Case: Scotts Miracle-Gro (the Spreader Sourcing Decision) Essay

Though there are many advantages for U.S. Businesses, having analyzed the economic and social impacts on individuals living in the United States, I am not in favor of outsourcing manufacturing activities to other countries. The most critical impact in my opinion is the increasing loss of jobs for United States workers due to outsourcing of manufacturing activities.

American companies and their products, have increasingly been pursed to be manufactured abroad. This however is one of the biggest discrepancies we confront within our economy. Although many businesses argue this is beneficial in order for them to turn a higher profit and be successful, the National Labor Committee thinks otherwise. Outsourcing has become one of the leading factors in product recalls, exploitation of workers, and a major contributor to the unemployment statistics in the US.

Finally, there are those costs that are common to both global and domestic sourcing. Direct labor and materials costs, lead-time costs, transportation costs and inventory costs are a part of both domestic and offshore sourcing. Transportation costs, inventory costs, and lead-time costs tend to be higher when sourcing globally. On the

Looking into the USD-CNY and USD-MXN Chart, the Peso is depreciating is a greater rate than the Yen. Therefore, we are better off expanding our operations in Mexico rather than contracting with Chinese manufacturers.

Another huge expense the company had was all the improvements they were making. It would cost the company about $500,000 per year, since they did not use a contract manufacturer. They estimated they lost a total of $200,000 per year. Because of all the costs, Scotts is experiencing difficulties at the Temecula plant. They are considering the possibility of completely outsourcing the spreaders manufacturing and assembly to China to save costs. Scotts Miracle-Gro already has experience in outsourcing. They have already outsourced the most complex components of the spreaders to China. They are considering completely outsourcing the company in hopes that they will profit from the move. In doing so, they would have to shut down the Temecula plant and, by closing the plant, Bob Bawcombe, will lose all the skilled laborers he has trained and his efforts to keep them by hiring temporary workers, will have gone to waste. Another issue to complete outsourcing is there “in-molding labeling” technology. If Scotts decides to outsource, it needs to provide the contract manufacturer with the equipment and the know-how to perform “in-molding labeling”, if not, they must remove the feature from its spreaders. An additional concern with this plan is if they do offer the training and equipment, it is questionable that the manufacturer will be able to use the current mold from Temecula. They would need 10 molds at $40,000 each and each mold lasts approximately five years.

Precision Worldwide, Inc. (PWI) has a plant located in Germany which manufactures industrial machines, equipment and replacement parts for sale in numerous countries. Repair and replacement parts, which accounted for a substantial part of the company’s business is now facing a dilemma, a new competitor has entered the market with a replacement part, a plastic ring, which PWI had in the past used a special steel to produce. During a meeting with the general manager, Hans Thorborg, the general manager of PWI’s plant in Germany, wanted to discuss with his sales manager, accountant and development engineer the introduction of the competitor, a French firm Henri Poulenc and the plastic ring substitute they produce

Will outsourcing the company’s inefficient sheet metal operation be a proper strategic move to save the company money and satisfy current and potential customers with respects to quality and delivery lead time?

With the evaluation of current conditions, opportunities are identified that will help initiate a more a scalable and flexible operation. For instance, many companies have restructured operations by selling or closing off manufacturing operations in industries where outsourcing companies can readily manufacture on a contractual basis. It’s through the decision to implement contract manufacturing rather than re-investing in facility operations that can have a direct impact on the performance of the business and help reduce economic risk.

However, a sourcing agent in China can solve these problems these problems. Logistical concerns will also raise the costs of dealing in Chinese goods, but a recent study found from PricewaterhouseCoopers in Germany found price savings of up to 50 percent were common when sourcing in China when compared with local sourcing. The same benefits were true even after the logistical costs were added to the price. [3]

Cost: Many cost are clearly related to the entrence into the international market. First the raw material is perishable so this will increase the cost. Then you have to think about transport and gas who can be very prohibitive. There is also media, and the cost of

Prepared by: Team 3, Section 1 Eshhad Islam 3515729 Yuanzheng Xu (Fiona) 3483393 Veena Gadhave 3518464

To remain competitive, it is necessary for company to seek new methods to deal with issues like how do distribute inventory on time in the right place faster than others. When company plans to extend globally, they will face more challenging problems such as outsourcing and offshoring.

This has been cost beneficial to the company as systems need not be developed per plant which will save the use of resources. Likewise best practices are being shared by the plants and are being capitalized especially in a new plant. In addition, the trainings of employees are standardized and procedures applicable to all plants need not be re-invented thus reducing overhead cost resulting to a positive impact in the bottom line. It is noteworthy to mention that the strategy of companies right now is to design a specific product in one location and manufacture it in a different location, usually Asia, where the overall cost will be advantageous to the company.

If US Tech decides to find an alternative supplier while remaining cooperation with Tai Source, it has to think about the costs.

3. Push through with the outsourcing and assign their employees still in their specialization which is production, by using the saved money in developing a new line of agricultural and mining pumps › PROS: The company can keep the loyalty and skills of the employees, avoid any intercompany conflict, gain more customers, become more attractive to the market, introduce a new product line, save more money, ensure the quality of the pump housings, and be more competitive to the market. › CONS: mishandling may lead to negative impact in the company Presentation of Alternative Course of Action 