Bergerac Systems: The

Challenge of backward
Integration
Group 2
Aravind Mahendran
Akshat Paliwal
Raja siva Sampath Kora
Divya Jhamb
Sasank Loya

Market Overview- Pet Diagnostics

Increasing pet ownership
Humanization leads to willingness to pay
Supply side improvement in diagnostic equipment's for
pet care
In House lab equipment and point of care testing
reduced diagnostic time for both doctors and pet
owners

Overview of Bergerac Systems

Founded in 2001
Diagnostic Equipment focusing on household pets
First product, HemaVue
Also added a line of disposable test kits
In mid 2006, Omnivue Launched
In 2013, Forecasted launch of Omnivue Mobile

Omnivue Features
Simple to use
Less physical footprint
Highly accurate test results
Reference lab ( quality and accuracy)
Competitive pricing ( $9,500 for instrument and $9.25
for test cartridges)
750 units sold in 1 year and expected sales of 7,500
units at end of 2010

Competitors
Idexx Lab- Industry leader, Dx Chemsitry analyser for
high end and high volume analysis
Abaxis Inc- Second position, Vetsca VS2, cost effective
and old disganostic technology
Heska corporation, Low Quality and less innovative
products

Production Process
Two stage production- Instrument and cartridge
Instrument: Assembly line, Extensive quality testing and
FDA regulations.
Cartridge: Two injection moudled plastic pieces ( base
and cover), needs sterile clean room, Chemical reagents
comes form dozen 3rd party chemical suppliers.
Currently manufactured by GenieTech (3/4) and Elsinore
Plastics(1/4)

Problems in cartridge production

Plastics depend on varying petrochemical pricing
Less margin vendors waits for low petrochemical price for
manufacture
Often delays the delivery
Bergerac needs to stake up huge inventory due to
unreliable 3rd party suppliers
Bergerac recently faced shortage of supplies from both
vendors, leading to delay in final equipment manufacture.
Not able to keep promise on delivery date to customer.
No control over the supply of plastics pieces

Decision Making- Make vs Buy

Buy: Merger of Genie Tech
Price: $5.75 million
Spec: 8 molding press each with 10 cavity molds with
operating time 75 second cycle time
Requirement Spec: 90% uptime, 3 shifts per day and 5
days in a week with 4 molding press meets demand of
Bergerac
Rest can be used for other business
key advantage- Experienced labor force, Reduced
manufacturing heads ( 26 cents per cartridge unit) and
pay back period 5 years

Decision Making- Make vs Buy

Make Spec- 4 molding unit, 70 seconds cycle time, 95%
uptime, raw material savings
Savings of 57 cents per cartridge and payback period of
16 months
Initial setup for installation, testing, hiring and training
of additional staff required.

Was Mccarthys case convincing and

timing right?
Output= 4687500
Production time (24*5*52)=6240 hrs = 374400
min=22464000 seconds
Buy: 75 seconds cycle time, 10/2 =5 cartridge at one cycle,
4 molding press with 0.9 up time.
Desired cycle time= production time/desired units of output
Cd=22464000/4687500=4.79232
Actual cycle time = ca= 75/(5*4*0.9)= 4.16

Make Timings
Output= 4687500
Production time (24*5*52)=6240 hrs = 374400
min=22464000 seconds
Buy: 70 seconds cycle time, 10/2 =5 cartridge at one
cycle, 4 molding press with 0.95 up time.
Desired cycle time= production time/desired units of
output
Cd=22464000/4687500=4.79232
Actual cycle time = ca= 70/(5*4*0.95)= 3.684

Will backward integration helps

Bergerac ?
Yes, it helps to eliminate the supply side problems

Do he have the managerial

resources to handle such a move?
No, he dont have managerial resources to handle to
move, he needs to hire for experts in cartridge
production.

What was the long term decision for

the company?
In long-term, Backward integration helps to produce
cartridges In time for delivery of instrument.