Please use question 4 to answer question 6!
CareMedi Importing Medical Supplies ahead of a Pandemic - The Year 2023 CareMed Inc. sells a wide range of personal protective gear, medical devices, and other medical supplies used in hospitals and private practices [see Appendix 1]. CareMed was founded ten years ago by Morgan Melendez and Victoris Contreras, two nurses who met while completing their MBAs at Grand Valley State University. The company is headquartered in Grand Rapids, Michigan, and has 623 amployees and revenues of nearly $1 billion per year. CareMed's sales occur in the United States. However, the company imports 80% of its products from suppliers outside the US. To manage international suppliers, the company has offices in Shanghai, Chins, and Eindhoven, Netherlands. The medical device market in the US is governed by strict regulations and standards, designed to ensure patient safety. Imported medical equipment must undergo rigorous government certification before it can be sold in US markets. Certifying that imported supplies meet US regulatory standards rapresents one of the bigsest cost drivers for CareMed. Morgan and Victoria have been watching the news closely and are concerned about a novel coronavirus that has emerged in Central Asia. The new virus, called the Eurasian Steppe Virus 2023 (or ESV-2023), is highly contagious and has been spreading quickly westward from Georgia to Russia and Turkey. China and other Asian countries to the east have not yet been affected. The World Health Organization (WHO) has been closely monitoring the virur's spread. The WHO is working closely with the government of Turkey to stop the spread of the virus, but these efforts have been hampered by the political instability in the region and a lack of funding from the international community. If the WHO's afforts are unsuccessful, the virus could reach Europe and the US in 6 weeks to 8 weeks. Morgan and Victoria think that it is only a matter of time before the virus spreads to Europe and the United States. When that happens, Morgan and Victoria are expecting a major surge in demand for exactly the types of medical supplies that CareMed sells. When that happens, CareMed expects annual unit sales of at least 150,000 units with average revenue per unit sale of 51,000 . To prepare for a possible surge in demand, Morgan and Victoria are considering onboarding a new supplier. They have found two potential suppliers: Zoueve Supplies located in Shanghai, China, and Gute Meglizic, located in the Baden Wuerttembers region of Germany. Thuprue-Supplies (Shanghai) Thecver specializes in high quality healthcare products. The company has annual revenues of roughly S2.2 bilion. It has long-term contracts with well-known US medical suppliers including Cardinal Health, Mckesson, and Henry Schein. The company is 1509001 certified and has been awarded the prestigious AME Award for Manufacturing Excellence. However, in-depth reporting by the Wall Street Journol sugtests that Zhepere is currently undergoing a leadership change that has caused its service leveis (lead time, on-time delivery, etc.) to drop off. The company's operations are entirely inhouse. Its production faclities Nelecktedt in the Shanghal FreeTrode Zone (SFTZ). Operating in the SFIZ provides n.owrober.9t benefits to Zouevere, This includes the elimination of usual export duties - although exports from the SFTZ are subject to the 25% taritfs recently Imposed by the US. It also makes it easier for Zbuoueg to maintain quality and comply with US medical certification guidelines. At the same time, Chinese authorities maintain tight control over the SFIZ and therefore would be able to quickly shut down exports from the SFTZ if an outbreak were to occurin China - or if political tensions with the US were to flare. If CareMed were to purchase products from Zlyoxue, the likely route would be as follows: Products would be palletized, placed in a contalner for shipment, and then moved by train a short distance to the Port of Shanghai. There, product would be losded onto a container ship. The container ship would depart Shanghal and arrive at the Port of Seattle, Washington, in approximately 13 days. At the Port of Seattie, containerized products would be load directly onto trains and shipped to Chicago via rali, In Chicago, cargo would be unloaded and palletized product would be loaded onto trucks and shipped to CareMed Warehouses in Grand Rapids. The entire process is estimated to take from 24 to 28 daya [See Appendix2]. Zhuover has a minimum order quantity of 1 container per month. Gute Medizio GmbH (Germany) Gute Medlzjo was established five years ago and had revenues of roughly 5750 million last year. The company sells a wide range of medical products. Gute Giglzjo has an outsourced production model for personal protective gear, such as mudical masks, gowns, and gloves. A network of suppliers in the Czech Republic makes the products then ship praducts to Gute Medizio for distribution. The company also operates several inhouse factories in the Baden Wuerttembers region of Germany. These inhouse factories produce medical devices such as eye and aar scopes, stethoscopes, blood pressure monitors, and other small-scale equipment. Guse, Mitdjijo then ships all products from Germany to customers around the world. Gute Medirjo representatives suggested that both the personal protective gear and medical aquipment are compliant with US standards, although it is not clear whether this is the same as being cartifled. CareMed has asked for additional information on this point but has not heard back from their contact yet. Still, the company has executed some short-term contracts for a few well-known medical equipment companies. If CareMed were to purchase products from Gute-Wedlzio, the likely route would be as follows: Products warehoused in Baden Wuerttemberg, in southern Germany, would be pallatized, placed on trucks, and shipped to the Port of Hamburg. In northern Germany. From there, products would be loaded into a shipping container and placed onto a container ship. The container ship would depart Hamburg and arrive at the Port of Charleston, South Carolina, in approximately 21 days. At the Port of Charleston, palletized product would be loaded back onto trucks and shipped to CareMed warehouses in Grand Raplds. The entire process is estimated to take from 28 to 31 days (See Appendix 3). Gute. Medliajo has a minimum order quantity of 2 containers per month. CareMed's internal Production Capabilities CareMed is primarily a medical supplies distributor. In other words, CareMed typleally purchases finished goods from external supplirs and then solls them to customers in the US. As noted above, all. of CareMed's sales occur in the US and the company imports 80% of its products from international suppliers. Still, CareMed does have some options for internal production. It has a small inhouse facility that produces personal protective gear. This facility produced about 10%6 of CareMed's medical supplies last year. But with an expansion, Morgan and Victoria think that the facility could ramp up production to a volume aqua to approximately 50% of the expected increase in sales. Such an expansion would require substantial fixed investment and the redesign of existing processes. An expanded tacility would likely be able to begin production in 12 weeks. Relevant Data CareMed has collected the following data to conduct is analysis of its different potential options. Costs for Appendix.1 c Zhuoyue Supplies O Shanghal, China 4 Transportation by Cargo ship 9 Port of seatile \& Transportation by Train P chicago, litinois \& Transportation by Truck Orand Rapids, Michloan Schlechte Medizin Baden Worttemberg Germany \& Transportation by Truck Port of Hamburg. Germany Transportation by Cargo Ship Port of Charleston, South Carolina Trantportation by Truck Grand Rapide, Michigan Make a recommendation as to whether CareMed should MAKE, BUY, OR SOME COMBINATION. Explain your reasoning based on your analysis. Include the options that you evaluated when deciding on your recommendation and why you did or did not select each option. Based on these factors, Gareed should consider outsourcing non-core manufacturing processes to external suppliers while retaining in-house manufacturing for core competancies or proprietary technologies. This approach would provide GeraMest with the benefits of both options - control, fiexibility, and intellectual property protection through in-house manufacturing, as well as mitigating risks associated with supply chain diaruptions, supplier dependence, and cost efficiencies through outsoursing. GachWed should carefully evaluate the specific manufacturing processes, technologies, and market demand to determine the optimal batance between make and-buy options for their business. CUSTOMER OF CHOICE For the supplier(s) that you selected in Question \#4 above, discuss how CareMed should structure their relationship to be the supplier(s) customer of choice. Include in the discussion any risks that exist and can be minimized or offset by being the customer of choice
