Danshui Plant No. 2

lo In August 2010, Wentao Chen, manager of Danshui Plant No 2 in southem China, was anxious The plant was in the third month of a 12-month contract to assemble the Apple iPhone 4. The contract called for Danshui to assemble 2.4 million iPhones in the period between June 1, 2010, and May 31, 2011, but now in the third month of the contract, production was only 180,000 units per month. Chen called Jianye Ma, the plant controller, to request summary of monthly operations for August as soon after the end of the month as possible

WILLIAM BELONE

Danshui was a contract manufacturer that assembled electronic products for companies wishing to save r costs by locating in southern Cana where semiskilled labor was available for less than one dollar an hour. Manufacturers like Dansini assembled parts in large plants using assembly line techniques according to specifications of the aetemational companies that contracted with them for assembly and final testing, The largest contract manufacturer in China was Foxconn, a division of the Hon Hai Group of Taiwan with more than 800,000 workers in China alone and contracts to supply Apple, Dell, and Hewlett Packard amo , others.

In expectation of high demand for the iPhone 4, Apple had contracted with Danahui to assemble

iPhones in Plant No. 2, which had been assembling computer hard drives on a contract that was

fulfilled at the end of May 2010. Although the assembly of hard drives was different than assembly of

iPhones, Danshui was confident that its workers would adapt to the new assembly tasks and that it

could hire and train the additional workers as needed. Chen's job was to get Plant No. 2 up to speed

to fulfill the Apple contract and earn a profit for Danshui's parent company, located in Hong Kong,

China.

Danshui Plact No. 2 was a profit center that was credited for each iPhone produced and shipped. and charged for parts, labor, overhead, and shipping. Because the contract was for a year, an annual budges was established soon after the iPhone contract was signed. This budget was divided by 12 to establish aqual monthly budgets to which actual revenues and expenses could be compared. All budgeting and monthly reporting was done in US dollars.