Scotts Miracle Gro case solution

Better Essays
Objective The objective of this study is to decide the best decision for Scott’s Miracle-Gro on whether to outsource their production to china or stay in the Temecula plant in California. Factors such as risks/benefits, and cost analysis will be considered in reaching an outcome onto what will be the best option for Scott’s Miracle-Gro in order to maximize profit, efficiency, and long-term growth. Suggestions The best option for Scott’s Miracle-Gro is to stay in the United States. This will benefit the company financially and will help keep the product quality standards high. However, some production cost need to be cut down in order to remain competitive and keep profit at a percentage they would make if the company would outsource…show more content…
A cost analysis has been performed for Scotts Miracle-Gro using the location of Temecula, CA and the estimated usage of 8,000,000 kWh’s of electricity per year. It has been determined that by implementing solar energy panels to offset 50% of the plants annual electricity usage, this will provide the company with the following incentives (please refer to Exhibit 2 for the full cost analysis): An average monthly savings of $559,600, An average 25 year savings of $279,660,603.33, A ROI of 215.82%, Only a 14.58 breakeven point, 30% Annual Federal Tax Credit, and The peace of mind knowing that the company is helping offset their carbon emission to protect our diminishing environment, also creating a good public image. Raw Materials Costs In 2006, Scotts Miracle-Gro spent $105.8 million in raw materials, a $28.3 million increase from 2005 (Supply Chain Management, 155). Although this increase in raw material costs is partly attributed to price inflation, Scotts Miracle-Gro can implement new production processes to save in raw material costs. The most predominant raw material used by Scotts Miracle-Gro products is plastic resin. In order to save on costs, the Temecula plant should find ways to reduce material input without changing the quality of the product. Also, excess plastic resin should be recycled back into the production process. Not only will this decrease the amount of raw materials used and wasted, but it will also help decrease the disposal cost of used
Get Access