K&S is a company that was involved in the production and supply of semiconductor device assemblers, although the company’s main market space was wire bonding. Semiconductors business became increasingly competitive from the year 2000 when the manufacturing industry shifted to Asian and Pacific nations. This increased the level of competition among European companies since the company had access to cheap raw materials.
The company could also afford to produce semiconductors at a low cost and sell them relatively cheaper. This prompted K&S to make changes in its supply chain in order to utilize the market opportunities in Asia.
The increase in competition also prompted the company to make changes in its supply chain to maintain its competitive advantage (Handfield, 2008). The need to increase production effectiveness considering that production was a complex process could also be another factor that forced the company to change its supply chain.
The decision to redesign the supply chain is one that should be taken with a lot of caution. It is important to consider all factors that might affect the supply chain before redesigning it (Baumgartner, 2009; Gattorna, 2008). Some of the factors that should be considered when redesigning the supply chain include cost, service level uncertainty, and risk factor (Chandra & Grabis, 2007).
The aim of redesigning the supply chain is to minimize costs as much as possible. In addition, the company should ensure that it adopts a supply chain that is free of risk or with the least risk level. The company should also consider the number of plants and manufacturing installations that it should own.
The current plant in Israel is said to have a very long history of over 30 years. However, tax burden is an issue that has been a challenge to the business. On the other hand, infrastructure and R&D are available in Israel at a cheap cost. The current emerging market in Asian countries has led to the company thinking of shifting its Israel operations.
Instead of expanding the plant in Israel, the company should open others chains in Asia since there is advanced technology in Asia and R&D is active in Asia. In addition, production cost in Asia will be cheaper. There are also intellectual property laws governing innovations in Asia. Having a plant and a lab in the same location would increase efficiency and reduce operation costs.
Advantages and disadvantages of opening in a new location: Opening business in a new location will be advantageous for the company since it will reduce operational costs in the long run. It will also increase efficiency of production and supply chain, thereby increasing the company’s competitive advantage.
However, there are also disadvantages that are associated with the change. Initial costs for opening the new plant are too high. In addition, it will take a lot of time to make sure that the plant is running efficiently. The company will also face a number of risks by shifting to a new location, a factor that might lead to losses.
Recommendation: I would recommend that K&S open operations in other countries where the operation costs are low and where the market is large, instead of expanding in Israel. This will increase profitability opportunities since the operation costs will be lowered.
Implementation challenges: The implementation challenges would include K&S establishing itself in a new location and winning the loyalty of customers.
How to address the challenges: I would recommend that the company forms ventures and associations with other companies that are already established in the new locations.
Reference List
Baumgartner, K 2009, Optimization approaches for the design of realistic supply chains: Examples from the chemical industry, KölnerWiss-Verl, Köln
Chandra, C & Grabis, J 2007, Supply chain configuration: Concepts, solutions and applications, Springer, New York, NY
Gattorna, J 2008, Strategic supply chain alignment: Best practice in supply chain management, Gower, Aldershot
Handfield, R 2002, Redesigning your supply chain: Strategies for success, Prentice Hall, NY