Tiger Golf

Ricky Magness, vice president of procurement for Tiger Golf Unlimited (TGU), islooking to bring his company out of a slump. Sales have been flat and TGU is a meresix months away from the most important industry event of the year, the PGA MerchandiseShow. During the trade show, TGU will introduce a new line of golf clubsthat almost magically correct the most common maladies of golfers-slices, worm burners,and duck hooks. The company is very excited about the product line and hasstaked its future on this rollout. Demand is expected to be very high and profitswill soar-if Magness can find a low cost manufacturer to build the product and fill theU.S. supply chain immediately following the PGA Merchandise Show.Magness has been traveling the globe in search of a high quality, low cost supplierfor the clubs. He is also wary of product espionage that could lead to copycat clubs fillingthe market too quickly. After conducting a thorough analysis of twelve differentmanufacturers, Magness has narrowed his consideration to three potential suppliers:

• Supplier 1 is located in Kuala Lumpur, Malaysia. The company has experiencemaking golf products, boasts excess factory capacity, and produces atremendous knock-off of the Callaway Big Bertha line of golf clubs. Productprices are reasonable but ocean freight rates and insurance costs are high dueto required transit through the Malacca Straits. The product is made availableat the Port of Kelang and is 670 MYR (Malaysian Ringgit) per set.

• Supplier 2 is located in Wulumuqi, China. The company is a former state-ownedmaker of Red Army military supplies. The far inland location createsa very low labor cost but increases the length of supply lines and the distributionchannel. The factory-based cost of the product is $149 U.S. per set.

• Supplier 3 is located in Edinburgh, Scotland. The company is a world-classmanufacturer of golf clubs and is used by nearly every major club manufacturerin the United States and Europe. They are somewhat constrained by factory capacity and road congestion to the port, but promise to meet alldeadlines. The cost of the product, delivered to the Port of Charleston, SouthCarolina is £165 (British Pound) per set.Before making a final supplier selection, Magness thought that it would be wise toconfer with Moe Hanna, TGU's vice president of logistics, and Larry Himmer, the directorof transportation. The three executives met at company headquarters to comparethe options. Hanna was impressed by the thoroughness of the supplier evaluationprocess and production cost analysis. In contrast to his boss, the transportation directorlaunched into a tirade. He gave a very impassioned speech about off-shore manufacturingrisks and possible transportation disruptions. Himmer also kept talking inacronyms about new security regulations and more paperwork requirements.By the time the meeting was over, Magness was worried. Had he missed somethingin his analysis or was Himmer ranting aimlessly about a nonissue? Magness decidedthat the analysis of the three potential suppliers should take on another dimension-supply chain risk and what could be done about it.

CASE QUESTIONS

1. What issues should Magness evaluate in his assessment of transportation risks?

2. Analyze each supplier option that Magness is considering. What specific risks does each supplier option present?

3. Which supplier would you recommend that Magness choose to best balance company goals with supply chain risk?

4. What types of security issues and requirements will confront TGU if they off-shore manufacturing?