5 - Module 10 Class Activity 24

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ICA – Module 10 Case Activity ElectroMax Manufacturing Products ElectroMax is a regional wholesaler of motors, relays, connectors, switches, and related products. It has been in business in Alabama since 1990 and has steadily increased sales volume to automotive manufacturers in the southeastern United States. Bernard Brogan, purchasing manager for ElectroMax Manufacturing in Auburn, AL was becoming increasingly concerned about the relative value of the Indonesian Rupiah versus the U.S. Dollars. Why? His main supplier of fractional horsepower motors was Tan Motor, a manufacturer based in Jakarta, Indonesia. Tan Motor has worked with Electromax for the past 12 years and sells the motors on an open account basis, thereby simplifying the relationship. However, the company recently raised its prices citing higher material costs and currency exchange rate issues. Last week, Bernard received an interesting competitive proposal from a Mexican company that wants to become an ElectroMax supplier. Escudo Electric promises to make bi-monthly deliveries to Electromax. Bernard suspects that Escudo Electric may be able to reduce distance-based risks and provide relief from his Indonesian currency concern. This is because the Mexican Peso has been relatively stable versus the U.S. Dollar, unlike the Indonesian Rupiah. The Options Tan Motors currently sells the ¾ horsepower electric motor to ElectroMax for 730,000 IDR per unit. Back in 2020, the price per motor was only 688,000 IDR. They are shipped to ElectroMax once a month in a 40-foot container. Order cycle time is ~26 days. Escudo Electric proposes to sell the ¾ horsepower electric motor to ElectroMax for 995 MXN per unit. They would be shipped to ElectroMax twice a month in a 20-foot container. Order cycle time is 11 days. Exchange Rates Current exchange rates are as follows (per $1 US). Date Indonesian Rupiah (IDR) Mexican Peso January 1, 2022 14,241 20.04

ICA – Module 10 Last Name Carter First Name: Mason Passcode Spring Case Questions 1. Evaluate the price per unit offered by the two suppliers in US dollars. Tan Motor = $US 51.26 Escudo Electric = $US 49.65 2. Besides price, identify three factors that will influence your international supplier selection. a. Product quality b. relationship c. order quick time 3. Based on the information in the case and the additional information provided from our discussion , which global supplier would you select? __hybrid__ Tan Motors in Indonesia Hybrid Escudo Electric in Mexico 4. Why did you choose this supplier? Tan motors in Indonesia are the more cost-effective supplier because they have a quicker order time. They are also more stable. General Concepts 5. What is the impact of global sourcing on…? Consideration Global sourcing impacts… Communication Difficult paperwork Visibility Challenging to maintain Labor Costs Cheaper but rising Freight Movement More expensive more risk Inventory Levels Higher levels and ICC

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