Wire Harness

The Global Sourcing Wire Harness Decision

MMT-235-W01 International Purchasing

John DAoust

February 21 2012

Autolink, a Detroit based producer of subassemblies for the automotive market, has sent out request for quotations (RFQs) for a wiring harness to four prospective suppliers. Only two of the four suppliers indicated an interest in quoting the business: Original Wire of Auburn Hills, Michigan, and Happy Lucky Assemblies (HLA) of Guangdong province, China. The estimated demand for the harness is 5000 units a month. Both suppliers will incur some costs to retool for this particular harness. The harness will be prepackaged in 24” x 12” x 6” cartons. Each packaged unit weighs approximately 10 pounds and is one cubic foot in dimension. (1 Cu.ft = 1728 cu.in).

The first quote received is from Original Wire, a supplier located about 20 miles from Autolink’s corporate headquarters. The quote includes unit price, tooling and packaging. The quoted unit price did not include shipping costs. Original wire requires no special warehousing of inventory, and daily deliveries from their manufacturing site directly to Autolink’s assembly operations are possible.

Original Wire quote:

• Unit price = $30

• Packing costs = $.75 per unit

• Tooling = $6,000 one time fixed charge

• Freight cost = $5.20 per hundred pounds

The per unit cost (based on an annual supply)

Yearly Unit Cost=

( annual demand *( unit cost + packaging cost )) + tooling charge

( 60000 *( 30 + .75 )) + 6000 = $1,851,000

Unit Cost = 1851000/60000 = $30.85

Yearly Freight Cost =

#units * unit weight * freight cost

60000*10 *.0520 = $31,200

Unit Freight Cost = 31200/60000 = .52

Total Unit Cost = Unit cost + Freight Cost

30.85 + .52 = $31.87

The second quote...