SHER WOOD HOCKEY STICKS GLOBAL SOURCING

subject Type Homework Help
subject Pages 9
subject Words 4395
subject Authors Christopher A. Bartlett, Paul W. Beamish

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SHER-WOOD HOCKEY STICKS: GLOBAL SOURCING
SYNOPSIS
The Sher-Wood Hockey Sticks case examines from a global sourcing perspective how an iconic Canadian
TEACHING OBJECTIVES
ASSIGNMENT QUESTIONS
1. What motivated Sher-Wood to outsource its manufacturing to suppliers inside or outside Canada in
2007 and 2011?
SUPPLEMENTARY READINGS
C.A. Bartlett and P.W. Beamish. Developing Transnational Strategies: Building Layers of Competitive
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CASE DISCUSSION AND ANALYSIS
1. What motivated Sher-Wood to outsource its manufacturing to suppliers inside or outside
Canada in 2007 and 2011?
Exhibit TN-1 illustrates the general planning process associated with global sourcing. The outsourcing
decision depends on whether the relevant activity can be disaggregated and whether it constitutes a
competitive advantage to the company. The nearshoring/offshoring decision depends on whether
alternative locations possess comparative advantages. Companies considering global sourcing strategies
2. What decision factors changed between 2007 and 2011?
To evaluate Sher-Woods proposal in 2011, students must analyze the companys strategic objectives
(refer to the answer for Question 1), past experience and environmental factors. Students should pay
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First, during the previous three years, Sher-Wood successfully shifted from wooden hockey sticks to
composite sticks. However, its sales volume dropped 50 per cent, and ROI of the fixed asset was poor.
Second, when Sher-Wood started to provide composite sticks more than 10 years ago, they had established
contact with their main supplier in China. During that decade, the main supplier learned about the tasks,
skills and processes of manufacturing composite hockey sticks and even gradually understood the
Third, after more than 10 years collaboration, Sher-Wood and its main supplier had developed interpartner
3. Which firm activities would be impacted in offshore outsourcing? How different were these
influences between 2007 and 2011?
According to the case and the discussion in Question 2, Sher-Wood offshore outsourced manufacturing in
2007 and planned to offshore outsource both manufacturing and R&D in 2011. Students should analyze the
manufacturing outsourcing and then examine what changes would happen if the offshore outsourcing of
R&D took place also.
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1) Interface between manufacturing and R&D
In this interface, the impacted activities are product innovation, designing for manufacturability,
manufacturing process innovation, knowledge transfer, IP management, etc. The greater the technology
intensity, the greater the impact on the interface.
2) Interface between manufacturing and marketing
Here the impacted activities are custom design, product modification, quality control and supply chain
management. The hockey companies need feedback from the market to adjust their manufacturing
3) Interface between R&D and marketing
Here the impacted activities are new product development and product positioning. Usually the companys
4) Interface between the company and material suppliers
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5) Interface between the company and customers
The example about how Jason Spezza transferred from Sherwood-Drolet to Reebok illustrates the
importance of the interface between the company and its customers, including relationship and market
6) Interface between the company and competitors
When a company implements manufacturing outsourcing, competitors might try to opportunistically win
7) Interface between the company and the public
8) Dynamics in all relevant factors
According to the case, if executives find they have made a serious misjudgement in deciding on offshore
1) Main activities: Sher-Wood would not have R&D and manufacturing activities on-site and would
2) Interface activities: Sher-Wood would pay more attention to collaboration management among the
3) Other interactions: Custom design and custom production would still be impacted. All their main
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4. Should Sher-Wood outsource its remaining manufacturing to China? Will this solve Sher-
Wood’s concerns?
Sher-Wood would offshore outsource not only the remaining high-end composite hockey sticks but also
the R&D in 2011. According to the discussion in Question 3, they expected to save some cost and create
more value by collaboration with their Chinese partner and retailers.
cover.
Scope Advantage = Technology Intensity X Relevant Product Scope
Moreover, with offshore outsourcing the remaining manufacturing and R&D, Sher-Wood was taking on
the risk of becoming hollow as well as increasing the partner’s bargaining power (or potentially becoming
a competitor). This would make Sher-Wood vulnerable to the environmental contingency. In contrast, their
competitors adopted flexible global sourcing strategies with multiple suppliers to hedge the environmental
contingency.
5. What alternatives exist? What are the pros and cons of each?
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According to the case, Sher-Wood had denied the alternatives of keeping manufacturing in Canada or
moving the manufacturing out of China.
For alternative (1), if Sher-Wood acquired the main supplier in China, it would need great investment and
management control. Whats more, without learning from other hockey companies, the partners R&D
capability might be weakened gradually.
KEY TAKEAWAYS
1. Global sourcing activities aim to exploit comparative advantages scattered around the world and
maximize the companys competitive advantages. Nevertheless, it is possible that these two types of
WHAT HAPPENED?
In April 2011, Sher-Wood Hockey Inc. announced that it was moving the last of its high-end hockey and
goalie stick production to China. About 40 employees would lose their jobs because of the change.
Another 110 employees would remain at Sher-Wood Hockey’s head office in Sherbrooke as well as its
research and development, distribution and novelty production facilities
5
.The media and public responded
to the announcement quickly.
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Before this time, they would try to move the equipment to China and then send their experts to set up
machines and coach the partner’s workers.
Meanwhile, reshoring continued to take place in other manufacturing sectors. In October 2009, NCR
moved production of its ATMs from overseas factories to Columbus, Georgia, creating some 870 jobs.
6
In
October 2011, Ford Motor Company and General Electric started returning to the United States some jobs
total cost advantage will drop to single digits or be erased entirely.
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EXHIBIT TN-1: GLOBAL SOURCING PLANNING
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EXHIBIT TN-2: IMPACTED ACTIVITIES IN MANUFACTURING OFFSHORE OUTSOURCING
Primary Activities
R&D
Marketing
Interface Activities*
R&D and Manufacturing
Manufacturing and Marketing
Marketing and R&D
Product innovation
Designing for manufacturability
Manufacturing process innovation
Knowledge transfer
IP management
Custom design
Product modification
Quality control
Supply chain management
New product development
Product positioning
Other Interactions
Supplier
Customers
Rivalries
The public
Dynamics
Material
procurement
Customer relationship
Market perception
Brand campaign
Employment concern
Cultural heritage
Scanning dynamics
Source: For interface activities, the impacted activities are summarized and modified from Kotabe,
Chapter 1: Global
sourcing strategy: An overview” in his Global Sourcing Strategy.
EXHIBIT TN-3: IMPACTED ACTIVITIES IN MANUFACTURING AND R&D OFFSHORE
OUTSOURCING
Primary Activities
R&D
Marketing
Reduce internal activities
Interface Activities
Between the Company and the Partner
Between the Company and Retailers
Custom design and custom product
Product testing
Management of collaboration
Management of collaboration
Other Interactions
Supplier
Customers
Rivalries
The public
Dynamics
Material
procurement
Customer relationship
Brand campaign
Employment concern
Scanning dynamics
Source: Case authors.
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EXHIBIT TN-4: SCOPE ADVANTAGE OF FIVE MAIN HOCKEY EQUIPMENT MANUFACTURERS
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EXHIBIT TN-6: PROS AND CONS OF OFFSHORE INSOURCING OR OFFSHORE OUTSOURCING
Offshore Insourcing
Offshore Outsourcing
Pros
Efficiency
Scale manufacturing with full capacity
Loyal workforce
No fixed asset investment
No management of manufacturing
No management of R&D
Flexibility
Production control
Innovation
Partner can acquire capability
from multiple channels.
Cons
Efficiency
Investment in fixed asset
Management of manufacturing
Management of R&D
Extra managerial effort for collaboration
Partners bargaining power
Flexibility
Innovation
Access to internal capability
Source: Case authors.
EXHIBIT TN-7: PROS AND CONS OF MOVING MANUFACTURING AND R&D TO CHINA OR MEXICO
In Mexico
In China
Pros
Cultural bond
NAFTA9 benefit
reduce the cost of trade
Better supply chain efficiency because of shorter
geographic distance
shorter lead time and cycle time
Low labour cost
Existing partnership
Cons
No existing partnership
A little bit higher labour cost
Cultural difference
Worse supply chain efficiency because of
longer geographic distance
longer lead time and cycle time
Source: Case authors.
9
The North American Free Trade Agreement or (NAFTA) is an agreement signed by the governments of Canada, Mexico
and the United States, creating a trilateral trade bloc.
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EXHIBIT TN-8: (A) LABOUR COST COMPARISON BETWEEN CHINA AND MEXICO
(Note: the trend lines are generated with exponential regressions.)
Source: Case authors.
EXHIBIT TN-8: (B) THE CHANGE RATES OF LABOUR COSTS IN CHINA AND MEXICO
Source: Case authors.
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DATA AND INFORMATION SOURCES:
Product:
1. www.sher-wood.com/
3. www.eastonbellsports.com/
5. www.ccmhockey.com/
7. Adidas Group Annual Report 2010.
9. Bauer Performance Sports Ltd. Managements Discussion and Analysis of Financial Condition and Results
of Operations (March 2011).
11. Sanctioned Team Sports Play In the US Remains Strong, But...,”
14. Hockey Stick Maker Sherwood-Drolet Files Proposal with Creditors,”
Acquisition or bankruptcy:
Global sourcing activities
19. Hockey Stick Maker Outsources,”
www.thestar.com/News/Canada/article/273561.
21. Hockey Sticks South of the Border Are the Way to Go,”
www.usatoday.com/sports/hockey/2008-01-10-hockey-sticks-mexico_N.htm.
23. Nike Bauer Recalls More Hockey Sticks,”
25. For Canadian Manufacturers, Foreign Assets Tantalizingly Cheap,”
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28. Jason Spezza Now Part of the Reebok Hockey Family,”
www.reebokhockey.com/labs/labs-blog/entries/2008/Nov/25/entry/jason-spezza-reebok-hockey-family/
Reshoring
29. Otis Shifts Work Closer to Home,”
http://online.wsj.com/article/SB10001424052970204294504576614973286731008.html.

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