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Remake or Buy? Reconditioning Products at Xtra Power Energy Systems
EXCERPTS
SUPPLY CHAIN RECONFIGURATION EFFECTS
Historically, Xtra Power had produced 18,000 new batteries annually, which was just one third of their predicted demand. The company operated in an industry where there was a need for the manufacturers to have a robust supply chain and a dynamic distribution network. Keeping the industry dynamics in mind, in June 2013, Dutta and his team opted for an entire supply chain reconfiguration. This led to improved lead times. As a result, the production of new batteries went up by 72% to 30,960 units per year, consuming the full capacity of the plant. With the entire facility involved in producing new batteries to match demand, the production of the reconditioned line of batteries, which required an additional production lead time of one day due to the inspection and disassembly process involved, was compromised... |
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REMAKE OR BUY?
Dutta was aware of the problems at the plant and called for immediate action. Together with Nanda, he worked out a detailed plan which involved the use of an adjoining facility on rent, installing the necessary equipment for the reconditioning process, and hiring additional manpower at a total cost of approximately Rs. 21.7 million (See Exhibit II for the breakup of costs). Sheikh, however, proposed that Xtra Power should outsource the reconditioning process to Revathi Batteries. Revathi’s core competency was in reconditioning used batteries and it had been in the business since 2001...
EXHIBITS
Exhibit I:The Battery Industry in India
Exhibit II:Detailed Break-Up of Costs
