time allow Toyota to move the parts to dealers that need them. Kyohans can order supplies of stocks once a day, and supplies them to the dealers 3-4 times a day. In case the stock is unavailable, kyohans can put in an emergency stock request which can be fulfilled by a domestic distributor within one-half a day to a day or an international di stributor in under 5 days. Toyota also promotes continuous improvement through a idea they refer to as kaizen.This process allows them to improve their operations through innovation, organizational learning and standardization of processes. For example, a mandatory bi-annual recapitulations of cars for adjustment at the service facilities usually takes 2-3 hours. The length of time it took was largely dependent on skills and experiences of the service technician in charge of the inspection. by and by applying kaizen principles, Toyota was able to streamline and standardize the inspection process so that inspections would only take 45 minutes. Control.Toyota conducts performance measurements at predetermined timeframes. For instance they do annual reviews wherein they apply some ranking and rating appliance to evaluate their dealers. The dealers are measured in terms of sales volume of new and used cars, after-service sales service, customer satisfaction, number of showrooms, n umber of service centers, number of staff, and profitability. banter There are various approaches to managing the supply chain of a firm. The decision to adopt one over another is highly depended on the long-term strategic goals of the corporation.From the Microsofts Xbox case, we can see that sometimes firm make costly decisions in the process of launching a product to gain foothold in the market place. It is then last up to the firm to learn form the process and as an organization learn from the experience and make the necessary changes. Microsoft adopted two distinct approaches in managing their supply chain based on their short- and long-term objectives. In the launching Xbox, they were highly dependent on the expertise of their suppliers so that they can launch the Xbox in time for the 2001 holiday sales.This enabled the firm to learn from their experience so that they can come up with a new strategy to launch the next generation gaming console. Microsofts disintermediation s trategy appears to minimize lock-in effects with suppliers so that they can take advantage of spot-markets and ultimately lower their costs. Interestingly, in the case of Toyota, they took a very different approach from Microsoft even when their objective was also to minimize production costs. Instead of relying on spot-markets, they embraced lock-in and invested in long-term relationships with its suppliers.This approach allowed them to make continuous improvements across multiple suppliers by sharing knowledge and information among the upstream and downstream processes. The increased information flows across the network was made possible by the use of various e-supply and e-demand applications. From the Toyota case, it can also be seen that a highly integrated supply chain that shares information, expertise across the firm can take advantage of minimized costs and profitability.It can also be gleaned from this case the importance of trust and respect because the members of the sup ply chain has access to critical information that can be detrimental to the other partners if opportunistic behavior arises. Chaffey, D. (2002). E-business and E-commerce Management Strategy, implementation and Practice. Essex Pearson Education Limited. Choi, T. Y. , &amp Hong, Y. (2002). introduction the structure of supply networks case studies in Honda Acura, and Daimler Chrysler. Journal of Operations Management, 20, 469-493. Chopra, S. , &amp Sodhi, M. S. (2004).Managing Risk To Avoid Supply-Chain Breakdown. MIT Sloan Management Review(Fall 2004), 53-61. Deming, W. E. (1982). out(p) of the crisis Quality Productivity and Competitive Position. Cambridge Cambridge University Press. Dyer, J. H. , &amp Nobeoka, K. (2000). Creating and Manageing a High-Performance Knowledge-Sharing meshing The Toyota Case. Strategic Management Journal, 21, 345-367. Shapiro, C. , &amp Varian, H. (1998). interlock and positive feedback How to exploit Network effects. In H. B. S. Pres s (Ed. ), Information rules A strategic guide to the network economy. (pp. 1-56).