Alberto Vacchi, President of IMA, with the help of Massimo Marchesini, Head of Production and Procurement in 2008, had to choose how to organize production and structure a supply chain compromised by the recent economic crises. The supply chain was critical to meeting ownership-defined growth imperatives. The purchasing costs accounted for 85% of the turnover: only the design of the machine, the manufacturing of its’ core components, and the activities related to customers’ assistance were performed internally. The supplier network included highly specialized companies. Those in charge of supplying high-precision parts and components and complex processing cycles represented over 50% of the total purchasing needs.
Target for Teaching
- Business Model
Target audience and Issues
This Case Study is developed mainly for MBA and Executive MBA classes, but it can easily be adapted for other Master’s degrees.
At first sight, this Case Study could be seen as a Make or Buy decision, but it gives many more opportunities for students to focus on different aspects.
The instructor could focus on the fact that different strategies, business models, and operations could fulfill the same goal: make or buy, supplier relations, and network structures are some of the theoretical aspects that could be used in this Case Study.
At first sight, this Case Study could be seen as a Make-or-Buy decision, but it gives much more opportunities for students to focus on different aspects. There are different theoretical anchors, different lenses through which the problem can be viewed. Students will probably discard the ‘make’ option through reasoning, given the specificity of the knowledge required and the role of IMA assumed over time (orchestrator of contributions, with the supervision of functional activities with a high knowledge content and connected to customer management and the market). That said, it will tend to focus on the ‘buy’ option using a series of theoretical contributions.
The choice to invest in a minority share of the capital of some suppliers can be read as ‘quasi-integration’. This relational governance modality allows a certain degree of control without compromising flexibility.
Furthermore, students will be able to use the analytical framework of strategic alliances and networks to identify the pros and cons of different approaches to the supply chain and stimulate the identification of systems for suppliers’ governance and motivation. The theme of digital transformation and, in general, of technology can also be used to make supply chain management more efficient.
The case stimulates a reflection on how companies find themselves having to manage crises internally and in the reference context. This is the consequence of an increasing de-verticalization of production cycles. With the example of IMA, we encourage students to consider coherent ways of aligning objectives (in this case, growth), strategy, business model, and Operations. In particular, with the instructor’s help, students reflect on how there is no single way to achieve a specific goal: different companies can leverage other structures and methods of governing their relationships.
Again, the case highlights the importance of relationships and their management in the long run. Technical capacity, therefore, must be accompanied by relational competence. Finally, students learn the relevance of managerial action, not wanting to remain anchored to traditional operating methods, and preparing to cope with highly complex competitive dynamics.