Scribd Logo
Upload

Welcome to Scribd!

  • 598 views

    Scotts Miracle Gro

    Uploaded by

    msarojini
    The document discusses Scotts Miracle-Gro's decision to offshore the production of its spreaders to China. It analyzes the key question of justifying why production should not be outsourced and compares the costs of various alternatives like continuing production in the Temecula plant, outsourcing to China, or offshoring in China. After considering factors like labor costs, freight costs, productivity, and intellectual property protection, the decision is made to offshore production in China while maintaining control over suppliers to protect quality standards. An action plan to open a new offshore facility in China over one year while gradually shutting down the Temecula plant is proposed.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd

    Scotts Miracle Gro

    Uploaded by

    msarojini
    598 views10 pages
    The document discusses Scotts Miracle-Gro's decision to offshore the production of its spreaders to China. It analyzes the key question of justifying why production should not be outsourced and compares the costs of various alternatives like continuing production in the Temecula plant, outsourcing to China, or offshoring in China. After considering factors like labor costs, freight costs, productivity, and intellectual property protection, the decision is made to offshore production in China while maintaining control over suppliers to protect quality standards. An action plan to open a new offshore facility in China over one year while gradually shutting down the Temecula plant is proposed.

    Original Description:

    test

    Copyright

    © © All Rights Reserved

    Available Formats

    PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    The document discusses Scotts Miracle-Gro's decision to offshore the production of its spreaders to China. It analyzes the key question of justifying why production should not be outsourced and compares the costs of various alternatives like continuing production in the Temecula plant, outsourcing to China, or offshoring in China. After considering factors like labor costs, freight costs, productivity, and intellectual property protection, the decision is made to offshore production in China while maintaining control over suppliers to protect quality standards. An action plan to open a new offshore facility in China over one year while gradually shutting down the Temecula plant is proposed.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    598 views10 pages

    Scotts Miracle Gro

    Uploaded by

    msarojini
    The document discusses Scotts Miracle-Gro's decision to offshore the production of its spreaders to China. It analyzes the key question of justifying why production should not be outsourced and compares the costs of various alternatives like continuing production in the Temecula plant, outsourcing to China, or offshoring in China. After considering factors like labor costs, freight costs, productivity, and intellectual property protection, the decision is made to offshore production in China while maintaining control over suppliers to protect quality standards. An action plan to open a new offshore facility in China over one year while gradually shutting down the Temecula plant is proposed.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 10

    Scotts

    Miracle -Gro
    Spreader Sourcing Decision

    GBRAT
    Rosa Tamayo
    John Johnson
    Hideo Taniguchi
    Vlamidir Petit
    Rafael Arango

    Table of Content
    Key Questions
    Arguments
    Proposed Solutions
    Conclusion/Decision

    Key Question
    To jus'fy why Sco. should not oshore/outsource
    (closing Temecula manufacturing plant)produc'on of
    its spreaders to a low-wage manufacturing site, such
    as China

    Company Background
    The Sco. Miracle Gro Company is

    What is happening!
    Corporate people want to outsource the produc'on of
    the company to a low wage country like China.
    Alterna'ves:

    To con'nue in Temecula manufacturing Plant

    To outsource to China
    To Oshore in China

    What is happening!
    Mr Bawcombe obviously doesnt
    want to do it because:

    His team has produce an important

    process innova'on that has


    represented 6% produc'vity over
    the years.
    Redesigns of hand spreader to
    make it pressure t.
    Pioneered use of In-molding
    labeling. (Tacit knowledge of the
    en're organiza'on)
    Sco.s regulary set up structured
    regular communica'on plans with
    its suppliers assuring quality
    standards.

    Why?
    Comparison cost of dierent alterna'ves:

    Outsource China

    Offshore China

    USA

    Labor cost
    Estimated increase
    Labor cost (annual
    terms)
    Real increase Labor cost
    (annual terms)

    $0,91

    $0,91

    $16,25

    4%

    4%

    3%

    10%

    10%

    3%

    Electricity fares

    $ 0,065 per Kwatts/hour

    $ 0,065 per
    Kwatts/hours

    $ 0.1850 per
    Kwatts/hours

    Increase Electricity fares

    2%

    2%

    2,5%

    Productivity
    Lease cost
    Production- quantity of
    spreader
    Freight cost
    Increase of freight costs
    Safe inshipment
    Safety stock
    Overhead cost
    Margin of outsource
    Appeciatiation of Yuan
    (annually)
    Corporate overhead

    Lower
    $0,00

    Lower
    $200.000,00

    Higher
    $3.000.000,00

    3000000

    3000000

    3000000

    $8.000.000,00
    3%
    -$1.000.000,00
    $460.000,00
    50%
    8%

    $8.000.000,00
    3%
    -$1.000.000,00
    $460.000,00
    0
    0

    $0,00
    0
    $1.000.000,00
    $0,00
    30%
    0

    4%

    4%

    $1.000.000,00

    $1.000.000,00

    $0,00

    Why?
    Pro and Cons of main alterna'ves:

    Pro,s

    Cons

    Outsource

    Lower cost

    Less control/
    innova'on

    Temecula Plant

    Quality Control
    Innova'on
    IP

    Higher Cost

    Oshore

    Lower Cost and IP

    Decision

    To oshore in China!

    How?
    Case Situa8on

    Argument

    Ac8on Plan

    Problem

    Cost in US is too high



    Protect IP

    Mantain control of
    suppliers to mantain
    quality

    Move opera'on to
    China mantainin

    control of the supply
    chain

    Decision

    Oshore in China

    Open facility and


    operate Oshore in
    China (1 year) and
    progressive and
    parallel shut down of
    the Temecula plant

    Evalua'on

    You might also like