In today’s business world, production cost was an increasing concern for companies working to stay competitive in the global marketplace. The top management must search for a global solution to drive down costs and reduce difficult activities associate with inventory management and production management. Global sourcing aimed to exploit global efficiencies in the delivery of services and goods across geopolitical boundaries, including low cost skilled labor, low cost raw materials, tax benefits, and price breaks. Whelan Pharmaceutical was the best example to illustrate how the company chose the best manufacturing site for global sourcing from different perspectives. Whelan was an American multinational pharmaceutical corporation, headquartered in Maryland. The main goal of the case was to examine and analyze potential manufacturing sites for Whelan’s new product Varex®, which were Maryland, Puerto Rico, Ireland, and continental European. Varex® was a cardiovascular drug and was estimated to be the blockbuster when it hit the market, generating a satisfactory profit and increasing company’s global expansion. While the benefits of sourcing have proven to produce some initial cost saving, there were numerous pitfalls and challenges that could arise. It had been approved that Whelan located all manufacturing stages at one site where products could be directly distributed domestically and internationally because this plan matched the corporate long-term strategies and provided economies of scale. The process of global site selection for sourcing was complicated. Tax used to be the key factor in sourcing decision-making process, however, with the development of globalization, several other factors had been increasing important, including marketing strategies, manufacturing strategies, government regulation, customs and duties. It was crucial for Whelan to analyze and calculate the trade-off among these factors in global site selection process. The process of site selection was complicated and time consuming. Whelan’s in site meeting was held by a group of executives from functional departments across the organization. Most of the important decisions were made by a cross-functional team in which people was able to provide well-defined background information and supportive evidences for potential solutions. John Neal, vice president for manufacturing and engineering, took charge of three meetings; the other two members were Stefan Bischel, vice president for worldwide marketing and international planning, and Linda Gonzalez, executive director of taxes. Advantages and disadvantages of each site were addressed and analyzed in their first meeting. After two weeks, during their second meeting, they eliminated two sites, Maryland and Puerto Rico, from the list; at the same time, they had a further review of the remaining two sites. Another two weeks later, the last meeting was held for final discussion and decision-making. Even though they went through a detailed examination of all related factors and trade-offs, it was difficult for them to reach a consensus conclusion. Stefan favored continental European, while Linda strongly supported Ireland; the difference opinions and preferences resulted from the differences in their assumptions. The challenge they had to overcome was to choose a best site where could maximize profit margin and minimize production cost, otherwise, Whelan had to take responsibility if they made a wrong choice. Problem Statement
The mission of Whelan Pharmaceutical was to select the appropriate manufacturing site to efficiently distribute the new product Varex® and existing products domestically and internationally so that the company could take advantage of tax breaks and price breaks as well as expanding foreign market, maximizing operational profit margin. The company was able to stay more competitive, more profitable, and more productive in the pharmaceutical industry. In order for...
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