Jul Farms

Jul Farms (pronounced Yule) is a Christmas tree farming company in the Pacific Northwest region of the United States. The company started as a collection of Christmas tree farms in which customers cut down their own trees, and this is still a big part of their business. The largest revenue sources though are sales to other firms that sell their cut Christmas trees across North America. Jul also ships trees to East Asia, which makes up between 5% and 10% of sales. Nearly all of the company's sales happen between November and December.

A small but growing share of Jul Farms' revenue is Christmas tree scented candles and essential oils made from the four types of trees that it grows; sales of these products are offered only at its farms, during the Christmas tree season. Jul Farms sources the oils from European companies and the candles from an East Asian manufacturer. The market for therapeutic and aromatic essential oils has been growing in excess of 8% for the last decade, and Jul Farms' owners would like to insource the production of these oils to a new facility that it would open in the US state of Oregon. Customers are increasingly asking them both to ship the oils and sell them year round.

Jul's tree farms in the US would give them a large enough supply of the evergreen needles required to produce essential oils. Furthermore, the Pacific Northwest region has seen even stronger growth in this market than the rest of North America. The owners believe that within a few years they could produce the oils at a lower cost than they currently pay to their supplier, and that in-house production in Oregon could add a marketing advantage.

Question

1: Define the term insourcing. 2

2: Explain an advantage and a disadvantage of Jul Farms purchasing its scented candles from an East Asian supplier. 4

3: Analyze an advantage to Jul Farms producing its Christmas trees on farms in the Pacific Northwest of the US. 4

4: Evaluate Jul Farms' decision to produce evergreen essential oils in the US. 10