Analysis of Sony Corporation - Case Study Example

Case Study: and Analysis of SONY Corporation Involved in the Production and Distribution of Products Subject / Course Date Total Number of Words: 2,162 Table of Contents I. Introduction ……………………………………………………………….. 3 II. Theory and Purpose of Supply Chain Management …………………. 4 III. Sony Requirements from Prospective Global Suppliers …………….. 5 IV. Supply Chain Management and its Impact in the Production Process and Product Distribution of Sony PlayStation ® 3 …………... 6 V. Special Circumstance(s) which Involve Sony’s Operational Activities …………………………………………………………………… 8 VIII. Discussion ………………………………………………………………… 8 IX. Conclusion ………………………………………………………………… 10 Figure I – Suppliers Requirements …………………………………………….. 12 Figure II – Supply Chain Management and its Impact in the Production Process and Product Distribution of Sony PlayStation ® 3 …………………… 13 Table I – Flowchart of Sony’s Requirement to Become a Supplier …………. 15 Table II – List of Affiliated Global Companies …………………………………. 17 References ………………………………………………………………………...18 - 20 Introduction Established under the company name of Tokyo Tsushin Kogyo (Totsuko), Sony Corporation was founded in Japan back in 1946. (Sony History, 2008a) Over the years, the company has gone through the product development process related to the production of G-type tape recorder (1950), pocketable transistor radio (1957), smallest and lightest micro-tv (1962), first triniton color tv (1968), walkman (1979), and minidisc (1991) among others. (Sony History, 2008b) Today, Sony manufactures electronics related to AV/IT products and components; playstation; mobile phones and other electronic gadgets that is capable of capturing motion pictures and music. (Sony, 2008a) In line with the purpose of capturing the global markets, Sony Corporation established several affiliated companies to enable the company to smoothen out its global product distribution. (Sony, 2008b; Sony, 2008c) On the other hand, a group of affiliated Sony suppliers works together with the company to strengthen the company’s supply chain management within and outside Japan. For this study, the researcher will first discuss the theory and purpose of supply chain management. Eventually, the researcher will examine the impact of an effective supply chain management in the production process and product distribution of Sony PlayStation ® 3. In the process of discussing the impact of supply chain management in Sony’s production line and product distribution, the researcher will analyze the impact of supply chain management strategies particularly the push and pull. Aside from discussing the impact of supply chain management to Sony’s operational performance, the researcher will mention a special circumstance which involves Sony’s operational activities followed by interpreting the relevance of these special circumstances to the company’s supply chain management strategies. Theory and Purpose of Supply Chain Management Supply chain management is referring to the study of operational process flow that includes business activities related to the purchasing of raw materials, conversion of raw materials into intermediate or finished products as well as the distribution of these products to the end consumers. (Council of Supply Chain Management Professionals, 2008) Supply chain strategy adopted by a company normally varies from one to another depending on the specific business organization goal that is implemented by the members of its top management level. Given that the cost of storing a large amount of raw material inventories can be costly on the part of the company, the purchasing manager has to be careful when searching for a competitive supplier. In line with this matter, the production manager needs to be sure that the selected suppliers are capable of delivering the purchased items just-in-time in order to avoid having the company suffer from unecessary down-time due to unavailable raw materials. Basically, the outsourcing of competitive suppliers and the selection of market distribution facilities greatly depends on the geographic location of the production area and the company’s target end consumers for the finish products. (Arntzen et al., 1995) Other major consideration when deciding for the geographic location within or outside the country includes: (1) tariff / taxes; (2) costs of production which is related to the availability of inexpensive skill workers; (3) the costs of distribution related to the available mode of transportation; and (4) export regulations among others. (Arntzen et al., 1995) In order to determine the volume of products to be produce, a company could apply either push (physically efficient) or pull (market supply) chain management approach. (Fisher, 1997) Sony Requirements from Prospective Global Suppliers For many years, Sony purchases its raw materials from several competitive suppliers worldwide. Basically, the decision behind the selection process of Sony’s suppliers is based on the suppliers’ ability to meet the expectations of customers of Sony throughout the global market and the ability of these groups of suppliers to maintain a good relationship with Sony. (Sony, 2008d) Among the basic requirements of Sony when selecting a competitive supplier includes: (1) financially sound business status; (2) strictly comply with laws, regulations and social standards; (3) implements environmental management program; and (4) uses advanced technology that will benefit the production of raw materials for Sony products. (Sony, 2008g) On top of the basic requirements, prospective global suppliers should also satisfy the eQCDS+E1 requirements. (Sony, 2008g) (See Figure I – Suppliers Requirements on page 12) Prior to the manufacturing of a new product, both parties make sure that they spend some time integrating their knowledge with regards to the use of existing and innovative technology. (Sony, 2008e) For this reason, the company is able to lessen the risk of opportunity loss related to production error. As a result, Sony is able to satisfy the specific needs and wants of its target global consumers in terms of the products’ appeal and competitive technology used in their electronic gadgets. Supply Chain Management and its Impact in the Production Process and Product Distribution of Sony PlayStation ® 3 Sony’s tight control in the selection process of its suppliers enables the company maintain a group of Sony’s affiliated global suppliers. (See Table I – Flowchart of Sony’s Requirement to Become a Supplier on page 15) In the process, Sony is able to reduce the risk of having to shoulder some monetary loss related to unnecessary manufacturing errors such as technical defects. The strict implementation of Sony’s purchasing procedure aside from the fact that the company strictly prohibits the development of a personal relationship between the certified global suppliers and the procurement agents2 (Sony, 2008f) significantly reduces the risk of anomaly or illegal transaction between the company and its certified suppliers. Given that Sony management ensures that the company practices a fair business transaction to all, the qualified and technically competitive suppliers will calmly and professionally continue doing business with Sony. In the case of Sony PlayStation ® 3, Teiyu Goto – the Master Designer of Creative Center for Sony and Shuji Hiramatsu – the Section Chief of GUI/OS Design Group of Corporate Design Center for Sony together with the rest of the team went through a series of trial and error when it comes to producing the final sketch for the said game console. (Sony, 2007) Prior to the production process of Sony PlayStation ® 3, Sony Group’s team members together with its credible suppliers such as IBM3 and Toshiba4 worked together upon making their final decision to use a new processor called the Cell Broadband Engine ™ combined with a built-in hard disk drive. (Sony, 2007a; Shilov, 2006) On the other hand, the RSX graphics chip that was used in Sony PlayStation ® 3 was manufactured by Nvidia Corporation. (Shilov, 2006) Basically, the partnership agreement between Sony and IBM as well as with Toshiba makes it possible for the company and its selected suppliers to collaborate with regards to the specifications needed in the production of Sony PlayStation ® 3. As a result, Sony is able to leverage their existing knowledge and experiences needed to improve the power consumption as well as the competitive costs of manufacturing the Sony PlayStation ® 3. (Sony, 2007b) Sony initially adopted the push approach to production due to the excessively large market demand and supply gap for Sony PlayStation ® 3. Sony’s production of 2 million units by the end of 2006 was based on the availability of the blue laser diode that has greatly affected the estimated supply for the North American and Japanese market. (Quilty-Harper, 2006) As soon as Sony was able to fix the supply problem of blue laser diode, the company will apply the pull approach in order to meet the market demand for Sony PlayStation ® 3. To make it easier for Sony to effectively distribute the Sony PlayStation ® 3 in the global market, the company has established several affiliated companies worldwide. Sony’s worldwide affiliated companies are also responsible in marketing the product in the local market within its geographic territories. (See Table II – List of Affiliated Global Companies on page 17; See Figure II – Supply Chain Management and its Impact in the Production Process and Product Distribution of Sony PlayStation ® 3 on page 13) Special Circumstance(s) which Involve Sony’s Operational Activities Back in 2006, there was a minor delay with the global launching of PlayStation 3 due to the shortage in the supply of blue laser diode (also known as Blu-ray disc drives) which significantly affected its mass production schedule for the said game console. (Fisher, 2006; Shilov, 2006) As a result, Sony first launched the PlayStation 3 in Japan and North America before announcing its launching plan in Europe, Russia, Middle East, Afica and Australasia. (Shilov, 2006) Discussion Supply chain management is important in maintaining the efficiency and cost effectiveness of Sony’s production line as well as its global product distribution outlets. Since Sony practices a strict selection of its global suppliers, it is easier for Sony to develop a professional relationship as the company monitors the timely and quality of goods delivered by each supplier. Based on Sony’s technological requirements, the company’s suppliers such as in the case of IBM and Toshiba play a crucial role when it comes to the manufacturing of a cutting-edge semi-conductor material. In line with the production of Sony PlayStation, the study of Parker, Zsidsin, & Ragatz (2008) shows that the act of integrating the group of supplier increases the efficiency of producing a good quality product. Since the company is able to establish a good connection with its selected suppliers, the business organization could enjoy the benefit of having a more flexible operational process which is required by the rapidly changing technology and market demands. As a result of a good working relationship with its selected suppliers, Sony is able to develop its product within the shortest possible production schedule. In general, the act of purchasing raw materials is believed to be a source of a long-term competitive edge on the company. (McGinnis & Vallopra, 1999) Given that Sony requires a large volume of specific raw material, the company could easily make a good bargain when it comes to the cost of purchasing its supplies. Aside from allowing Sony to acquire the needed raw materials on time, the company’s capability to purchase raw materials at a relatively cheaper cost will enable the company to enjoy the benefits of economies of scale. Since Sony will have the competitive advantage of selling the Sony PlayStation ® 3 at a reasonable market price (Ramsay, 2001), the company is expected to enjoy a good business profit at the end of each year. Conclusion In general, the ability of the company to gain competitive advantage from being able to purchase the raw materials at a relatively cheaper price combined with the company’s ability to be able to capture its target market within the shortest possible market distribution channel will enable the company to gain a better financial performance. (Hunt & Morgan, 1997) In other words, companies who that fail to maximize its bargaining power when purchasing the needed supplies as well as allowing the finish products to go through a longer chain of distribution channel often results to a poor financial performance due to the fact that the market price will become less affordable by the time the product reaches the end-users. In the case of Sony, the company uses two strategies related to its supply chain management. First, the company ensures a strict selection of competitive suppliers to minimize the possibility of poor quality and untimely delivery of raw materials. In line with maintaining a good working relationship with its awarded suppliers, the company ensures a more effectively production planning when it comes to the manufacturing the Sony PlayStation ® 3. In the end, the company was able to launch the Sony PlayStation ® 3 at the least possible time and a more affordable cost. Despite Sony’s effort to be able to effectively deliver its finish products in the global market based on its forecasted schedule of delivery, there are some special occasions or incidence that could hinder the progress of its manufacturing outcome. With regards to the launching of Sony PlayStation ® 3, the mass production delay was caused by the inadequate supply of blue laser diode (also known as Blu-ray disc drives) – an important component of the game console. The second strategy is related to a more effective global product distribution on behalf of Sony. By establishing several affiliated companies throughout its different target countries, the company is able to deliver the Sony PlayStation ® 3 to its customers within the shortest period of time. *** End *** Figure I – Suppliers Requirements Source: Sony, 2008 Figure II – Supply Chain Management and its Impact in the Production Process and Product Distribution of Sony PlayStation ® 3 Initial Step Second Step Final Step Table I – Flowchart of Sony’s Requirement to Become a Supplier Sony Suppliers Preliminary Examination Strictly comply with laws, regulations and social standards Reflect environmental issues in their operating activities Demonstrate advanced technological capabilities Be e-commerce ready Offer high-levels of quality and competitive prices Be able to supply items on a stable yet flexible basis Be dedicated to customer service Manage environment-related substances as required First determine whether your company meets Sonys requirements Select your most competitive products and technologies Determine which Sony products your own products and technologies are most suitable for Contact the nearest Sony procurement office First Meeting (Prelimination Exam by Procurement Division) Items to be supplied to Sony, technological superiority Management policies, environmental management and compliance policies Manufacturing, sales and other operating parameters Strategies for sales, technology development, manufacturing, quality assurance and other activities Provide a brief introduction of your company Explain your products and technologies, including how they can help Sony improve its products and how they are superior to those of other companies Second Meeting (Preliminary Exam by Design Engineers) Specifications and performance of prospective suppliers products Manufacturing methods, production capacity and quality assurance methodology A more thorough discussion of your products and technologies is required at this point Explain in detail your operating systems, including technology development, production facilities and systems, and quality assurance programs Evaluation Sampes & Company Evaluation of specifications, reliability and other aspects of the prospective suppliers product Verification of quality assurance and environmental management programs Verification of operating results and financial position To initiate evaluations, you are asked to provide price estimates, samples, diagrams, reliability data and other information in accordance with specifications provided by Sony Samples are evaluated and tested in accordance with Sony standards, followed by a notification of the results Undergo an audit covering quality assurance, environmental programs and management, which require the disclosure of relevant information Evaluation & Certification Prior to delivery of the first shipment, Sony checks the quality, reliability and environmental properties of parts or materials, which are then certified or rejected based on performance, quality and other parameters. Provide documents and data for the certification of samples manufactured using volume production processes Final Preparation Preparation for order placement and deliveries Confirmation of all documents required to begin placing orders Provide other documents required by Sony for finalization of order placement Placement of First Order Source: Becoming a Sony Supplier Flowchart, 2008 Table II – List of Affiliated Global Companies Sony Americas Holding, Inc Sony Electronics Inc. Sony Magnetic Products Inc. of America Sony Australia Ltd. Sony Electronics (S’pore) Pty. Ltd. Sony Music Entertainment Inc. Sony Benelux B.V. Sony Electronics of Korea Corp. Sony Music Holding Inc. Sony Berlin G.m.b.H. Sony Electronics (Wuxi) Co., Ltd. Sony Network Taiwan Ltd. Sony BMG Management Co., LLC Sony EMCS (Malaysia) Sdn. Bhd. Sony Nordic A/S Sony BMG Music Entertainment BV Sony Ericsson Mobile Communication, AB Sony of Canada Ltd. Sony Brasil Ltda. Sony Espana, S.A. Sony Overseas S.A. Sony Broadband Entertainment Inc. Sony Europa, B.V. Sony Pictures Cable Ventures Inc. Sony Capital Corporation Sony Europe Holding B.V. Sony Pictures Entertainment Inc. Sony Computer Entertainment America Inc. Sony Film Holding Inc. Sony Pictures Home Entertainment Inc. Sony Computer Entertainment Europe Ltd. Sony France S.A. Sony Pictures Releasing Corp. Sony Corp. of America Sony Global Treasury Services Plc. Sony Pictures Television, Inc. Sony Corporation of HK Ltd. Sony Gulf FZE Sony Precision Devices (Huizhou) Co. Ltd. Sony Corporation of Panama, S.A. Sony Holding (Asia) B.V. Sony Service Centre (Europe) N.V. Sony (China) Ltd. Sony Hungaria kft Sony Taiwan Ltd. Sony DADC US Inc. Sony India Pvt. Ltd. Sony Technology (Malaysia )Sdn. Bhd. Sony de Mexico S.A. de C.V. Sony International (HK) Ltd. Sony Technology (Thailand) Co., Ltd. Sony Deutschland G.m.b.H. Sony Italia S.p.A. Sony Thai Co., Ltd. Sony Device Technology (Thailand) Co., Ltd. Sony Korea Corp. Sony UK Ltd. Sony Electronics Asia Pacific Pte. Lte. Sony Latin America Inc. Sony U.S. Funding Corp. Source: Sony Affiliated Companies Outside Japan, 2008 References: Arntzen, B., Brown, G., Harrison, T., & Trafton, L. (1995, January - February). Global Supply Chain Management at Digital Equipment Corporation. Interfaces , 25(1):69 - 93. Council of Supply Chain Management Professionals. (2008). Retrieved May 7, 2008, from Supply Chain Management and Logistics Management Definitions : http://cscmp.org/AboutCSCMP/Definitions/Definitions.asp Fisher, M. (1997, March - April). What is the Right Supply Chain for Your Product? Harvard Business Review , 105 - 116. Hunt, S., & Morgan, R. (1997). Resource-Advantage Theory: A Snake Swallowing Its Tail or a General Theory of Competition? . Journal of Marketing , 61(4):74 - 82. McGinnis, M., & Vallopra, R. (1999). Purchasing and Supplier Involvement Issues and Insights Regarding New Product Success. Journal of Supply Chain Management , 35(3):4 - 15. Parker, D. B., Zsidsin, G. A., & Ragatz, G. L. (2008). Timing and Extent of Supplier Integration in New Product Development: A Contingency Approach. Journal of Supply Chain Management , 44(1):71 - 83. Quilty-Harper, C. (2006, September 6). Joystiq. Retrieved May 8, 2008, from North American, Japanese PS3 Launch Limited to 500,000 Units: http://www.joystiq.com/2006/09/06/north-american-japanese-ps3-launch-limited-to-500-000-units/ Ramsay, J. (2001). The Resource Based Perspective, Rents, and Purchasings Contribution to Sustainable Competitive Advantage. Journal of Supply Chain Management , 37(3):38 - 47. Shilov, A. (2006, September 6). Retrieved May 7, 2008, from Sony Cuts PlayStation 3 Launch Shipment Volumes to 500 Thousand. Only 500 Thousand PlayStation 3 Consoles to Be Available at Launch: http://www.xbitlabs.com/news/multimedia/display/20060906145124.html Sony. (2007a, May). Retrieved May 7, 2008, from Feature Design PlayStation 3: The DNA of Fun, Reborn: http://www.sony.net/Fun/design/activity/product/ps3_01.html Sony. (2007b, October 18). Retrieved May 7, 2008, from Sony Group Expands High-Performance Semiconductors Manufacturing Alliances with IBM and Toshiba: http://www.sony.net/SonyInfo/News/Press/200710/07-1018E/index.html Sony. (2008a). Retrieved May 7, 2008, from About Sony Group: http://www.sony.net/SonyInfo/ Sony. (2008b). Retrieved May 7, 2008, from Affiliated Companies: Japan: http://www.sony.net/SonyInfo/CorporateInfo/Subsidiaries/index.html Sony. (2008c). Retrieved May 7, 2008, from Affiliated Companies: Outside Japan: http://www.sony.net/SonyInfo/CorporateInfo/Subsidiaries/outside.html Sony. (2008d). Retrieved May 7, 2008, from Procurement Activities : http://www.sony.net/SonyInfo/procurementinfo/index.html Sony. (2008e). Retrieved May 7, 2008, from For Suppliers: Partnership : http://www.sony.net/SonyInfo/procurementinfo/partnership.html Sony. (2008f). Retrieved May 7, 2008, from Business Practices in Purchasing: http://www.sony.net/SonyInfo/procurementinfo/fair.html Sony. (2008g). Retrieved May 7, 2008, from Fundamental Policy for Selecting a Supplier: http://www.sony.net/SonyInfo/procurementinfo/policy.html Sony History. (2008a). Retrieved May 7, 2008, from Establishing Tokyo Tsushin Kogyo (Tokyo Telecommunications Engineering Corporation): http://www.sony.net/Fun/SH/1-1/h2.html Sony History. (2008b). Retrieved May 7, 2008, from http://www.sony.net/Fun/SH/ Read More