5-613-094
APRIL 29, 2013
T E AC
CHING NOTE
Ko
onys, In
nc.
Desccription
Th
his case descrribes the sourrcing challeng ges of firm th
hat produces mobile comm munication deevices
with very short prroduct life cy ycles. The su upply chain m manager musst trade off a low per-uniit cost
supplly contract which guarantees the quan ntity and high hat allow quantity
her average ccost options th
flexib
bility; i.e., an option
o contracct or the spot market.
Teacching Purp
poses
Thhe case gives students an understandin ng of how diffferent contraact types can be used to eensure
stablee supply, mittigate procureement risk, and
a reduce p rocurement ccost. The case teaches stu udents
how option
o contracts can be useed to mitigatee supply unceertainty. The case is design
ned to be taught in
a course focused ono supply cha ain managem ment or operaations manag gement. It can n also be used
d in a
course that covers quantitative decision
d moddeling.
here are severral purposes for
Th f which thiss case is well ssuited.
• Illustrate ho
ow various su
upply chain contracts
c work
k.
• Show how option contra
acts can be ussed to mitigatee risk from deemand and su
upply uncertaainty.
• Show how to determin
ne distributio
on parameter s for a set o
of data using
g the “distrib
bution
fitting” fun
nction.
• dents to experiment with parameters iin a quantitattive model to
Allow stud o understand
d their
impact on the
t decision.
_______
_______________
_______________
________________
___________________________________________________________________
, 613-094 Teaching Note—Konys, Inc.
Materials and Assignment Questions
Materials
Konys, Inc. (HBS Case 613-065)
Konys spreadsheet supplement
Monte Carlo Simulation software
Instructors may also choose to make the following optional material available to students, either
before or after the class.
Nagali, V., J. Hwang, D. Sanghera, M. Gaskins, M. Pridgen. T. Thurston, P. Mackenroth, D.
Branvold, P. Scholler, G. Shoemaker. 2008. “Procurement Risk Management (PRM) at Hewlett-
Packard Company,” Interfaces, Vol. 38, No. 1, January–February 2008, pp. 51–60.
A further theoretical and background reference for the instructors is:
Pei, Pamela Pen-Erh, David Simchi-Levi, and Tunay I. Tunca, Sourcing Flexibility, Spot Trading,
and Procurement Contract Structure, 2011, Operations Research, 59 (3), 578–601.
Assignment Questions
1. Work through the assignment questions at the end of the case.
2. How does an option contract create value for the buyer? For the supplier?
3. What would you recommend to Judy Taso?
Teaching Plan
This case can be taught according to the following 80-minute teaching plan.
Block 1: Introduction—What is Judy’s problem? 5 minutes
Block 2: Contract types 20 minutes
Block 3: Part A 20 minutes
Block 4: Part B 20 minutes
Block 5: Part C (Optional) 10 minutes
Block 6: Wrap—HP PRM 5 minutes
The solutions to the case questions are given using specific functions in @Risk; however,
analogous functions in CrystalBall or another Monte Carlo Simulation method can be substituted.
These solutions are referenced in the teaching plan below.
2
APRIL 29, 2013
T E AC
CHING NOTE
Ko
onys, In
nc.
Desccription
Th
his case descrribes the sourrcing challeng ges of firm th
hat produces mobile comm munication deevices
with very short prroduct life cy ycles. The su upply chain m manager musst trade off a low per-uniit cost
supplly contract which guarantees the quan ntity and high hat allow quantity
her average ccost options th
flexib
bility; i.e., an option
o contracct or the spot market.
Teacching Purp
poses
Thhe case gives students an understandin ng of how diffferent contraact types can be used to eensure
stablee supply, mittigate procureement risk, and
a reduce p rocurement ccost. The case teaches stu udents
how option
o contracts can be useed to mitigatee supply unceertainty. The case is design
ned to be taught in
a course focused ono supply cha ain managem ment or operaations manag gement. It can n also be used
d in a
course that covers quantitative decision
d moddeling.
here are severral purposes for
Th f which thiss case is well ssuited.
• Illustrate ho
ow various su
upply chain contracts
c work
k.
• Show how option contra
acts can be ussed to mitigatee risk from deemand and su
upply uncertaainty.
• Show how to determin
ne distributio
on parameter s for a set o
of data using
g the “distrib
bution
fitting” fun
nction.
• dents to experiment with parameters iin a quantitattive model to
Allow stud o understand
d their
impact on the
t decision.
_______
_______________
_______________
________________
___________________________________________________________________
, 613-094 Teaching Note—Konys, Inc.
Materials and Assignment Questions
Materials
Konys, Inc. (HBS Case 613-065)
Konys spreadsheet supplement
Monte Carlo Simulation software
Instructors may also choose to make the following optional material available to students, either
before or after the class.
Nagali, V., J. Hwang, D. Sanghera, M. Gaskins, M. Pridgen. T. Thurston, P. Mackenroth, D.
Branvold, P. Scholler, G. Shoemaker. 2008. “Procurement Risk Management (PRM) at Hewlett-
Packard Company,” Interfaces, Vol. 38, No. 1, January–February 2008, pp. 51–60.
A further theoretical and background reference for the instructors is:
Pei, Pamela Pen-Erh, David Simchi-Levi, and Tunay I. Tunca, Sourcing Flexibility, Spot Trading,
and Procurement Contract Structure, 2011, Operations Research, 59 (3), 578–601.
Assignment Questions
1. Work through the assignment questions at the end of the case.
2. How does an option contract create value for the buyer? For the supplier?
3. What would you recommend to Judy Taso?
Teaching Plan
This case can be taught according to the following 80-minute teaching plan.
Block 1: Introduction—What is Judy’s problem? 5 minutes
Block 2: Contract types 20 minutes
Block 3: Part A 20 minutes
Block 4: Part B 20 minutes
Block 5: Part C (Optional) 10 minutes
Block 6: Wrap—HP PRM 5 minutes
The solutions to the case questions are given using specific functions in @Risk; however,
analogous functions in CrystalBall or another Monte Carlo Simulation method can be substituted.
These solutions are referenced in the teaching plan below.
2
