Case Detail

Case Summary

The Mexico-China Dual Sourcing Strategy Simulation

Case Number: 1-212-500, Year Published: 2011

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Key Concepts

Dual Sourcing, Strategic Sourcing, Inventory Management, Total Landed Cost, Operations, Supply Chain Management, Inventory Production, Simulation Game, Experiential Learning

Abstract

This team-based simulation teaches students how to make strategic and operational decisions about sourcing. Students play the role of sourcing managers who must make strategic allocation decisions as they place day-to-day orders with two suppliers—one that is responsive but expensive (Mexico) and another that is cheaper but more remote (China). Each team must develop a sourcing strategy that will satisfy a random level of demand that is revealed over time. In each period teams place orders with both suppliers while managing inventory and attempting to maximize their bank account. Students experience the operational, financial, and service-related consequences of their sourcing decisions, and instructors have access to the strategies used by different teams along with financial and operational metrics to use as part of the debrief.

Learning Objectives

Students will:

  1. Develop sourcing strategies and implement simple, robust policies to guide sourcing decisions;
  2. Practice including working capital estimation in total landed cost;
  3. Understand the added complexity of managing a portfolio of suppliers rather than a single source;
  4. Experience the consequences of guessing and overreacting to demand.

Extended Case Information

Teaching Areas: Operations

Teaching Note Available: Yes

Geographic: Mexico, China

Industry: Wireless Transmission

Organization Department: Operations, Sourcing, Manufacturing