Question 1,2 and 3
Tina Chou, a buyer at SunTech, a Houston-based producer of subassemblies for the automotive ma has sent out requests for quotations for a network box to be used in new models of cars to four prospective suppliers. Only two of the four suppliers indicated an interest in the quoting the busine Terrel Electric (Sugarland, TX) and HLA of Guangdong Providence, China. The estimated demand for boxes is 5,000 units a month. Both suppliers will incur some costs to retool for this particular box for SunTech. The boxes will be prepackaged in 24*12*6-inch cartons. Each packaged unit weighs approximately 10 pounds. Quote 1 The first quote received is from Terrell Electric. Sugarland is about 20 miles from SunTech's corporate headquarters, so the quote was delivered in person. When Tina went down to the lobby, she was greeted by the sales agent and an engineering representative. After the quote was handed over, the sales agent noted that engineering would be happy to work closely with SunTech developing the unit and also be interested in the future business that might involve finding ways to reduce costs. The sales agent also noted that they were hungry for business, as they were losing a lot of customers to companies in Mexico and China. The quote included unit price, tooling, and packaging. The quoted unit price does not include shipping costs. Terrell Electric requires no special warehousing of inventory, and daily deliveries from its manufacturing site directly to SunTech's assembly operations are possible. Terrell Electric Quote: Unit Price = $30 Packing costs = $0.75 per unit Tooling - $6,000 one-time fixed charge Freight cost = $5.20 per hundred pounds. Quote 2 The second quote received is HLA of Guangdong Providence, China. The suppliers must pack the boxes in a container and ship via inland transportation to the port of Shanghai in China, have shipment transferred to a container ship, ship material to Seattle, and then have material transported inland to Houston. The quoted unit price does not include international shipping costs, which the buyer will assume HLA Quote: Unit price = $19.50 Shipping lead time = Eight week Tooling = $3,000 IBN M command In addition to the supplier's quote, Tina must consider additional costs and information before preparing a comparison of the Chinese supplier's quotation. Each monthly shipment requires three 40-foot containers. Packing costs for containerization = $2 per unit Cost of inland transportation to port of export = $200 per container Freight forwarder's fee = $100 per shipment (letter of credit, documentation etc.) Cost of ocean transport - $$4,000 per container. This has risen signification in recent years due to a shortage of ocean freight capacity. Marine Insurance = $0.50 per $100 of shipment (based on total cost of each box with the product) U.Sport handling charges = $1,200 per container. This fee has also risen considerably this year, due to increased security. Ports have also been complaining that the charges may increase in the future. Custom duty = $5% of the unit cost. Customs broker fees per shipment-$300 Transportation from Seattle to Houston = $18.60 per hundred pounds. Need to warehouse at least four weeks of inventory in Houston at a warehousing cost of $1.00 per cubic foot per month, to compensate for lead time uncertainty Sheila must also figure the costs associated with committing corporate capital for holding inventory. She has spoken to some accountants, who typically use corporate cost of capital rate of 15% Cost of hedging currency broker fees = $4.00 per shipment. Additional administrative time due to international shipping - 4 hours per shipment *$25 per hour estimated)
