OUTLINE
BERGARAC SYSTEMS
THE CHALLENGE OF BACKWARD INTEGRATION

Bergerac Systems is a manufacturer of diagnostic instruments used in veterinary practices that has been growing constantly although is small in the market. Led by CEO Ian Wyckoff.
This case is based in getting the result by performing qualitative and quantitave analysis of “make vs. buy” decision considering expected production capacities, market forecast and the source of effective strategies.
The company introduced the OmniVue chemistry analyzer that allows veterinarians to run a wide range of blood chemistry tests on their patients (animals) in the office instead of sending them outside the laboratories. This method produces highly stable results using a proprietary cartridge for holding the blood specimen during the analysis, veterinarians mark this process easy to operate which make the work more efficient.
The CEO is concerned about uncertain delivery from the cartridge suppliers which have resulted in deficits and stock-outs. The firm entrust on two extern suppliers for the plastic components of the cartridges. To address the supply chain problems, the CEO considers acquiring one of the suppliers, GenieTech, while the director of planning proposes to build the required capabilities within the company's existing manufacturing facilities.
The Sales of these single-use cartridges represent an important part of the revenue stream for the product line.
Make – decision: Make the plastic pieces at Bergerac´s plant
Consists in: Acquire machinery, make 4 required molding presses, lower costs by $.57 per unit ; payback of 16 months.
Buy - decision: Acquire Begnerac´s supplier, Genie Tech for $ 5. 75 mil
Consists in: Gain experienced labor, capacitation, gain 8 molding presses , lower costs by $.26 per unit : payback in 5 years.
I think that Bergerac should make a cartridge fabrication