Kulicke and Soffa Industries, Inc. (K&S) is a global company looking to expand its tool bonding capacity to support its growth. Should the company maintain its operation and expand in Israel or seek other alternative locations?
Gal Raz, Martin N. Davidson, Gerry Yemen
Harvard Business Review (UV5148-PDF-ENG)
August 30, 2010
Case questions answered:
- What are the underlying forces that led to Kulicke and Soffa Industries, Inc.’s desire to make changes to its current supply chain network?
- Based on financial considerations, should K&S expand the current capacity in Israel or open a new plant elsewhere? Use the data in the case to calculate the three-year cost for each of the options as well as the amount of demand (Asia versus other parts of the world) to be satisfied from each location).
- What factors should K&S take into account in each decision to redesign its supply chain network?
- Assuming K&S opens another plant, what are the advantages and disadvantages of the different locations?
- What recommendation would you give K&S management regarding the location choice? What implementation challenges do you foresee, and how would you recommend addressing those challenges?
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Kulicke and Soffa Industries, Inc.: Designing a Supply Chain Network Case Answers
1. What are the underlying forces that led to Kulicke and Soffa Industries, Inc.’s desire to make changes to its current supply chain network?
Customers moving to Asia-Pacific regions and China resulted in the growth and shift of Kulicke and Soffa Industries, Inc.’s (K&S Inc.) competitors as they had begun to set up shops in China and Asia-Pacific regions.
This new market had high demand and hence was offering great opportunities for growth and new business.
Making changes in the current supply chain network will help K&S Inc. reduce the supply risk associated with holding the largest worldwide market share of wire bonding tools.
It would help Kulicke and Soffa Industries, Inc. to increase its mass production capabilities, as it was relying mostly on its Israel-based production unit. This would be possible either by growing the capabilities of their current operations or seeking new alternative sites.
2. Based on financial considerations, should K&S expand the current capacity in Israel or open a new plant elsewhere? Use the data in the case to calculate the three-year cost for each of the options as well as the amount of demand (Asia versus other parts of the world) to be satisfied from each location).
where:
N = No. of workers,
D = Number of working days in a year
P = Total manufactured units being shipped to Asia
S = Total manufactured units being shipped to the United States and internationally
Keeping the above-defined variables constant, we see that the investment for China for the plant setup is high, i.e., $6.5M.
However, if we consider the total costs in the long run and consider that the majority of the demand comes from the new potential market, i.e., Asia, we see that Kulicke and Soffa Industries, Inc.’s opening up a plant in
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