Collins Aerospace is looking to purchase machined housing for next generation commercial jet fuel control, which will be assembled in Windsor Locks, CT with an expected volume of 2000 fuel controls over 5 years. Collins' engineers have created a "should cost" analysis and detailed quotes have been received from three suppliers. Each supplier has been pre-qualified with acceptable engineering capabilities as well as quality and delivery performance.

		Should Cost Estimate	Smith Machine	Howe Machine	Zhou Machine
(US$)			CT, USA	Quebec, CDN	Shenzhen, China
Direct Labor Costs		$600	$700	$450	$300
Labor Hours		10	10	9	15
Labor cost per hour		$60/hr	$70/hr	$50/hr	$20/hr
Overhead Costs		$900	$980	$900	$450
% Direct Labor Costs		150%	140%	200%	150%
Materials		$2,500	$2,400	$2,500	$2,150
Selling, General, Admin Costs	$800	$1,000	$1,100	$750
Margin		$1,000	$1,100	$900	$750
Unit Costs		$5,800	$6,180	$5,850	$4,400
Set-Up/Tooling Costs		$500,000	$600,000	$500,000	$3,000,000

Questions

1) What 3 key items can you learn from the above cost analysis?

2) If were to challenge only one line item per supplier, what would they be and why?

3) Assuming the above numbers are final and you cannot dual source, which supplier would you select and why?