Purchasing and Supply Chain Management
6th Edition
ISBN: 9781285869681
Author: Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter C, Problem 5.2SC
Scenario 3
Ben Gibson, the purchasing manager at Coastal Products, was reviewing purchasing expenditures for packaging materials with Jeff Joyner. Ben was particularly disturbed about the amount spent on corrugated boxes purchased from Southeastern Corrugated. Ben said, “I don’t like the salesman from that company. He comes around here acting like he owns the place. He loves to tell us about his fancy car, house, and vacations. It seems to me he must be making too much money off of us!” Jeff responded that he heard Southeastern Corrugated was going to ask for a price increase to cover the rising costs of raw material paper stock. Jeff further stated that Southeastern would probably ask for more than what was justified simply from rising paper stock costs.
After the meeting, Ben decided he had heard enough. After all, he prided himself on being a results-oriented manager. There was no way he was going to allow that salesman to keep taking advantage of Coastal Products. Ben called Jeff and told him it was time to rebid the corrugated contract before Southeastern came in with a price increase request. Who did Jeff know that might be interested in the business? Jeff replied he had several companies in mind to include in the bidding process. These companies would surely come in at a lower price, partly because they used lower-grade boxes that would probably work well enough in Coastal Products’ process. Jeff also explained that these suppliers were not serious contenders for the business. Their purpose was to create competition with the bids. Ben told Jeff to make sure that Southeastern was well aware that these new suppliers were bidding on the contract. He also said to make sure the suppliers knew that price was going to be the determining factor in this quote, because he considered corrugated boxes to be a standard industry item.
As the Marketing Manager for Southeastern Corrugated, what would you do upon receiving the request for quotation from Coastal Products?
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
To ensure a full line of outdoor clothing and accessories, the marketing department at Teddy Bower insists that they also sell waterproof hunting boots. Unfortunately, neither Teddy Bower nor TeddySports has expertise in manufacturing those kinds of boots. Therefore, Teddy Bower contacted several Taiwanese suppliers to request quotes. Due to competition, Teddy Bower knows that it cannot sell these boots for more than $54. However, $40 per boots was the best quote from the suppliers. In addition, Teddy Bower anticipates excess inventory will need to be sold off at a 50 percent discount at the end of the season. Given the $54 price, Teddy Bower’s demand forecast is for 400 boots, with a standard deviation of 300.
Questions:
1. If Teddy Bower decides to include these boots in its assortment, how many boots should it order from its supplier?
2. Suppose Teddy Bower orders 380 boots. What would its expected profit be?
3. John Briggs, a buyer in the procurement department, overheard at lunch…
To ensure a full line of outdoor clothing and accessories, the marketing department at Teddy Bower insists that they also sell waterproof hunting boots. Unfortunately, neither Teddy Bower nor TeddySports has expertise in manufacturing those kinds of boots. Therefore, Teddy Bower contacted several Taiwanese suppliers to request quotes. Due to competition, Teddy Bower knows that it cannot sell these boots for more than $54. However, $40 per boot was the best quote from the suppliers. In addition, Teddy Bower anticipates excess inventory will need to be sold off at a 50 percent discount at the end of the season. Given the $54 price, Teddy Bower’s demand forecast is for 560 boots, with a standard deviation of 460.a. If Teddy Bower decides to include these boots in its assortment, how many boots should it order from its supplier?(Round your answer to nearest whole number.) _________b. Suppose Teddy Bower orders 540 boots. What would its expected profit be?(Round your answer to the nearest…
eBook
Problem 7-15
Par, Inc., is a small manufacturer of golf equipment and supplies. Par's distributor believes a market exists for both a medium-priced golf bag, referred to as a standard model, and a high-priced golf bag, referred to as a deluxe model. The distributor is so confident of the
market that, if Par can make the bags at a competitive price, the distributor will purchase all the bags that Par can manufacture over the next three months. A careful analysis of the manufacturing requirements resulted in the following table, which shows the production
time requirements for the four required manufacturing operations and the accounting department's estimate of the profit contribution per bag:
Product
Standard
Deluxe
Cutting
and
Dyeing
7/10
1
Production Time (hours)
Sewing
½
516
Finishing
1
2/3
Inspection
and
Packaging
1/10
1/₁
Profit
per
Bag
$10
$9
The director of manufacturing estimates that 630 hours of cutting and dyeing time, 600 hours of sewing time, 708 hours of finishing…
Chapter C Solutions
Purchasing and Supply Chain Management
Ch. C - Avion, Inc. Susan Dey and Bill Mifflin,...Ch. C - Prob. 1.2ACh. C - Prob. 1.3ACh. C - Prob. 1.4ACh. C - Prob. 1.5ACh. C - Avion, Inc. Susan Dey and Bill Mifflin,...Ch. C - Avion, Inc. Susan Dey and Bill Mifflin,...Ch. C - Prob. 1.8ACh. C - Prob. 1.9ACh. C - Prob. 1.10A
Ch. C - The Global Sourcing Wire Harness Decision Sheila...Ch. C - The Global Sourcing Wire Harness Decision Sheila...Ch. C - The Global Sourcing Wire Harness Decision Sheila...Ch. C - The Global Sourcing Wire Harness Decision Sheila...Ch. C - The Global Sourcing Wire Harness Decision Sheila...Ch. C - Prob. 3.1ACh. C - Prob. 3.2ACh. C - Prob. 3.3ACh. C - Prob. 3.4ACh. C - Prob. 3.5ACh. C - Prob. 3.6ACh. C - Prob. 3.7ACh. C - Prob. 3.8ACh. C - Prob. 3.9ACh. C - Prob. 3.10ACh. C - Prob. 3.11ACh. C - Prob. 3.12ACh. C - Prob. 3.13ACh. C - Prob. 5.1SACh. C - Prob. 5.2SACh. C - Prob. 5.3SACh. C - Prob. 5.4SACh. C - Prob. 5.1SBCh. C - Prob. 5.2SBCh. C - Scenario 3 Ben Gibson, the purchasing manager at...Ch. C - Scenario 3 Ben Gibson, the purchasing manager at...Ch. C - Scenario 4 Sharon Gillespie, a new buyer at...Ch. C - Scenario 4 Sharon Gillespie, a new buyer at...Ch. C - Scenario 4 Sharon Gillespie, a new buyer at...Ch. C - Prob. 6.2ACh. C - Prob. 6.3ACh. C - Prob. 6.4ACh. C - Prob. 6.5A
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, operations-management and related others by exploring similar questions and additional content below.Similar questions
- Scenario 3 Ben Gibson, the purchasing manager at Coastal Products, was reviewing purchasing expenditures for packaging materials with Jeff Joyner. Ben was particularly disturbed about the amount spent on corrugated boxes purchased from Southeastern Corrugated. Ben said, I dont like the salesman from that company. He comes around here acting like he owns the place. He loves to tell us about his fancy car, house, and vacations. It seems to me he must be making too much money off of us! Jeff responded that he heard Southeastern Corrugated was going to ask for a price increase to cover the rising costs of raw material paper stock. Jeff further stated that Southeastern would probably ask for more than what was justified simply from rising paper stock costs. After the meeting, Ben decided he had heard enough. After all, he prided himself on being a results-oriented manager. There was no way he was going to allow that salesman to keep taking advantage of Coastal Products. Ben called Jeff and told him it was time to rebid the corrugated contract before Southeastern came in with a price increase request. Who did Jeff know that might be interested in the business? Jeff replied he had several companies in mind to include in the bidding process. These companies would surely come in at a lower price, partly because they used lower-grade boxes that would probably work well enough in Coastal Products process. Jeff also explained that these suppliers were not serious contenders for the business. Their purpose was to create competition with the bids. Ben told Jeff to make sure that Southeastern was well aware that these new suppliers were bidding on the contract. He also said to make sure the suppliers knew that price was going to be the determining factor in this quote, because he considered corrugated boxes to be a standard industry item. Is Ben Gibson acting legally? Is he acting ethically? Why or why not?arrow_forwardAvion, Inc. Susan Dey and Bill Mifflin, procurement managers at Avion, Inc., sat across from each other and reviewed a troubling performance report concerning a key supplier, Foster Technologies. The report detailed the deteriorating performance of Foster Technologies in the areas of material quality and on-time delivery. At this point, Kevin ODonnell, another procurement manager, entered the room. Explain the role of performance measurement in managing supply chain activities.arrow_forwardAvion, Inc. Susan Dey and Bill Mifflin, procurement managers at Avion, Inc., sat across from each other and reviewed a troubling performance report concerning a key supplier, Foster Technologies. The report detailed the deteriorating performance of Foster Technologies in the areas of material quality and on-time delivery. At this point, Kevin ODonnell, another procurement manager, entered the room. What parts of the supply chain are most closely involved with the situation in this case? What is the responsibility of each part in order to maintain a smooth flow of material?arrow_forward
- The Global Sourcing Wire Harness Decision Sheila Austin, a buyer at Autolink, a Detroit-based producer of subassemblies for the automotive market, has sent out requests for quotations for a wiring harness to four prospective suppliers. Only two of the four suppliers indicated an interest in quoting the business: Original Wire (Auburn Hills, MI) and Happy Lucky Assemblies (HLA) of Guangdong Province, China. The estimated demand for the harnesses is 5,000 units a month. Both suppliers will incur some costs to retool for this particular harness. The harnesses will be prepackaged in 24 12 6-inch cartons. Each packaged unit weighs approximately 10 pounds. Quote 1 The first quote received is from Original Wire. Auburn Hills is about 20 miles from Autolinks corporate headquarters, so the quote was delivered in person. When Sheila went down to the lobby, she was greeted by the sales agent and an engineering representative. After the quote was handed over, the sales agent noted that engineering would be happy to work closely with Autolink in developing the unit and would also be interested in future business that might involve finding ways to reduce costs. The sales agent also noted that they were hungry for business, as they were losing a lot of customers to companies from China. The quote included unit price, tooling, and packaging. The quoted unit price does not include shipping costs. Original Wire requires no special warehousing of inventory, and daily deliveries from its manufacturing site directly to Autolinks assembly operations are possible. Original Wire Quote: Unit price = 30 Packing costs = 0.75 per unit Tooling = 6,000 one-time fixed charge Freight cost = 5.20 per hundred pounds Quote 2 The second quote received is from Happy Lucky Assemblies of Guangdong Province, China. The supplier must pack the harnesses in a container and ship via inland transportation to the port of Shanghai in China, have the shipment transferred to a container ship, ship material to Seattle, and then have material transported inland to Detroit. The quoted unit price does not include international shipping costs, which the buyer will assume. HLA Quote: Unit price = 19.50 Shipping lead time = Eight weeks Tooling = 3,000 In addition to the suppliers quote, Sheila must consider additional costs and information before preparing a comparison of the Chinese suppliers quotation: Each monthly shipment requires three 40-foot containers. Packing costs for containerization = 2 per unit. Cost of inland transportation to port of export = 200 per container. Freight forwarders fee = 100 per shipment (letter of credit, documentation, etc.). Cost of ocean transport = 4,000 per container. This has risen significantly in recent years due to a shortage of ocean freight capacity. Marine insurance = 0.50 per 100 of shipment. U.S. port handling charges = 1,200 per container. This fee has also risen considerably this year, due to increased security. Ports have also been complaining that the charges may increase in the future. Customs duty = 5% of unit cost. Customs broker fees per shipment = 300. Transportation from Seattle to Detroit = 18.60 per hundred pounds. Need to warehouse at least four weeks of inventory in Detroit at a warehousing cost of 1.00 per cubic foot per month, to compensate for lead time uncertainty. Sheila must also figure the costs associated with committing corporate capital for holding inventory. She has spoken to some accountants, who typically use a corporate cost of capital rate of 15%. Cost of hedging currencybroker fees = 400 per shipment Additional administrative time due to international shipping = 4 hours per shipment 25 per hour (estimated) At least two five-day visits per year to travel to China to meet with supplier and provide updates on performance and shipping = 20,000 per year (estimated) The international sourcing costs must be absorbed by Sheila, as the supplier does not assume any of the additional estimated costs and invoice Sheila later, or build the costs into a revised unit price. Sheila feels that the U.S. supplier is probably less expensive, even though it quoted a higher price. Sheila also knows that this is a standard technology that is unlikely to change during the next three years, but which could be a contract that extends multiple years out. There is also a lot of hall talk amongst the engineers on her floor about next-generation automotive electronics, which will completely eliminate the need for wire harnesses, which will be replaced by electronic components that are smaller, lighter, and more reliable. She is unsure about how to calculate the total costs for each option, and she is even more unsure about how to factor these other variables into the decision. Calculate the total cost per unit of purchasing from Original Wire.arrow_forwardThe Global Sourcing Wire Harness Decision Sheila Austin, a buyer at Autolink, a Detroit-based producer of subassemblies for the automotive market, has sent out requests for quotations for a wiring harness to four prospective suppliers. Only two of the four suppliers indicated an interest in quoting the business: Original Wire (Auburn Hills, MI) and Happy Lucky Assemblies (HLA) of Guangdong Province, China. The estimated demand for the harnesses is 5,000 units a month. Both suppliers will incur some costs to retool for this particular harness. The harnesses will be prepackaged in 24 12 6-inch cartons. Each packaged unit weighs approximately 10 pounds. Quote 1 The first quote received is from Original Wire. Auburn Hills is about 20 miles from Autolinks corporate headquarters, so the quote was delivered in person. When Sheila went down to the lobby, she was greeted by the sales agent and an engineering representative. After the quote was handed over, the sales agent noted that engineering would be happy to work closely with Autolink in developing the unit and would also be interested in future business that might involve finding ways to reduce costs. The sales agent also noted that they were hungry for business, as they were losing a lot of customers to companies from China. The quote included unit price, tooling, and packaging. The quoted unit price does not include shipping costs. Original Wire requires no special warehousing of inventory, and daily deliveries from its manufacturing site directly to Autolinks assembly operations are possible. Original Wire Quote: Unit price = 30 Packing costs = 0.75 per unit Tooling = 6,000 one-time fixed charge Freight cost = 5.20 per hundred pounds Quote 2 The second quote received is from Happy Lucky Assemblies of Guangdong Province, China. The supplier must pack the harnesses in a container and ship via inland transportation to the port of Shanghai in China, have the shipment transferred to a container ship, ship material to Seattle, and then have material transported inland to Detroit. The quoted unit price does not include international shipping costs, which the buyer will assume. HLA Quote: Unit price = 19.50 Shipping lead time = Eight weeks Tooling = 3,000 In addition to the suppliers quote, Sheila must consider additional costs and information before preparing a comparison of the Chinese suppliers quotation: Each monthly shipment requires three 40-foot containers. Packing costs for containerization = 2 per unit. Cost of inland transportation to port of export = 200 per container. Freight forwarders fee = 100 per shipment (letter of credit, documentation, etc.). Cost of ocean transport = 4,000 per container. This has risen significantly in recent years due to a shortage of ocean freight capacity. Marine insurance = 0.50 per 100 of shipment. U.S. port handling charges = 1,200 per container. This fee has also risen considerably this year, due to increased security. Ports have also been complaining that the charges may increase in the future. Customs duty = 5% of unit cost. Customs broker fees per shipment = 300. Transportation from Seattle to Detroit = 18.60 per hundred pounds. Need to warehouse at least four weeks of inventory in Detroit at a warehousing cost of 1.00 per cubic foot per month, to compensate for lead time uncertainty. Sheila must also figure the costs associated with committing corporate capital for holding inventory. She has spoken to some accountants, who typically use a corporate cost of capital rate of 15%. Cost of hedging currencybroker fees = 400 per shipment Additional administrative time due to international shipping = 4 hours per shipment 25 per hour (estimated) At least two five-day visits per year to travel to China to meet with supplier and provide updates on performance and shipping = 20,000 per year (estimated) The international sourcing costs must be absorbed by Sheila, as the supplier does not assume any of the additional estimated costs and invoice Sheila later, or build the costs into a revised unit price. Sheila feels that the U.S. supplier is probably less expensive, even though it quoted a higher price. Sheila also knows that this is a standard technology that is unlikely to change during the next three years, but which could be a contract that extends multiple years out. There is also a lot of hall talk amongst the engineers on her floor about next-generation automotive electronics, which will completely eliminate the need for wire harnesses, which will be replaced by electronic components that are smaller, lighter, and more reliable. She is unsure about how to calculate the total costs for each option, and she is even more unsure about how to factor these other variables into the decision. Calculate the total cost per unit of purchasing from Happy Lucky Assemblies.arrow_forwardThe Global Sourcing Wire Harness Decision Sheila Austin, a buyer at Autolink, a Detroit-based producer of subassemblies for the automotive market, has sent out requests for quotations for a wiring harness to four prospective suppliers. Only two of the four suppliers indicated an interest in quoting the business: Original Wire (Auburn Hills, MI) and Happy Lucky Assemblies (HLA) of Guangdong Province, China. The estimated demand for the harnesses is 5,000 units a month. Both suppliers will incur some costs to retool for this particular harness. The harnesses will be prepackaged in 24 12 6-inch cartons. Each packaged unit weighs approximately 10 pounds. Quote 1 The first quote received is from Original Wire. Auburn Hills is about 20 miles from Autolinks corporate headquarters, so the quote was delivered in person. When Sheila went down to the lobby, she was greeted by the sales agent and an engineering representative. After the quote was handed over, the sales agent noted that engineering would be happy to work closely with Autolink in developing the unit and would also be interested in future business that might involve finding ways to reduce costs. The sales agent also noted that they were hungry for business, as they were losing a lot of customers to companies from China. The quote included unit price, tooling, and packaging. The quoted unit price does not include shipping costs. Original Wire requires no special warehousing of inventory, and daily deliveries from its manufacturing site directly to Autolinks assembly operations are possible. Original Wire Quote: Unit price = 30 Packing costs = 0.75 per unit Tooling = 6,000 one-time fixed charge Freight cost = 5.20 per hundred pounds Quote 2 The second quote received is from Happy Lucky Assemblies of Guangdong Province, China. The supplier must pack the harnesses in a container and ship via inland transportation to the port of Shanghai in China, have the shipment transferred to a container ship, ship material to Seattle, and then have material transported inland to Detroit. The quoted unit price does not include international shipping costs, which the buyer will assume. HLA Quote: Unit price = 19.50 Shipping lead time = Eight weeks Tooling = 3,000 In addition to the suppliers quote, Sheila must consider additional costs and information before preparing a comparison of the Chinese suppliers quotation: Each monthly shipment requires three 40-foot containers. Packing costs for containerization = 2 per unit. Cost of inland transportation to port of export = 200 per container. Freight forwarders fee = 100 per shipment (letter of credit, documentation, etc.). Cost of ocean transport = 4,000 per container. This has risen significantly in recent years due to a shortage of ocean freight capacity. Marine insurance = 0.50 per 100 of shipment. U.S. port handling charges = 1,200 per container. This fee has also risen considerably this year, due to increased security. Ports have also been complaining that the charges may increase in the future. Customs duty = 5% of unit cost. Customs broker fees per shipment = 300. Transportation from Seattle to Detroit = 18.60 per hundred pounds. Need to warehouse at least four weeks of inventory in Detroit at a warehousing cost of 1.00 per cubic foot per month, to compensate for lead time uncertainty. Sheila must also figure the costs associated with committing corporate capital for holding inventory. She has spoken to some accountants, who typically use a corporate cost of capital rate of 15%. Cost of hedging currencybroker fees = 400 per shipment Additional administrative time due to international shipping = 4 hours per shipment 25 per hour (estimated) At least two five-day visits per year to travel to China to meet with supplier and provide updates on performance and shipping = 20,000 per year (estimated) The international sourcing costs must be absorbed by Sheila, as the supplier does not assume any of the additional estimated costs and invoice Sheila later, or build the costs into a revised unit price. Sheila feels that the U.S. supplier is probably less expensive, even though it quoted a higher price. Sheila also knows that this is a standard technology that is unlikely to change during the next three years, but which could be a contract that extends multiple years out. There is also a lot of hall talk amongst the engineers on her floor about next-generation automotive electronics, which will completely eliminate the need for wire harnesses, which will be replaced by electronic components that are smaller, lighter, and more reliable. She is unsure about how to calculate the total costs for each option, and she is even more unsure about how to factor these other variables into the decision. Based on the total cost per unit, which supplier should Sheila recommend?arrow_forward
- The Global Sourcing Wire Harness Decision Sheila Austin, a buyer at Autolink, a Detroit-based producer of subassemblies for the automotive market, has sent out requests for quotations for a wiring harness to four prospective suppliers. Only two of the four suppliers indicated an interest in quoting the business: Original Wire (Auburn Hills, MI) and Happy Lucky Assemblies (HLA) of Guangdong Province, China. The estimated demand for the harnesses is 5,000 units a month. Both suppliers will incur some costs to retool for this particular harness. The harnesses will be prepackaged in 24 12 6-inch cartons. Each packaged unit weighs approximately 10 pounds. Quote 1 The first quote received is from Original Wire. Auburn Hills is about 20 miles from Autolinks corporate headquarters, so the quote was delivered in person. When Sheila went down to the lobby, she was greeted by the sales agent and an engineering representative. After the quote was handed over, the sales agent noted that engineering would be happy to work closely with Autolink in developing the unit and would also be interested in future business that might involve finding ways to reduce costs. The sales agent also noted that they were hungry for business, as they were losing a lot of customers to companies from China. The quote included unit price, tooling, and packaging. The quoted unit price does not include shipping costs. Original Wire requires no special warehousing of inventory, and daily deliveries from its manufacturing site directly to Autolinks assembly operations are possible. Original Wire Quote: Unit price = 30 Packing costs = 0.75 per unit Tooling = 6,000 one-time fixed charge Freight cost = 5.20 per hundred pounds Quote 2 The second quote received is from Happy Lucky Assemblies of Guangdong Province, China. The supplier must pack the harnesses in a container and ship via inland transportation to the port of Shanghai in China, have the shipment transferred to a container ship, ship material to Seattle, and then have material transported inland to Detroit. The quoted unit price does not include international shipping costs, which the buyer will assume. HLA Quote: Unit price = 19.50 Shipping lead time = Eight weeks Tooling = 3,000 In addition to the suppliers quote, Sheila must consider additional costs and information before preparing a comparison of the Chinese suppliers quotation: Each monthly shipment requires three 40-foot containers. Packing costs for containerization = 2 per unit. Cost of inland transportation to port of export = 200 per container. Freight forwarders fee = 100 per shipment (letter of credit, documentation, etc.). Cost of ocean transport = 4,000 per container. This has risen significantly in recent years due to a shortage of ocean freight capacity. Marine insurance = 0.50 per 100 of shipment. U.S. port handling charges = 1,200 per container. This fee has also risen considerably this year, due to increased security. Ports have also been complaining that the charges may increase in the future. Customs duty = 5% of unit cost. Customs broker fees per shipment = 300. Transportation from Seattle to Detroit = 18.60 per hundred pounds. Need to warehouse at least four weeks of inventory in Detroit at a warehousing cost of 1.00 per cubic foot per month, to compensate for lead time uncertainty. Sheila must also figure the costs associated with committing corporate capital for holding inventory. She has spoken to some accountants, who typically use a corporate cost of capital rate of 15%. Cost of hedging currencybroker fees = 400 per shipment Additional administrative time due to international shipping = 4 hours per shipment 25 per hour (estimated) At least two five-day visits per year to travel to China to meet with supplier and provide updates on performance and shipping = 20,000 per year (estimated) The international sourcing costs must be absorbed by Sheila, as the supplier does not assume any of the additional estimated costs and invoice Sheila later, or build the costs into a revised unit price. Sheila feels that the U.S. supplier is probably less expensive, even though it quoted a higher price. Sheila also knows that this is a standard technology that is unlikely to change during the next three years, but which could be a contract that extends multiple years out. There is also a lot of hall talk amongst the engineers on her floor about next-generation automotive electronics, which will completely eliminate the need for wire harnesses, which will be replaced by electronic components that are smaller, lighter, and more reliable. She is unsure about how to calculate the total costs for each option, and she is even more unsure about how to factor these other variables into the decision. Are there any other issues besides cost that Sheila should evaluate?arrow_forwardThe Global Sourcing Wire Harness Decision Sheila Austin, a buyer at Autolink, a Detroit-based producer of subassemblies for the automotive market, has sent out requests for quotations for a wiring harness to four prospective suppliers. Only two of the four suppliers indicated an interest in quoting the business: Original Wire (Auburn Hills, MI) and Happy Lucky Assemblies (HLA) of Guangdong Province, China. The estimated demand for the harnesses is 5,000 units a month. Both suppliers will incur some costs to retool for this particular harness. The harnesses will be prepackaged in 24 12 6-inch cartons. Each packaged unit weighs approximately 10 pounds. Quote 1 The first quote received is from Original Wire. Auburn Hills is about 20 miles from Autolinks corporate headquarters, so the quote was delivered in person. When Sheila went down to the lobby, she was greeted by the sales agent and an engineering representative. After the quote was handed over, the sales agent noted that engineering would be happy to work closely with Autolink in developing the unit and would also be interested in future business that might involve finding ways to reduce costs. The sales agent also noted that they were hungry for business, as they were losing a lot of customers to companies from China. The quote included unit price, tooling, and packaging. The quoted unit price does not include shipping costs. Original Wire requires no special warehousing of inventory, and daily deliveries from its manufacturing site directly to Autolinks assembly operations are possible. Original Wire Quote: Unit price = 30 Packing costs = 0.75 per unit Tooling = 6,000 one-time fixed charge Freight cost = 5.20 per hundred pounds Quote 2 The second quote received is from Happy Lucky Assemblies of Guangdong Province, China. The supplier must pack the harnesses in a container and ship via inland transportation to the port of Shanghai in China, have the shipment transferred to a container ship, ship material to Seattle, and then have material transported inland to Detroit. The quoted unit price does not include international shipping costs, which the buyer will assume. HLA Quote: Unit price = 19.50 Shipping lead time = Eight weeks Tooling = 3,000 In addition to the suppliers quote, Sheila must consider additional costs and information before preparing a comparison of the Chinese suppliers quotation: Each monthly shipment requires three 40-foot containers. Packing costs for containerization = 2 per unit. Cost of inland transportation to port of export = 200 per container. Freight forwarders fee = 100 per shipment (letter of credit, documentation, etc.). Cost of ocean transport = 4,000 per container. This has risen significantly in recent years due to a shortage of ocean freight capacity. Marine insurance = 0.50 per 100 of shipment. U.S. port handling charges = 1,200 per container. This fee has also risen considerably this year, due to increased security. Ports have also been complaining that the charges may increase in the future. Customs duty = 5% of unit cost. Customs broker fees per shipment = 300. Transportation from Seattle to Detroit = 18.60 per hundred pounds. Need to warehouse at least four weeks of inventory in Detroit at a warehousing cost of 1.00 per cubic foot per month, to compensate for lead time uncertainty. Sheila must also figure the costs associated with committing corporate capital for holding inventory. She has spoken to some accountants, who typically use a corporate cost of capital rate of 15%. Cost of hedging currencybroker fees = 400 per shipment Additional administrative time due to international shipping = 4 hours per shipment 25 per hour (estimated) At least two five-day visits per year to travel to China to meet with supplier and provide updates on performance and shipping = 20,000 per year (estimated) The international sourcing costs must be absorbed by Sheila, as the supplier does not assume any of the additional estimated costs and invoice Sheila later, or build the costs into a revised unit price. Sheila feels that the U.S. supplier is probably less expensive, even though it quoted a higher price. Sheila also knows that this is a standard technology that is unlikely to change during the next three years, but which could be a contract that extends multiple years out. There is also a lot of hall talk amongst the engineers on her floor about next-generation automotive electronics, which will completely eliminate the need for wire harnesses, which will be replaced by electronic components that are smaller, lighter, and more reliable. She is unsure about how to calculate the total costs for each option, and she is even more unsure about how to factor these other variables into the decision. Based on this case, do you think international purchasing is more or less complex than domestic purchasing? Why? Is it worth the additional effort?arrow_forwardAvion, Inc. Susan Dey and Bill Mifflin, procurement managers at Avion, Inc., sat across from each other and reviewed a troubling performance report concerning a key supplier, Foster Technologies. The report detailed the deteriorating performance of Foster Technologies in the areas of material quality and on-time delivery. At this point, Kevin ODonnell, another procurement manager, entered the room. Why can changes within a supply chain disrupt the normal flow of goods and services within a supply chain?arrow_forward
- Philibert Enterprises Inc is a manufacturing and distribution company that is engaged insupplying exotic Caribbean Food products of high quality for the European and NorthAmerican markets. The Product Quality and consistency of supplies of the product are twocritical success factors. Philibert Enterprises Inc. has been using its website as its principalpoint of contact for its customers It recently won a major contract to supply the Marks&Spencer chain in the UK, where persons of Caribbean origin are a significant group in thepopulation. This is in addition to the growing popularity of Caribbean Cuisineinternationally. High productivity levels are necessary to meet the product quality anddelivery time requirements. The Marketing Manager is expected to work closely with theHuman Resource Manager to develop a reward system that will enable greater reliabilitywith respect to response time and assure quality and compliance with HACCAP1requirements. 1. how can the following criteria…arrow_forwardPhilibert Enterprises Inc is a manufacturing and distribution company that is engaged insupplying exotic Caribbean Food products of high quality for the European and NorthAmerican markets. The Product Quality and consistency of supplies of the product are twocritical success factors. Philibert Enterprises Inc. has been using its website as its principalpoint of contact for its customers It recently won a major contract to supply the Marks&Spencer chain in the UK, where persons of Caribbean origin are a significant group in thepopulation. This is in addition to the growing popularity of Caribbean Cuisineinternationally. High productivity levels are necessary to meet the product quality anddelivery time requirements. The Marketing Manager is expected to work closely with theHuman Resource Manager to develop a reward system that will enable greater reliabilitywith respect to response time and assure quality and compliance with HACCAP1requirements. 1. Outline the factors that…arrow_forwardFOB retailer means: -the vendor pays the transportation charges to the retailers store or warehouse -the retailer pays the shipping charges - the vendor pays the shipping into the country -the retailer pays the shipping only until it enters into the counrtyarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Purchasing and Supply Chain ManagementOperations ManagementISBN:9781285869681Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. PattersonPublisher:Cengage Learning
Purchasing and Supply Chain Management
Operations Management
ISBN:9781285869681
Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson
Publisher:Cengage Learning
Forecasting 2: Forecasting Types & Qualitative methods; Author: Adapala Academy & IES GS for Exams;https://www.youtube.com/watch?v=npWni9K6Z_g;License: Standard YouTube License, CC-BY
Introduction to Forecasting - with Examples; Author: Dr. Bharatendra Rai;https://www.youtube.com/watch?v=98K7AG32qv8;License: Standard Youtube License