Group 3

Bergerac
Systems: The
Challenge of
backward
Integration

Market Overview
Increasing

pet ownership
Humanization leads to willingness to pay
Supply side improvement in diagnostic
equipment's for pet care
In House lab equipment and point of care
testing reduced diagnostic time for both
doctors and pet owners

Overview of Bergerac Systems

Founded

in 2001
Diagnostic Equipment focusing on
household pets
First product, HemaVue
Also added a line of disposable test kits
In mid 2006, Omnivue Launched
In 2013, Forecasted launch of Omnivue
Mobile

Omnivue Features
Simple

to use
Less physical footprint
Highly accurate test results
Reference lab ( quality and accuracy)
Competitive pricing ( $9,500 for instrument
and $9.25 for test cartridges)
750 units sold in 1 year and expected
sales of 7,500 units at end of 2010

Competitors
Idexx

Lab- Industry leader, Dx Chemsitry

analyser for high end and high volume
analysis
Abaxis Inc- Second position, Vetsca VS2,
cost effective and old disganostic
technology
Heska corporation, Low Quality and less
innovative products

Production Process

Two stage production- Instrument and

cartridge
Instrument: Assembly line, Extensive quality
testing and FDA regulations.
Cartridge: Two injection moudled plastic
pieces ( base and cover), needs sterile clean
room, Chemical reagents comes form dozen
3rd party chemical suppliers.
Currently manufactured by GenieTech (3/4)
and Elsinore Plastics(1/4)

Problems in cartridge
production

Plastics depend on varying petrochemical pricing

Less margin vendors waits for low petrochemical
price for manufacture
Often delays the delivery
Bergerac needs to stake up huge inventory due to
unreliable 3rd party suppliers
Bergerac recently faced shortage of supplies from
both vendors, leading to delay in final equipment
manufacture. Not able to keep promise on
delivery date to customer.
No control over the supply of plastics pieces

Decision Making- Make vs Buy

BUY

PRICE : $5.7 M
Gain 8 molding
presses
Gain experienced
labor
Lower cost by
$.26/unit
Payback = 5 years

MAKE

Only make the 4

molding presses
Acquire new
machinery with shorter
cycle time
More efficient use of
raw materials
Lower cost by $.56/unit
Payback = 16 months

Intangible cost of MAKE

decision
Inexperience

: low productivity
No specialized knowledge : lacks
innovation
Low capacity utilization
The time needed to learn the process and
fixing mistakes will be costly

Intangible cost of BUY decision

Ability

to invest in other growth opportunities

will decline
Interpersonal conflicts between old and new
staff
Acquisition would come with a supervisor,
inexperienced oversight and management
may deteriorate the value and productivity

Was Mccarthys case

convincing and timing right?
Output= 4687500
Production time (24*5*52)=6240 hrs = 374400
min=22464000 seconds
Buy: 75 seconds cycle time, 10/2 =5 cartridge at
one cycle, 4 molding press with 0.9 up time.
Desired cycle time= production time/desired
units of output
Cd=22464000/4687500=4.79232
Actual cycle time = ca= 75/(5*4*0.9)= 4.16

Make Timings
Output= 4687500
Production time (24*5*52)=6240 hrs = 374400
min=22464000 seconds
Buy: 70 seconds cycle time, 10/2 =5 cartridge at
one cycle, 4 molding press with 0.95 up time.
Desired cycle time= production time/desired
units of output
Cd=22464000/4687500=4.79232
Actual cycle time = ca= 70/(5*4*0.95)= 3.684

RECOMMENDATION
Bergerac

should build-in-house capability

Consistent supply : More control over
supply chain
Increased flexibility in production
New machinery : less maintenance, faster
production
Cheaper & Faster production
Save on transportation cost
Faster return on investment