Case Study: Wire Harness Case

Case Study: the Global Sourcing

Case Study: The Global Sourcing Wire Harness Decision

Calvin Smith

Westwood College

Professor Rivers

MGMT 350

2/8/15

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 time, the possible delays it takes in actual...