The Plant Location Puzzle

Ann Reardon made her way across the crowded trade-show floor, deep in thought and oblivious to the noisy activity all around her. As CEO of The Eldora Company (EDC) for the previous 13 years, she had led her organization through a period of extraordinary success. While larger bicycle makers had moved their manufacturing operations overseas to take advantage of lower labor costs, Eldora had stuck with a domestic manufacturing strategy, keeping its plant on the same campus as its corporate offices in Boulder, Colorado. Ann felt that her strategy of keeping all the parts of the company in the same location, while unconventional, had contributed greatly to cooperation among various departments and, ultimately, to the company’s growth: EDC had become the largest and most profitable bicycle company in the United States. Yet her manufacturing vice president, Sean Andrews, was now urging her to build a plant in China.

“Look at the number of companies here,” he had said that morning, as they helped several other EDC staffers stack brochures on the exhibit table and position the company’s latest models around the perimeter of their area. Manufacturing heads rarely attended trade shows; in fact, this was Sean’s first, but he had wanted to attend, and Ann had supported his interest. “There are too many players in this market,” he had said. “I’ve been saying this for two months now, and you know the forecasters’ numbers back me up. But if they weren’t enough to convince you, just look around. The industry is reaching the saturation point here in the States. We have to break into Asia.”

“Leave it alone, Sean,” Ann had replied. “I know this is something you’re pushing; you’ve said so in the past. But let’s set up a time to talk about it in detail later. This isn’t the time or the place.”

Now, three hours later, with the show in full swing, Ann understood why Sean had been compelled to speak up again. Having all their competitors in the same room at the same time was a