Reg.No.

MANIPAL ACADEMY OF HIGHER EDUCATION, DUBAI CAMPUS

School of Business

2020-S2-MGC-OP-703-SUPPLY CHAIN MANAGEMENT

INTERNAL EXAM 1

Time: 1.5 hours Max. Marks: 20 marks

Case analysis

Toshiba Micro-chips

One of the world’s largest manufacturers of computer chips, Toshiba needs to reduce supply chain
expenditure significantly for its low-cost ‘Atom’ chip to market. Supply chain costs of 5.50 per chip are
bearable for units selling for $100, but the price of the new chip is a fraction of that, at about $20.

The Supply Chain Cost Reduction Challenge

Somehow, Toshiba must reduce the supply chain costs for the Atom chip but has only one area of
leverage - inventory.

The chip must work, so Toshiba can make no service trade-offs. With each ‘Atom’ product being a
single component, there is also no way to reduce duty payments. Toshiba has already brought
packaging down to a minimum, and with a high value-to-weight ratio, the chips’ distribution costs
cannot be pared down any further.

The only option is to try to reduce levels of inventory, which, up to this point, have been kept high to
support a nine-week order cycle. The only way Toshiba can find to make supply chain cost reductions is
to bring this cycle time down and therefore reduce inventory.

The Path to Cost Reduction

Toshiba has decided to try what is considered as an unlikely supply chain strategy for the
semiconductor industry: make to order. The company will begin with a pilot operation using a
manufacturer in Malaysia. Through a process of iteration, they will gradually seek and eliminate supply
chain inefficiencies and reduce order cycle time incrementally.

Further improvement initiatives may also include:

 Cutting the chip assembly test window from a five-day schedule to a bi-weekly, 2-day process
 Moving to a vendor-managed inventory model
Questions:
A (6+4 marks)
1. Assess if Toshiba’s move from a push strategy to a pull strategy will augur well for the Chip
manufacturer. Highlight the advantages and disadvantages for both strategies and make a
recommendation to Toshiba based on your understanding of the case.
2. Which of these strategies works well to eliminate supply chain inefficiencies and improves
inventory management related processes? Provide examples to support your answer.
B (6+4 marks)
3. The realignment of Toshiba’s objectives towards cost reduction in its supply chain does not
seem to be in line with organizational goals of being responsive in the Chips market. Identify
the strategic issues in each of the planned steps: moving away from the customer by reducing
inventory levels, compromising on quality of packaging, accepting cycle down time, and moving
towards a supplier managed model.
4. Recommend suitable changes to Toshiba’s plans so it does prioritize cost reduction at the cost
of customer responsiveness by making a comparison between the two perspectives and using
examples from other industries to justify.