Vibrant Video

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 sells its

products FOB Destination, Freight Collect and Allowed. The receiver supplier sells its products

FOB Origin, Freight Collect. The remaining issue for the V2 transportation director is to evaluate

the delivery options that her analyst recommended for each product and make a decision.

Relevant information is provided in the following table:

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?

SPEAKERS RECEIVER Manchester, New Hampshire Tijuana, Mexico Manufactured in $175 perset $225 per unit Vrebase price 28 pounds 5 pounds Weight 30"(L)x 18" (W) x 18" (H) 18" (L) x 8" (W) x4" (H Dimensions X Sturdy,bulky,not easily damaged Compact, vibration sensitive, theft risk Characteristics FOB Origin, Freight Collect FOBDestination, Freight Collect and Allowed Freight Terms Weekly LTL delivery Weekly Ground delivery Option 1 200 units 200 units $2,485 Cost per delivery $2,169 Cost per delivery Twice per month TL delivery Twice perweek airfreightdelivery Option 2 100 units 400 units $2,946 Cost per delivery $2,411 Cost per delivery