Vibrant Video (V2) is a manufacturer of home theater projection systems. The company assembles Ultra HD projectors in Portland, Oregon and sells them online and through specialty electronics stores. The most popular model retails for 4,995 and V2 bundles the projector with high fidelity audio components that are purchased from external suppliers.

Due to ongoing delivery challenges with their Pacific Rim suppliers and carriers. V2 has decided to buy from suppliers in closer proximity to Portland. The speakers will be supplied by an electronics company with operations in Tijuana, Mexico and the receivers will be purchased from an audio lab in Manchester, New Hampshire.

The purchase contracts have been negotiated in principle. The speaker supplier has given V2 two shipping choices under FOB destination, Freight Collect. The receiver supplier only sells its products FOB Origin, Freight Collect. The remaining issue for the V2 transportation director is to evaluate the delivery options that her analyst recommend for each product and make a decision.

Speakers Receivers

Manufactured in	Tijuana, Mexico	Manchester, New Hampshire
V2 purchase price	$175 per set	$225 per set
Weight	28 pounds	5 pounds
Dimensions	30 (L) x18 (W) x18 (H)	18 (L) x8 (W) x4 (H)
Characteristics	Sturdy, bulky, not easily damaged	Compact, vibration sensitive, theft risk
Freight Terms	FOB Destination, Freight Collect and Allowed	FOB Origin, Freight Collect
Option 1	Weekly LTL delivery 200 units $2,485 cost per delivery	Weekly Ground delivery 200 units $2,169 Cost per delivery
Option 2	Twice per month TL delivery 400 units $2,946 Cost per delivery	Twice per week airfreight delivery 100 units $2,411 Cost per delivery

Case Questions

1. What responsibilities, control, and costs does V2 bear under each of the FOB terms offered?

2.What is the delivery cost and landed cost per unit for each speaker delivery option?

3.Which delivery option do you recommend for the speakers?

4.What is the delivery cost and landed cost per unit for each receiver delivery option?

5.Which delivery option do you recommend for the receivers?

6.What other supply chain issues and costs must V2 take into consideration when making these transportation decisions?