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Stryker Corporation Case Study

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Stryker Corporation Case Study

Andrew Wyatt

Brett Nymeyer

Brett Sundberg

Josh Ihnen

Executive Summary

It is 2003 and Stryker Corporation is proposing to build a new facility that would be able to produce a key component (printed circuit boards) in-house instead of outsourcing that activity to suppliers. Currently, Stryker purchases PCBs from a small number of contract manufacturers but recently the suppliers have been underperforming in quality and delivery. The proposed plan would create a high degree of control over this product, ensure quality, and create an economy of scale in the long run.

However, this plan also required the most capital outlay in both money and resources. The project would have an initial investment of a new building, capital equipment, and IT infrastructure totaling $6,287,258. However, there would also be cost savings in the long run from decreased purchases from suppliers even after the increased expense of Stryker’s manufacturing costs. To find out if this project offered an adequate return on investment we performed a Net Present Value Analysis and also calculated Internal Rate of Return and Payback Period for years 2003 through 2009.

Analysis

1. Does this project make sense?

We like the insourcing proposal and think that it makes business sense for several reasons. However, these reasons are based off of the information taken from the case before we analyzed NPV, IRR, or Payback Period, so they are strictly inferences made using sound business sense.

First, we think insourcing is a good strategic move on the basis of having inconsistent and weak suppliers. When the suppliers you are working with are neither effective nor efficient, your own supply chain and ultimately your profits will suffer. Good logistics are very important in trying to create a competitive or distinct advantage

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