Reference no: EM133320324

Case Study: Wolverine Global Sourcing Historically Wolverine produced most of its footwear itself in company-owned factories in the United States. Over time, however, the firm shifted the focus of its in-house activities from manufacturing to designing, marketing, and distributing its footwear brands. Today, sourcing Wolverine outsources production of more than 90 percent of its products to independent suppliers, with the remainder produced at company-operated facilities. Although Wolverine contracts with manufacturers throughout Asia and Latin America, most of its footwear is produced in China. Management wants to achieve sufficient flexibility to properly balance the need for timely shipments, high-quality products, and competitive pricing.

Managing wide-ranging value chains in many countries is challenging for Wolverine. Global sourcing exposes the firm to various risks, including possible shortages of qualified workers and production capacity, overreliance on independent suppliers, and strengthening foreign individual currency values, which affects the cost of imports. Wolverine frequently experiences inventory shortages in key markets, which upset the timing of customer shipments and hurt brand loyalty.

Transit time from China to Wolverine's warehouses in Europe and North America averages about one month. Sourcing from distant locations affects production schedules, transportation costs, insurance, and delivery timelines, leading to higher costs that must be absorbed in final product pricing.

The fixed exchange rate regime that China uses for its currency, the yuan, helps keep its exports cheap to the rest of the world. But Western countries and the World Trade Organization have regularly pressured China to rescind the regime. If the yuan strengthened, the cost of products imported from China would increase substantially.

Given its heavy reliance on global sourcing, Wolverine must maintain positive relationships with its suppliers. The firm has offices in Asia to facilitate and develop strategies for sourcing and importing quality footwear. Several Wolverine managers have worked in China, and headquarters managers fly to China regularly to meet with suppliers, inspect their facilities, and strengthen relationships.

In order to monitor product quality and labor conditions, Wolverine established guidelines for each of its independent manufacturers. The firm's "Engagement Criteria for Partners & Sources" aim to ensure suppliers comply with health and safety regulations, environmentally safe practices, fair employee treatment, and ethical business standards. Wolverine tries to reduce its ecological footprint by using biodegradable shoe forms and soy-based inks in footwear production and recycled cardboard and paper for its packaging

Question 1. What are the specific benefits that Wolverine obtains from global sourcing?

Question 2. What specific threats and risks does it face?

Question 3. What strategies can Wolverine employ to minimize the risks and threats it faces from global sourcing?