LCC Medical Manufacturing, Inc.

LCC Medical Manufacturing, located in Punta Gorda, Florida, produces medical devices for orthopedic surgery including replacement parts for human knees, hips, and elbows, and surgical tools. One component LCC outsources is the metal tibial component. This part has a metal stem that is inserted into the tibial lower leg bone. LCC is evaluating three Tier 1 suppliers to manufacture the component part in a certain size. Annual demand for this stockkeeping-unit (SKU) is 20,000 units per year, and we assume 250 working days in a year. Other information is shown in Exhibits 13.17 and 13.18.

(Tier 1 Supplier)	Price per Unit (P) @	Price per Unit (P) @	Price per Unit (P) @	Management Oversight Cost (O) per Unit	Transport Mode Cost per Unit	Order Costs	Cost to Store One Unit per Year	Order Lead Time (L) in Days
Xiajing	$1.25	$0.95	$0.70	$0.35	$0.25	$655	$0.90	120
MedicUSA	$1.70	$1.60	$1.55	$0.15	$0.15	$260	$0.80	90
Werkzeug	$1.60	$1.35	$1.30	$0.20	$0.20	$350	$0.70	120

exhibit 13.18

LCC Medical Manufacturing Qualitative Sourcing Criteria for a Surgical Kit

	Rank Order (1 worst, 5 best)
Supplier Selection Criteria	Xiajing	Medic USA	Werkzeug
Delivery reliability	3	5	4
Product quality	3	4	5
Single supplier risks (sole sourcing)	High	Moderate	Moderate
Product and customs uncertainty (obsolescence, fees, work stoppages, etc.)	3	5	4
Sustainability practices (green supplier)	2	3	5

1. What is the total supply chain and logistics cost for each supplier when Q=5,000,Q=10,000 , and Q=20,000?

2. What supplier and order quantity do you recommend based on total supply chain costs?

3. Given your total supply chain cost analysis and the qualitative criteria in Exhibit 13.18, using a weighted scoring model of your own design, what are your summary scores for each supplier? (You may decide how to scale each criterion, the weight of each criterion, and whether to include costs or not.)

4. What are your final recommendations?