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scotts sourcing
Scotts Miracle-Gro
September 7
BUAD 6600
SCMers
Meagan Frances Ayers
James Franks
Emelie Hall
Jean-Hubert Trahan Instructor: Sachin Modi

Objective/Scope

The purpose of this article is to determine whether staying at the Temecula plant or outsourcing to China is the best option for Scotts Miracle-Gro. A cost analysis will be used to determine which option will give Scotts Miracle-Gro the best opportunity for long-term growth and profit.

Recommendations

It has been determined that staying in the United States at the Temecula plant in California will be the best decision for Scotts Miracle-Gro financially and with regards to their image and product quality. However, in order to remain competitive, costs must be lowered to keep profits up to par with where they would be had the company decided to outsource. To do this, it has been recommended that Scotts Miracle-Gro cut production costs by reducing:

1. Energy Costs,
2. Raw Materials Costs, and
3. Labor Costs.

By reducing costs, Scott’s Miracle-Gro can remain competitive while in the United States and avoid outsourcing the production line to China.

Analysis

Risk and Benefits

Upon reviewing the information regarding the production line of The Spreader, it has been concluded that there are many risks with outsourcing the production line overseas to China which include but are not limited to:
1. Loss of quality
2. Loss of production innovation
3. Forgoing in-mold label capabilities or paying to provide such technology to a contract manufacturer
4. Lead time; Defective batches will not be detected until they arrive from China
5. Slight risk of change in policies regarding duties and taxes on agricultural imports
6. Risk of labor and utility rates increasing faster than expected
7. Currency exchange rate risk; undervalued Yuan
While there are many risks, there are few benefits for outsourcing the production line which include:
1. Cheap labor, and
2. Cheap electricity.


Citations: "Scotts Miracle-Gro: The Spreader Sourcing Decision." Supply Chain Management. McGraw-Hill, 2010. 149-59. Print. "Six Typical Cost Reduction Examples : Raw Materials and Supplies; Water and Waste Water; Energy; Waste Management; Transport and Travel; and Packaging." Costkiller.net : Cost Cutting, Costs Savings, Cost Killing B2B Portal. Web. 07 Sept. 2010. . The PVWatts Solar Calculator. N.p., n.d. Web. 7 Sept. 2010. . "Temecula Home Loans ." First Time Home Buyer. First-Time-Home-Buyer-s, n.d. Web. 7 Sept. 2010. .
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