There are various factors which influence the level of success that a firm experiences. Strategic partnerships are among these factors. In order to stave off competition and flourish in the highly complex business environment of today, firms need to collaborate with partners who present value and enhance their competitiveness. Suppliers are some of the partners who play a critical role in shaping the competitive advantage of a company. If it is to thrive, a firm needs to join forces with a supplier who is able to deliver products of good quality in good time and within budget. When a supplier fails to execute its mandate faithfully, it could cause a company to suffer irreparable harm. The case of Spin Master Toys underscores the critical role that suppliers play. In this case, this firm needs to select a supplier between two companies, Wah Shing and Wai Lung. The successful firm will be required to manufacture and deliver E-Charger, a flagship toy designed by Spin Master Toys, under stringent timelines and quality specifications. As it selects the supplier, Spin Master Toys needs to consider a wide range of factors and confirm that the selected company possesses the required capacity to deliver.
Evaluation Criteria
The supplier selection process is indeed complex as there are many factors that companies need to consider. In his text, Stevic (2017) addresses some of these factors. Quality, delivery and performance record are some of the factors that this scholar examines. They note that firms should choose suppliers who have the capacity to produce goods of high quality. Furthermore, the companies need to ensure that the selected supplier is able to deliver within the stipulated deadline and budget. As is noted in the case study, the success of any firm hinges on its capacity to release a product into the market ahead of its competitors. Whether a company outperforms its rivals depends on the delivery capacity of its suppliers. Warranties, production capacity, and price are other factors that Stevic and Sarajevo identify as being important in the supplier selection process. Firms should prioritize suppliers who offer some guarantees such as insulation against production delays or defective products. Additionally, it is critical for companies to work with suppliers with adequate production capacity. The production capacity determines whether the supplier is able to meet the demand and deliver on time. While it does not top the list of the factors to consider, the price that the suppliers charge is also an important issue. Suppliers who charge lower fees are more preferable as they allow companies to achieve higher profit margins. Spin Master Toys should ensure that all these factors form part of its evaluation criteria.
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Identified above are among the main factors that should guide firms as they identify suppliers. In addition to these factors, there are other issues which play a less important role in the selection process. They include the financial health of the supplier, procedural compliance, management and organization, repair service, attitude, impression and geographical location (Stevic, 2017). A supplier of sound financial health is able to meet the financial costs associated with the production process. For example, this supplier can pay employees comfortably and procure the raw materials needed for production. On the other hand, a supplier facing financial difficulties may be unable to acquire the resources necessary for production. The geographical location of the firm, the management and the provision of repair services are also vital factors to consider. In order to quality for consideration, suppliers need to be located ideally. For example, the supplier should be located close to raw materials, qualified personnel and transport infrastructure. Such a location helps to lower costs while ensuring that the production process is not derailed by such challenges as labor shortages. In considering the supplier to enlist for the manufacture of E-charger, Spin Master Toys should confirm that the management of the suppliers is competent and able to offer dedicated and highly personalized attention. Furthermore, Spin Master Toys should only work with a supplier who offers repair services and complies fully with all procedures that govern the production process.
Evaluation Scores
It is evident from the section above that the evaluation criterion that Spin Master Toys should adopt is composed of a wide range of critical factors. In the case study, it is noted that the firm has already pre-qualified Wah Shing and Wai Lung. However, the company cannot work with the two suppliers and must select one. In the following section, the scores that each company earns on the basis of the criteria outlined above are noted.
Wah Shing and Wai Lung are promising candidates. However, an evaluation of their performance as measured using the criterion proposed reveals that the two firms operate differently and are in different positions. Capacity, price, leadership, experience, and terms of payment are among the issues that distinguish the two firms. On the one hand, Wai Lung has lower production capacity. It has 2,000 employees (Mark, 2001). However, currently, this firm is not handling any major projects and should be able to comfortably meet the demands of Spin Master Toys. Furthermore, Wai Lung’s leadership is fully and personally committed to the production process. Spin Master Toys has received a personal assurance from the owner of Wai Lung that he will oversee the production process and ensure timely delivery (Mark, 2001). Furthermore, since Wai Lung is not a subsidiary, it can focus all its efforts on satisfying the demands of Spin Master Toys. The favorable terms of payment that this firm offers is another reason why it is a strong contender. Wai Lung has allowed Spin Master Toys to make payments using wire transfer as opposed to a letter of credit which would require Spin Master Toys to make a 30% deposit and provide documentation (Mark, 2001). There is no doubt that the letter of credit would frustrate the production process and possibly strain the relationship between the two companies. Whereas Wai Lung is generally strongly positioned, there are some issues that erode its capacity. Its lack of experience in the production of electric toys is one of these factors. If Spin Master Toys is to release E-charger into the market in good time, it needs to work with a supplier with an established record of excellence in the making of electric toys. Wai Lung simply lacks this record and this could hurt its competitiveness.
On the other hand, Wah Shing is also a strong competitor. In fact, on the surface, this firm appears to be the obvious best choice. Its main strength lies in its production record and capacity. With 3,500 employees, this company promises to deliver the required volume of E-chargers in good time (Mark, 2001). However, the fact that it is currently working on a number of large projects and is operating at between 70 and 80% capacity raises questions about its ability to satisfy Spin Master Toys’ demands. The company reclaims the integrity of its production capacity through its strong financial position. The average earnings in the industry is US $30 million (Mark, 2001). Wah Shing has managed to sustain earnings of US $40 million. Its inability to offer personalized service and guarantees hurts this company. Given the large number of clients with which it works, this firm is simply unable to offer the same level of personalized attention that Spin Master Toys will be able to experience when it chooses Wai Lung. That the company has failed to adopt appropriate mechanisms for communication among the management and the high price that it is charging further harm its prospects (Mark, 2001). The table below offers a summary of the scores awarded to the two companies.
| Criterion | Wai Lung | Wah Shing |
| Production capacity (Size of workforce, floor space, number of current projects) | 1 | 1 |
| Performance record | 0 | 1 |
| Leadership (Personal guarantees, communication within management, personal relationships with Spin Master Toys) | 1 | 0 |
| Payment terms | 1 | 0 |
| Price | 1 | 0 |
| Financial position | 0 | 1 |
| Total | 4 | 3 |
A simple scoring system has been adopted to arrive at the scores in the table above. In a criterion where a firm enjoys an advantage, a score of 1 is awarded. Otherwise, the firm receives a score of 0.
Selected Supplier and Risks
From the table above, it is clear that Wai Lung and Wah Shing are equally matched. However, as the total scores show, the former outperforms the latter. Given this fact, it is proposed that Spin Master Toys should select Wai Lung. As it works with Wai Lung, there are various advantages that the company will enjoy. These include guarantees of timely delivery given Wai Lung’s owner’s assurance, the favorable payment terms, the lower price and the dedicated service that the firm can offer. However, Spin Master Toys should be wary of risks that it is likely to encounter in its collaboration with Wai Lung. These risks and the steps that Spin Master can take to dampen their impact are discussed in the following section.
There are a number of pitfalls that firms usually face in their relationships with suppliers. They include group failure, overconfidence in judgment, and failure to monitor the selection process and the performance of the supplier (Altinoz, 2016). Left unaddressed, these hurdles can destroy the supplier-company relationship, resulting in avoidable losses. It is indeed possible that Spin Master Toys could place too much confidence in Wai Lung. For example, the company can erroneously expect Wai Lung to deliver the required units of E-charger despite the fact that this supplier has never worked on electric toys in the past. Furthermore, when it fails to constantly monitor how Wai Lung is fulfilling its mandate, Spin Master Toys may suffer delays or a total production halt. Other risks that this company faces include cash flow challenges on the part of Wai Lung, and inadequate engineering skills (Mark, 2001). In the case study, it is suggested that Wai Lung is a rather small firm with a minuscule engineering team that is composed of a meager three employees. These issues should concern Spin Master Toys as they present a serious risk of delay. It is also possible that Wai Lung will be unable to make any deliveries within the required timeline. Consequently, Spin Master Toys will lose the advantage of being the first to introduce the E-charger toy into the market.
If it fails to institute steps aimed at mitigating the risks discussed above, Spin Master Toys should brace for financial hardships. Fortunately, there are a number of strategies that the company can adopt. To eliminate the risk of group failure, the company should maintain a close relationship and establish channels for communication (Altinoz, 2016). By communicating constantly and clearly with Wai Lung, the firm will manage to confirm that acceptable progress is being made. Grounding its decision making on facts holds the key to addressing the problem of over-confidence. Throughout the production process, Spin Master Toys should perform a fact-based analysis and evaluation. Demanding accountability, and supply chain protection are other best practices that companies can implement in a bid to eradicate risks (“Best Practices in Supplier”, 2015). Spin Master Toys should make it clear to Wai Lung that excellence and quality are irreducible demands that must be fulfilled. Furthermore, the company should conduct regular inspections and hold discussions with Wai Lung as part of supply chain protection. Combined, the different strategies will either totally eliminate or reduce the impact of the risks.
Conclusion
The complexities surrounding supplier selection can make this process seem daunting. While it is true that the process can be complicated, firms need not worry as there are guidelines that they can use in identifying the ideal supplier with whom to work. These guidelines involve the main factors that the firms should examine. Among the factors are the supplier deliver record, production capacity, and price, among many others. Spin Master Toys faces the challenge of selecting between two suppliers, each of which has appealing strengths and competencies. However, after the application of the criterion that Spin Master Toys is advised to adopt, Wai Lung emerges as the favorite. The company should move with speed and initiate the production process at Wai Lung’s facilities. It should note that its relationship with Wai Lung will be fraught with challenges and risks which can be eliminated through proper due diligence, open communication and demanding accountability.
References
Altinoz, C. (2016). Avoid these five decision-making pitfalls in supplier selection. Supply & Demand Chain Executive.
Best practices in supplier qualification and supply chain protection. (2015). Nutraceutical Business Review
Mark, K. (2001). Spin Master Toys (A): Finding a manufacturer for e-chargers. London, ON: Ivey Management Services.
Stevic, Z. (2017). Criteria for supplier selection: a literature review. International Journal of Engineering and Enterprise Applications. Retrieved January 22, 2019 from https://www.researchgate.net/profile/Zeljko_Stevic/publication/314117457_Criteria_for_supplier_selection_A_literature_review/links/58b691c292851c471d43ded1/Criteria-for-supplier-selection-A-literature-review.pdf?origin=publication_detail
