First, dependency on a single supplier, Shui Fong, may cause the company to face difficulty. Many companies believe that having a single supplier could help them to reduce thier logistic and supplier cost. However, depending on a single have some disadvantages. If there are unexpected event occured, such as plant diseases or natural disasters (earthquake, flooding, or typhoon), the quality of raw materials would be changed or sometimes cannot be delivered. However, the company’s representative said that they have already stocked raw material, tea leaves, that can be produced for 3 months. The company should rethink about if it is last more than 3 months, what will be the problems. As the company’s production process is dependent demand.…show more content…
However, variable cost can affect the company’s financial statement softly or strongly depending on the number of purchase orders that are processed and other variable costs, like preparing a purchase requisition or creating of new purchase orders. In addition, producing new product catagories may lead to increasing in setting up cost. The company may innitially has enough machines that can produce and be filling drink; however, those current machines may not be compatible for new product catagories (Martin, 2013).
What if some machines, such as filling drinks, can be used together with new products, they still have some problems. The machine has to be stopped operation for greentea filling and turn to fill coffee. They have to clean the machine’s pipeline, and it cause in higher lobor cost and opportunity cost, like probability to reach Economy of scale, since machine is shared.
For warehouse, the company has to check whether it is suitable for new kinds of products or not. They may need to expand the size of the wearhouse and buy additional equipments needed. This can cause increasing in facilities costs, labors monitoring the begining process costs, and construction warehouse.
For wholesellers and retailers may have some impact on introduction new product catagories. The problem is that wholsellers and retailers may not willingly devote their shelf-space or inventories for the new products since they may want to