Case Write-Up for Microsoft Case

1. Discuss the supply chain changes Microsoft made between the Xbox and the Xbox 
360? How were these changes designed to improve results? Do you agree with their shift in supply chain strategy? Why of why not? 


a) Microsoft mainly made four changes between the Xbox and Xbox 360. First, since Microsoft accumulated some market shares by selling Xbox and planned to launch Xbox 360 earlier than PS3, they expected a higher sale amount on Xbox 360, thus leading to a lack of production capacity because both of Microsoft’s EMS partners were producing Xbox at full capacity. So Microsoft added one more EMS partner, Celestica, to increase the production capacity and reduce cost by producing in Celestica’s new factory in China. Second, after learned the experience on Xbox, Microsoft decided to outsource the product design to develop a smaller and more elegant machine to secure the sales in some console markets, especially in Japan. Third, Microsoft decided to change their processor and graphic chip vendor to IBM and ATI because they wanted to take more control on both design and manufacture of these two extremely critical parts. At last, Microsoft also brought their major EMS partners into the design process so they could design production to be optimized for Xbox 360.

b) As mentioned above, these changes were designed to improve the whole procedure they build Xbox 360, from design procedure to production procedure. By changing the Xbox 360’s launch time and strategy, Microsoft could have a head start against Sony and take away some market shares that PS2 had. By adding a new EMS partner in China, Microsoft could both reduce manufacturing cost and fulfill the capacity. Outsourcing the product design to Astro Studios could secure the sales of their new console in the specific market where the consumers are more concerned about the design and make Xbox 360 more popular. Changing the main critical parts vendors gave Microsoft more control both on the design and...