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Guillaume Laverdure, chief operating officer at Medicom Group $($Medicom$),$ was evaluating a potential investment in a new facility that would manufacture melt$-$flown propylene $($melt$-$blown$),$ a key raw material for surgical and respirator masks. It was February $2021,$ and the previous $12$ months had been eventful for the company, one of the largest suppliers of medical masks in the world, as the Covid$-19$ pandemic had led to a staggering increase in demand for its products. Raw material supply shortages had been a major problem during $2020,$ and Guillaume was exploring opportunities that would make the company's supply chain more resilient. Guillaume was scheduled to meet with Medicom's chief executive officer, Ronald Reuben, the following week to review alternatives and to make a decision regarding melt$-$blown supply.

Objectives:

Analyze the financial, operational, and strategic implications of insourcing production of a key raw material

Understand the implications of investing in capacity for a capital$-$intensive business

Distinguish between supply chain resilience and supply chain agility

Identify potential sources of supply chain risks

Prepare a plan that aligns operations and corporate strategies

Discussion Questions:

In the role of Guillaume Laverdure, what recommendations would you make to Ronald Reuber and why? Support your recommendations with appropriate analysis and an implementation plan.

What is a reasonable payback period for this investment?

How does vertical integration allow Medicom to foster product and process innovation?

How will Medicom's suppliers react if the company builds a plant to manufacture melt$-$blown?

What is the difference between supply chain agility and supply chain resilience? Can companie develop both capabilities simultaneously?