The Global Sourcing Wire

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The Global Sourcing Wire, pg. 805
1. Original Wire Quote:
* Unit Price = $30
* Packing Costs = $0.75 per unit
* Tooling = $6,000 one-time fixed charge
* Freight Cost = $5.20 per hundred pounds
Yearly Unit Cost = ((monthly demand*12) * (unit cost + packaging cost)) + tooling charge Yearly Unit Cost = ((60000)*(30+.75)) + 6000
Yearly Unit Cost = (60000*30.75) + 6000 = $1,851,000
Yearly Unit Cost = $1,851,000

Unit Cost = Yearly Unit Cost / Yearly Demand
Unit Cost = $1,851,000 / 60,000
Unit Cost = $30.85

Yearly Freight Cost = # of units * unit weight * freight cost Yearly Freight Cost = 60,000 * 10 * .0520
Yearly Freight Cost = $31,200

Unit Freight Cost = $31,200/60,000 = .52
Total Unit Cost = Unit Cost + Freight Cost
Total Unit Cost = $30.85 + $0.52
Total Unit Cost = $31.87

2. Happy Lucky Assemblies Quote:
* Unit Price = $19.50
* Shipping Lead Time = Eight Weeks
* Tooling: $3,000
Yearly Unit Cost = ((monthly demand*12) * (unit cost + packaging cost)) + tooling charge Yearly Unit Cost = ((60000)*($19.50+.00)) + 3,000
Yearly Unit Cost = (60000*19.50) + 3000
Yearly Unit Cost = $1,173,000

Unit Cost = Yearly Unit Cost / Yearly Demand
Unit Cost = $1,173,000 / 60,000
Unit Cost = $19.55

Monthly Freight Cost = $41,366

Unit Freight Cost = $41,366/5000 = 8.28
Total Unit Cost = Unit Cost + Freight Cost
Total Unit Cost = $19.55 + $8.28
Total Unit Cost = $27.83

3. The supplier that Sheila should recommend is Happy Lucky Assemblies. Happy Lucky Assemblies has a lower total unit cost at $27.83 over Original Wire Quote with a total unit cost of $31.87. Happy Lucky Assemblies creates a savings of $4.04 per unit or 13% per unit.

4. Other issues that Sheila should evaluate are the amount of lead time needed to make sure the product gets to the customer on-time, the possibility for delays with Customs clearance, as well as possible delays with actual transportation.

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