Case Study: the Global Sourcing

In: Business and Management

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Case Study: The Global Sourcing Wire Harness Decision
Calvin Smith
Westwood College
Professor Rivers
MGMT 350

The Global Sourcing Wire Harness Decision

1. Quote 1

Original Wire Quote:
Unit price = $30 * Packing costs = $.75 per unit * Tooling = $6,000 onetime fixed charge * Freight cost = $5.20 per hundred pounds
Yearly Unit Cost = ((monthly demand*12) * (unit cost + packaging cost)) + tooling charge Yearly Unit Cost = ((60000)*(30+.75)) + 6000
Yearly Unit Cost = (60000*30.75) + 6000 = $1,851,000
Yearly Unit Cost = $1,851,000
Unit Cost = Yearly Unit Cost / Yearly Demand
Unit Cost = $1,851,000 / 60,000
Unit Cost = $30.85
Yearly Freight Cost = # of units * unit weight * freight cost Yearly Freight Cost = 60,000 * 10 * .0520
Yearly Freight Cost = $31,200
Unit Freight Cost = $31,200/60,000 = .52
Total Unit Cost = Unit Cost + Freight Cost
Total Unit Cost = $30.85 + $0.52
Total Unit Cost = $31.87

2. Quote 2

2. Happy Lucky Assemblies Quote: * Unit Price = $19.50 * Shipping Lead Time = Eight Weeks * Tooling: $3,000

Yearly Unit Cost = ((monthly demand*12) * (unit cost + packaging cost)) + tooling charge Yearly Unit Cost = ((60000)*($19.50+.00)) + 3,000
Yearly Unit Cost = (60000*19.50) + 3000
Yearly Unit Cost = $1,173,000

Unit Cost = Yearly Unit Cost / Yearly Demand
Unit Cost = $1,173,000 / 60,000
Unit Cost = $19.55

Monthly Freight Cost = $41,366

Unit Freight Cost = $41,366/5000 = 8.28
Total Unit Cost = Unit Cost + Freight Cost
Total Unit Cost = $19.55 + $8.28
Total Unit Cost = $27.83

3. Based on the total cost per unit this writer feels that Sheila should recommend Happy Lucky Assemblies as their per unit cost was cheaper than Original Wire. 4. The other issues that Sheila should evaluate are the amount of lead time needed for a product to get to their customer on…...

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