Scm 309 - Developing a Sourcing Strategy at Exeter Pharmaceutical Corporation
Essay by Noreen Byrne • March 25, 2018 • Case Study • 6,213 Words (25 Pages) • 1,037 Views
Essay Preview: Scm 309 - Developing a Sourcing Strategy at Exeter Pharmaceutical Corporation
Developing a Sourcing Strategy at Exeter Pharmaceutical Corporation
SCM 309
Section 010
Professor Trent
Fall 2017
884841151~887276901~881236036
Table of Contents
- Executive Summary…………………………………………………………………… 2
- Supplier Financial Analysis…………………………………………………………… 3
- Financial Ratios………………………………………………………………... 3
- Z-Score Analysis……………………………………………………………….. 8
- Total Cost Analysis…………………………………………………………………….. 9
- Supplier Evaluation and Selection Analysis……………………………………….. 12
- Rough Cut Capacity Analysis……………………………………………….. 13
- Weighted-point Supplier Assessment Audit……………………………….. 14
- Sourcing Risk Management Plan and Map………………………………………... 16
- Scenario Risk Map…………………………………………………………… 20
- Strategy Recommendation, Implementation, and Timeline……………………… 21
- Our Strategy…………………………………………………………………... 21
- Implementation……………………………………………………………….. 21
- Timeline………………………………………………………………..…….... 23
- Key Takeaways………………………………………………………………...…….. 23
Executive Summary
This analysis develops a sourcing strategy for Exeter Pharmaceutical Corporation (EPC), Inc., pertaining to a critical chemical required to support the production of a recently approved pharmaceutical drug Trivare that helps delay and even reverse symptoms of Alzheimer’s disease. Because other companies also expect to win FDA approval for their Alzheimer's drugs over the next several months, it is important that EPC gets to market first. EPC decided to source a major intermediary code named Intermediary 332 and the company is considering three suppliers: Nippon Materials, Dytec Chemicals Company, and RXP NV. We will use the data collected during the commodity team’s visits to each supplier to analyze the supplier selection.
The first section of this report will include an analysis of the financial integrity of each supplier through calculation and evaluation of carefully selected financial ratios and the z-score bankruptcy predictor for each company. Dytec Chemicals ranked highest of the three suppliers based on the financial ratios and the bankruptcy predictor, although no one company was particularly alarming. The next section will contain a total cost analysis in order to quantify the costs that are in addition to the quoted unit price. From the TCO we concluded that Dytec offers the lowest estimated price. After performing the TCO, we must also conduct a rough-cut capacity analysis to ensure that our supplier of choice has the capacity to maintain our demand. Nippon MAterials is the only supplier who has the capacity to fulfill our demand indefinitely.
In order to more thoroughly evaluate each supplier we will also perform a weighted-point supplier assessment audit to see how each supplier compares in a variety of qualitative and quantitative considerations, weighting the categories based on how important it is to the selection analysis. From the weighted point analysis, we can conclude that Nippon Materials is our strongest supplier. Based on all of the information given in the case, along with the financial analysis, total cost analysis, and weighted-point assessment, we will carefully select a supplier. It will be clear that Nippon has the capacity to provide the higher volumes early on to get our drug to market first, so we will outsource from Nippon. However, we will implement a tailored sourcing strategy with Dytec Chemicals, who will have enough capacity to fulfill a one month’s order in the off-chance that a shipment from Japan is delayed. Dytec’s financial state and U.S. location will be an effective fall back in the case of a major issue with Nippon. After the selection decision, the we will identify potential risks, map these risks, and explain our developed set of action plans to prevent/mitigate them. The final section will conclude with a discussion of our strategy and a detailed timeline to implement our recommendation in anticipation of the product launch.
Section 1: Supplier Financial Analysis
Ratio Analysis
In this section we will analyze each company through several different financial ratios including profitability, liquidity, activities, and leverage ratios. Highlighting the supplier of weakness for each ratio, we can visualize which companies tend to be financially more weak while others are stronger. This will help us in our final supplier selection decision.
Financial Ratios | |||||
Measure | Nippon Materials | Dytec Chemicals | RXP NV | ||
Profitability Ratios | Profitability Ratios | ||||
Profit Margin | 0.0192 | 0.0682 | 0.0343 | Profit Margin= Net Income/Net Sales | |
Return on Investment | 3.5857 | 13.5191 | 8.0973 | ROI = Net Profit / Total Investment * 100 | |
Return on Stockholders Equity | 0.0653 | 0.2174 | 0.0994 | Return on Stockholders Equity= Net Income/Average Stockholders’ Equity | |
Liquidity Ratios | Liquidity Ratios | ||||
Current Ratio | 1.2159 | 1.3388 | 1.1294 | Current Ratio= Current Assets/Current Liabilities | |
Quick Ratio | 0.9678 | 0.8245 | 0.9331 | Quick Ratio=(Cash +Accounts Receivable + Short Term Investments)/Current Liabilities | |
Net Working Capital | 384.5 | 41.5 | 44.9 | Net Working Capital= Current Assets - Current Liabilities | |
Activity Ratios | Activity Ratios | ||||
Inventory Turnover | 5.1999 | 5.4330 | 7.0050 | Inventory Turnover= COGS/Average Inventory | |
Accounts Receivable Turnover | 7.3116 | 12.2222 | 7.7650 | Accounts Receivable Turnover= Net Sales/Average Accounts Receivable | |
Average Collection Period | 49.9208 | 29.8636 | 47.0055 | Average Collection Period= 365/Accounts Receivable Turnover | |
Return on Net Assets | 0.0590 | 0.2252 | 0.1017 | Return on Net Assets= Net Income/ (Fixed Assets +Working Capital) | |
Total Asset Turnover | 1.3200 | 1.5700 | 1.3800 | Total Asset Turnover= Sales/Total Assets | |
Leverage Ratios | Leverage Ratios | ||||
Debt Ratio | 0.6124 | 0.5071 | 0.5226 | Debt Ratio= Total Liabilities/Total Assets | |
Equity Ratio | 0.3876 | 0.4929 | 0.4774 | Equity Ratio= Total Equity/Total Assets | |
Times Interest Earned | 1.7500 | 6.4583 | 2.8455 | Times Interest Earned= Operating Income/Interest | |
Debt-Equity Ratio | 1.5801 | 1.0290 | 1.0945 | Debt-Equity Ratio= Total Liabilities/Total Equity | |
*Yellow Shading= the supplier with the most concerning ratio for each measure | |||||
*Green Shading= the supplier with the most promising ratio for each measure |
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