Xox Supply Chain

Answer the following questions in relation to Xbox case Lee, Hau Hoyt David W. and Hollo port, Chuck, Evolution of the Xbox contri scarcee Chain * Who ar the unlike s proposeholders for Xbox that formed the Microsoft ecosystem while developing the add on stove business strategy for Xbox? * What were the ch severallyenges faced by Xbox when it first demonstrateed Xbox? * How did this study to the launch of Xbox 360? * Did they consider both changes in the planning concatenation of mountains? judge Xbox StakeholdersMicrosofts Xbox project was started by a group of gamers in 1999 so that they hind end everywherely develop a looseness console which jeopardise the proceeding of the home PC market place. The Xbox project consisted of both internal and impertinent stakeholders who had either a direct or indirect stake in the project. These stakeholders embroil the Microsoft employees (i. e. , Xbox project team, Microsoft executives), shareholders, suppliers (e. g. , I ntel, Nvidia), contract makers (i. e. , Flextronics, Wistron Corp, Celestica), game developers, designers (i. , Astro Studios), distributors, broadband providers, retailers and customers. The stakeholders of the Xbox project rout out be visualized in legal injury of their military post in Microsofts extended tag on chain, shown in mannikin 1. 0 below. Figure 1. 0 Microsofts Xbox supply chain Ch every(prenominal)enges with Original Xbox Microsoft encountered many challenges when entry the archetype Xbox in 2001. To weaken low(a)stand the challenges in the legitimate Xbox, we rump suck the SOSTAC (Situation analysis, Objective Setting, Strategy, Tactics, Actions and Control) approach.Situation analytic thinking. Microsoft did non make a front man in the gaming console market and was up against strong competitors which already had established markets such(prenominal) as Sony (Playstation) and Nintendo (GameCube). This competitive landscape put them in a po layion wher ein they needed to develop a product that offered features that were comparable to existing products in the marketplace which was perfectly priced to establish themselves in the market. Moreover, Microsoft recognised that it was critical to launch in time for the 2001 holi daylight eason to allow them to have a presence in the marketplace before they became up against the next-generation product. Thus, Microsofts early(a) challenges came at a price of high production r international angstrom unitere up be, where they needed to produce 100,000 consoles in a week in instal to launch the cutting Xbox in time for the Christmas. Objective. The short-term objectives of developing the real Xbox was primarily aimed at entering the gaming console market, moderateing from the visualise and paving way for the next generation of products. Strategy. Microsoft adapted a vigour supply chain strategy using an extended supply chain.They create their products establish on existing game con soles with added features, most of which were built to fence against Sony PS2. In addition to a having features similar to other gaming consoles procurable in the market, the Xbox had other features such as allowing Xbox to play videodiscs, and a built-in modem which in 2002 was social function to launch Xbox live. Tactics. Microsoft lacked the competency in building hardware neither did it have exposure to designing and manufacturing hardware that plenty be utilised as a game console nor did it have any experience with the game console market.Hence, Microsoft contumacious to form strategic partnerships with like contract manufacturers who can deliver the products for them because they did not have the time to subscribe with unproven vendors and jeopardyy designs. Actions. Microsoft in like manner took into account the location of manufacturing facilities in their alternative of contract manufacturers to allow to take into account the logistics of to shipping products cu rsorily to the US and European markets and contumacious to find plants in Mexico and Hungary.Logistics is the time- link up positioning or re theme, or the strategic circumspection of the total supply chain. The supply chain is a sequence of events think to satisfy a customer It can include procurement, manufacture, distribution, and waste disposal, together with associated transport, storage and information technology(Chaffey, 2002). Microsofts Xbox had over one and only(a) thousand (1000) components and forty-five (45) of which were critical components that was only available from a genius supplier. The Xbox also required several parts with high technical performance requirements (e. . , attend toing speed, graphics resolution, memory requirement and internet glide slope). The high dependency on Microsofts suppliers make it necessary to integrate the information commute with its key suppliers. Thus, Microsoft decided to require co-investments from its suppliers and electr onics manufacturing suffices (EMS) to improve the coordination among the various groups. This suggests that Microsoft recognized the need for using technology to improve the flow of information and adapted some form of technology to manage the family relationship with various intermediaries.Control. time the case did not provide adequacy data to see how Microsoft mensural the outcome, it can be inferred from the changes they made to the launch Xbox 360 that they did some reviews internally so that they can make the necessary changes. Unfortunately, Microsoft had very little time to learn to how to manage the supply electronic meshs the coordination of all supply activities of an organization from its suppliers and partners to its customers(Chaffey, 2002, p. 335).While they produceed a push approach to supply chain management, which is typically suggests that the production changees are aimed at cost and efficiency, Microsoft was up against significant challenges that made it difficult to be cost effective. In the end, Microsofts investment in the Xbox is higher than the anticipate sale price of the product i. e. , the costs for producing the Xbox hardware were estimated to be at $450, when retail price for the Xbox was only at $299. 00. Profitability was therefore open on driving the costs down for the Xbox console and sales from merchandising games.Differences between Original Xbox and Xbox 360 and translate Chain Changes Situation. When Microsoft launched Xbox 360, gaming had already generate a big part of the home pleasure and broadband plan of attack was substantially higher. Microsoft also had a better understanding of what games were needed in each country because they had already established a presence in the market. Objective. Microsofts decisions on developing the Xbox 360 was no largeer based on their desire to get into selling hardware and simply offering a gaming console, but much on their goal of increasing software package sal es.So, Microsoft developed the unsanded system in such a way that can be a central part of home entertainment thereby incorporating other features such as internet access. Strategy. In launching Xbox 360, Microsoft planned a global launch, which no other company had make before, so that Xbox 360 can be made available in all major markets before Sony would have a chance to launch PS3. Implementing a global strategy posed two large bumps for Microsoft. To mitigate this risk, Microsoft also implemented some risk management techniques. guess management is intended to identify potential risks in a range of situations and then take actions to minimize risk (Chaffey, 2002, p. 599). It involves several stages which include the identification of risks, possible solutions, implementing the solutions that design high-impact risks and monitoring them for the future. First, was related to the fact that the Xbox required complementary products for it to be enjoyed and their biggest fretfuln ess was whether there would be sufficient game titles available at the like time. Thus, Microsoft lined up game developers who could develop new games.For this task, Microsoft had a better appreciation of game types needed in each country based on the original Xbox experience, nonetheless ensuring that the games were ready had various timing issues. The inaccessibility of games in a particular country would mean a light of sales of consoles and would have a significant impact on the gainfulness of Microsoft. Second, Microsoft faced the risk of service where the supply of gaming consoles would not be sufficient to keep up with demand. Foreseeable, this can manifest itself in divergent 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 electronic vane effects. For Microsoft, the worse case scenario is for Microsoft to miss customer expe ctations and put them at risk for losing their customers. other 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 model to have high definition capability, high storage capableness and access to the internet.Unlike the earlier 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, Microsoft also wanted to take advantage of the timing, pricing and exploiting the relationships with complementary product. Actions. Microsoft made triple changes in its supply chain management to drive down costs (1) change the location of its manufacturing facilities (2) attach the morsel of EMS suppliers and (3) chip contracting.First, when launching the original Xb ox, 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 expensive option by switching the facility location from Mexico and Hungary to China. While this meant an increased risk in fulfilling orders in time for a global launch, the pixilated was able to supplement lower labor rates from a place where the infra expression was already available for electronic manufacturing.Second, by permitting multiple EMS suppliers, Microsoft was able to ensure that they had enough manufacturers who would be able to fulfill the orders. This also provided the ability to negotiate as compared with being dependent on a single supplier at Xbox launch. This helped Microsoft manage the supplier vender lock-in that they had originally and arrest the possible increase in switching costs such as search cos ts, change suppliers, contractual commitment (Shapiro & deoxyadenosine monophosphate Varian, 1998).Third, Microsoft decided that it was best to take willpower of the design of the chip (which was previously owned and designed by Nvidia and Intel) and source its parts from the supply chain. This disintermediation strategy in their supply chain made it possible for Microsoft to be in a better position to view as costs over the products lifetime. Moreover, this strategy is consistent with what is commonly referred to as an outside-in outsourcing activity so that they can build up skills internally and manage this area.Microsoft was also able to compress the design cycle by engaging in concurrent design development activities which included a closer link between and manufacturing, unbroken testing and iterative redesign. This was a change from Microsofts original Xbox strategy which had significant system and supplier aim lock-in effects for Microsoft because Nvidia and Intel owne d and designed the chips. While the dual sourcing strategy minimized the risks of lock-in at the supplier level, they were still locked-in at the system level where Microsoft had to contend 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-year engineer start in third generation consoles because Sonys Blu-Ray decision caused a significant delay in Sonys PS3 launch. By betting 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. Nipponese Automakers Supply Chain Structures The disintermediation strategy that Microsoft took gives some insight to classic make or buy argume nts that companies make in determining where to source their supplies. In bloodline to Microsofts decision to do things themselves, Japanese automakers apparently assume that tincture, delivery, inventories, and related costs can be better governed by the purchasing segment in a buy situation, than by making it yourself. (Deming, 1982, p. 7). However, for them to control the quality they require invariably have demanding expectations from their suppliers. The expectations include (1) exceptional quality requirements (2) real just-in-time deliver (3) exact quantities no over- or under-runs and (4) continuously improving productiveness resulting in long-term 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 six years), and may include requirements for product design and testing.For the Japanese automakers, they have arms around relationship where they emb race the lock-in effects with their suppliers instead of arms-length transactions which rely on the spot-market. The Japanese auto manufacturers are more likely to engage in vertical disintegration and outsourcing of processes to a web of suppliers. For example, in the case of Honda, they engage in strategic alliances with first gradation suppliers whom they are said to have a strong close relationship through shared history (Choi & Hong, 2002, p. 78). They are said to have approximately 400 core suppliers and a number of indirect suppliers which all contribute to the production of 400,000 units of Accord models each year (Choi & Hong, 2002). Another example is Acura, where the structure of their network is very complex 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 & Hong, 2002).Another example is Toyota, a company that is recognized worldwide for adopting scarper management principles in its supply chain. Toyota has various stakeholders that contribute to the success of the supply chain namely Domestic Suppliers Overseas suppliers Parts Centers Toyota Plants Distributors Kyohans Dealers Repair Shops Parts Jobbers Customers. SOSTAC Analysis of Toyota To better appreciate how supply chain strategies differ, we can also adopt the SOSTAC model to explain Toyotas strategy. Situation Analysis. Toyota is an established car manufacturer that has been in existence since 1937.Toyota offers a full range of models from mini-vehicles to trucks. Toyota thinks 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 respect 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. To yotas supply chain objective is to establish strong links to its customers, dealers and channels. Strategy.Toyota created an efficient network so that it can deliver sensitive dish up to its customers. Their close interrelationship between various parts 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 takings 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 ferocity on long-term relationships.Toyotas manufacturing processes is also developed so that each plant serves a local market and at least some other market crosswise the world. While this tactic can be seen as a logistical decision, it is also driven by various risk considerations. It is driven by a financial consideration so that it can hedge exc hange-rate risks and shift production when exchange rates increase (Chopra & Sodhi, 2004, p. 345). It is also driven by ability considerations so that idle capacity is mitigated by ensuring that more than one market are back up by the plants to deal with demand fluctuations(Chopra & Sodhi, 2004).Action. Toyota ensures that both the upstream and downriver supply chains are exceedingly efficient networks. For its upstream supply chain, Toyota not only engages in activities that ensure that information flows across its suppliers, but also engages in various activities geared toward promoting a shared network identity among its suppliers. More specifically, Toyota created network-level processes to ensure that they share a social community, network norms and knowledge (Dyer & 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 member companies and Toyota, (2) vulgar development and training among member companies, and (3) socializing events(Dyer & Nobeoka, 2000). For its downriver supply chain, Toyota is dependent on its dealers to distribute new and used vehicles, as head as servicing for its profitability. Toyota manages its dealers with three principles (1) Independence of dealers as outside investors (2) good-natured jointly (3) Encouraging competition among channels.This approach encourages their dealers 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 apply 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 maintain a low level of parts supply.The use of an intermediary to have a c entral control of parts allows the network some flexibility so that parts do not sit idly at dealers at the same time allow Toyota to hold up the parts to dealers that need them. Kyohans can order supplies of stocks once a day, and supplies them to the dealers 3-4 time 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 half a day to a day or an international distributor in under 5 days. Toyota also promotes continuous improvement through a excogitation 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 controls of cars for registration 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. After applying kaizen principles, Toyo ta 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 be and rating mechanism 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, number of service centers, number of staff, and profitability. Discussion 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 ultimately up to the firm to learn form the process and as an organization learn from the experience and make the necessary c hanges. Microsoft choose 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 expertness 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 strategy 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 variant approach from Microsoft even when their objective was also to minimize production costs. sooner 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 supply chain has access to critical information that can be detrimental to the other partners if opportunistic behavior arises. Chaffey, D. (2002). 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