Supply Chain and Bergerac

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Bergerac Systems: The Challenge of Backward Integration
Abstract
Veterinary expenditure has been on an increasing trend due to the increase in pet ownership in the United States. Bergerac is a company producing equipments used for testing pet patients in the veterinarian clinics. Omnivue is one of the most successful equipments produced by the company, which is priced at a competitive rate to attract lower and middle sized veterinarians. The production of Omnivue involves the use of plastics and chemical reagents supplied by two major suppliers, GenieTech and Elsinore. The management of Bergerac is planning to take control over its suppliers to reduce the production fluctuation and overhead costs of the firm. There are three strategic
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Hence, manufacturing department should not interfere in the distribution department, and the latter should be experienced in distribution of products like Omnivue to the end customers.
Strategic Alternative 2- Backward Integration
Backward integration is a type of vertical integration in which a company takes control over its suppliers. It is a form of acquisition of the intermediary players involved in supplying the raw materials used in the production process of the firm. Raw materials, intermediate manufacturing and assembly are controlled by the firm whereas distribution to the end customer is done by a third party company. In this way, company increases production efficiency and gains a competitive advantage by lowering its production cost.
Bergerac can opt for the buy option and implement its backward integration by acquiring GenieTech. GenieTech can provide the company with eight efficient molding machines for the acquisition price of $ 5.75 million. The price includes experienced labor force and management. Bergerac can fulfill its chemical reagent demand by using 4 out of 8 moulds provided in the acquisition. Rest of the presses can be used in the expansion process or can be used to meet the demand of a third party. This investment can result in the reduction of overhead expenses by twenty six percent per unit. Bergerac can pay the amount over a period of five years making the project

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