Autolink

Case Summary:

Sheila Austin is a buyer for Autolink, a producer for the automotive industry. Request for Quotes have been sent out for a wiring harness. Two companies quoted the business. One was from a local supplier and one was an international supplier located in China. Sheila is faced with the decision to either buy from a local supplier or buy internationally. At first glance, the supplier from China, Happy Lucky Assemblies (HLA) looks like the best bet based on pricing. But, when underlying fees and costs associated with the international seller are reviewed, it makes her think twice. In this case study, we will analyze all cost and see which potential supplier Sheila should go with.

There are many things to consider when deciding to buy domestically or internationally. First – Cost. How cost effective is the local market versus the international market for supplier pools? Second – Quality. What Quality can the manufacturer support for their price? Third – Delivery. How well can the buyer maintain the supply distribution channels for either storage or Just-in-Time Deliveries? Original Wire looks like the easy solution since it’s a local business but if Autolink wants to break into the global sourcing market – Happy Lucky Assemblies might be a better choice. Original Wire has quoted the part at $30.00 each before packaging and delivery fees are applied. Original Wire also has a one-time re-tooling fee of $6,000.00. Happy Lucky Assemblies has quoted a price of $19.50 with a one-time $3,000 re-tooling fee. Easy decision, huh? Happy Lucky is the way to go!!! NOT SO FAST… International shipping fees haven’t been added. With that being said, let’s review the true cost of Original Wire and Happy Lucky Assemblies.

Original Wire - Auburn Hills, MI

Type Basis Calculation Per unit

Unit Price $30.00

Packing Costs $0.75

Tooling $6,000 one-time fixed charge Spreading Cost over 180,000 units produced in 3 years...