Joe Hanaman is trying to capture the attention of holiday shoppers for EZ$-$Shop, an electronics discounter with $1,500$ stores in Canada and the United States. Joe envisions being the first retailer to offer its own virtual reality $($VR$)$ headset and break the $$250$ price barrier. He believes that the VReal will be a game$-$changer, not only for the price point, but for its high resolution, realistic $3$D experiences, and growing list of game titles. The low profile, highly comfortable VR headset is projected to sell $350,000$ units during the holiday season and $25,000$ units per month thereafter.

After much effort to ensure feasibility of his design, evaluate prototype quality, and compare supplier capacity, Joe targeted three options. Each supplier offers a high$-$quality VR headset that meets EZ$-$Shop specifications at a reasonable cost per unit. However, each supplier is in a different country, which gives Joe some concerns. He knows that there is nothing virtual or trivial about the global delivery costs, Incoterms risks, and potential delays that accompany each proposal:

Option $1$purchase the VReal headsets from Retina Electronics in Nagano, Japan, a long$-$time supplier of products to EZ$-$Shop. Retina works on an open account basis and promises to make shipments of $12,500$ units in $40-$foot containers under terms Incoterm DPU, Port of Long Beach. The price offered per unit is $23,125$ JPY $($Japanese Yen$).$

Option $2$purchase the VReal headsets from V$.$Image Innovations, a Kuala Lumpur, Malaysia$-$based manufacturer. V$.$Image has a solid reputation and Joe nearly purchased $3$D printers from them last year. Their offer is based on shipments of $7,000$ units in $20-$foot containers under Incoterm FAS, Port of Tanjung Pelepas. The price offered is $718$ MYR $($Malaysian Ringgit$)$ using Letter of Credit payments.

Option $3$purchase the VReal headsets from Iris Enterprises, an electronics contract manufacturer in Bucharest, Romania. Iris assembles VR headsets using components sourced in Eastern Europe. Their offer is based on EZ$-$Shop taking control of the product at the Iris assembly campus under Incoterm EXW. The price offered is $775$ RON $($Romanian Leu$),$ cash in advance.

As Joe considered his options, he consulted an online currency converter to evaluate the quotes. He found the following exchange rates:

$1$ USD $=145\mathrm{.}7$ JPY $1$ USD $=4\mathrm{.}67$ MYR $1$ USD $=5\mathrm{.}10$ RON

Case Questions

$1.$ What is the price per VR headset in USD for the Retina Electronics offer? What costs, responsibilities, and risks does EZ$-$Shop assume under DPU, Port of Oakland?

$2.$ What is the price per VR headset in USD for the V$.$Image Innovations offer? What costs, responsibilities, and risks does EZ$-$Shop assume under FAS, Port of Tanjung Pelepas?

$3.$ What is the price per VR headset in USD for the Iris Enterprises offer? What costs, responsibilities, and risks does EZ$-$Shop assume under EXW, Bucharest?

$4.$ What other global transportation issues and costs must Joe consider when trying to make an effective purchase selection?

$5.$ Which of the three options would you recommend? Why?

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