Hilti – Gearing the Supply Chain for the Future
Case Study SCMMS II – Hilti – Gearing the Supply Chain for the Future
1. Evaluate the three scenarios proposed by the project team along the lines of the criteria presented in the case
2. What would be your recommendation to the board in the current situation of world economy in December 2011
1. The project team has proposed three scenarios for Hilti’s management board which all have the potential to help the company compete in an ever more competitive and cost-driven environment. Hilti has still the competitive advantage over most other important industry players, because it has a very high-quality approach and is able to charge 30% premiums for their products. The first approach the project team has to offer is a “Low pain, low gain”-scenario in which semi-complex plastic and machined parts are not made in-house but bought from suppliers and all small tools are manufactured in Hilti’s plant in Shanghai. In the first assessment this alternative would have a small impact on cost reduction (8% of COGS) but it would be an alternative with a relatively small footprint. It could be easily achieved and wouldn’t have a big impact on some aspects that are very important to the company’s values. Hilti has established a couple of premises around which decisions about the company’s future have always been made. The “low pain, low gain”-alternative would be in line with the business model that the home factory in Liechtenstein has still a high enough value-add to support high prices and with most of the Champion3C strategy. The Champion3C strategy focuses on three important factors: The company should be economically and technologically independent, should focus on it’s own products and should maintain its sustainable leadership. With this scenario the only factor that is in question is, if the shift to even more “buy” instead of “make” (Hilti is already buying 80% of total product value from outside suppliers) makes the company even more
1. Evaluate the three scenarios proposed by the project team along the lines of the criteria presented in the case
2. What would be your recommendation to the board in the current situation of world economy in December 2011
1. The project team has proposed three scenarios for Hilti’s management board which all have the potential to help the company compete in an ever more competitive and cost-driven environment. Hilti has still the competitive advantage over most other important industry players, because it has a very high-quality approach and is able to charge 30% premiums for their products. The first approach the project team has to offer is a “Low pain, low gain”-scenario in which semi-complex plastic and machined parts are not made in-house but bought from suppliers and all small tools are manufactured in Hilti’s plant in Shanghai. In the first assessment this alternative would have a small impact on cost reduction (8% of COGS) but it would be an alternative with a relatively small footprint. It could be easily achieved and wouldn’t have a big impact on some aspects that are very important to the company’s values. Hilti has established a couple of premises around which decisions about the company’s future have always been made. The “low pain, low gain”-alternative would be in line with the business model that the home factory in Liechtenstein has still a high enough value-add to support high prices and with most of the Champion3C strategy. The Champion3C strategy focuses on three important factors: The company should be economically and technologically independent, should focus on it’s own products and should maintain its sustainable leadership. With this scenario the only factor that is in question is, if the shift to even more “buy” instead of “make” (Hilti is already buying 80% of total product value from outside suppliers) makes the company even more