Synopsis of the Case:
This case follows the outsourcing decisions of the Scotts Miracle-Gro company in June 2007. The company’s main production facility, located in Temecula, CA, produces all of the company’s domestic lawn seed and fertilizer spreaders. This facility was acquired after Scotts merged three fertilizer spreader production factories from the acquisition of Republic Tool & Manufacturing Company in 1992. A fifteen year lease was signed in 2001 on the current Temecula facility. Although this lease is noted as a 15-year contract, the Scotts company believes that they could terminate it early. This is important because they believe that the $3 million annual fee for the facility and other factory costs are creating a large amount of cost pressure. Bob Bawcombe, the Temecula factory’s director of operations, has been trying his best to fight off the corporate plans to outsource the factory’s production to a possibly cheaper facility in China. Bawcombe has improved production six percent each year over several years and he believes that the production cost cuts created by outsourcing would be offset by the rise in freight costs and inventory costs.
Several innovations have also been created through Bawcombe’s management and direction. Through his work with the research and development team, Bawcombe created an in-house automated assembly line which only took four people instead of six to assemble their hand spreader product. He believes that this innovation would not be possible without “production capability being in-house” and if the production were to be outsourced to China, these innovations would not be possible because the labor would be less knowledgeable about product design and engineering. Another innovation created by Bawcombe’s team at the Temecula plant was the implementation of “in-mold labeling”. This put the company’s label on their spreaders directly through imprinting instead of sticking labels on their products... [continues]
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