1. Which contract manufacturing option has the most attractive financial benefits?
Financially I would say Yangtze would be the most attractive. You have the ability to produce a very minimal order volume (compared to competitors) at significantly less cost. To test the market in the early stages this would be the cheapest option. If the product fails less costs would have been incurred.
2. What are the complications and benefits associated with entering into a contract to manufacture Dry Goods outside the United States?
There are language and cultural barriers. The American consumer is trying to buy more American made products. Manufacturing overseas, there is less certainty over the social and environmental standards set by the organization and the government’s regulation of the industry in that country. Products produced in Suzhou, China will not qualify for FDA’s over-the-counter designation. Shipping and lead-time can be costly factors. However, inexpensive components mean Dry Goods can be produced at a lower cost than that in the US.
3. If Joyce and Cornuke choose to hire a contract manufacturer, whom should they hire, and why? Aero Master King CSC Yangtze
Units 100000 100000 100000 100000
Price per unit order value 1.75 1.48 1.52 1.16
Defect Rate
Units 2%
2000 .02%
200 2%
2000 1%
1000
R&D $20000 $40000 (N/A)
$30000 (N/A)
$30000
Driving Distance No Yes No No
Medical Product Yes Yes No No
Shipping Cost - - - 17500
COGS per unit $2.3 $2.23 $1.82 $1.64
Distribution Costs per Unit $0.78 $0.78 $0.78 $0.78
Wholesale Price $6.04 $6.04 $6.04 $6.04
COGS including damages per unit $2.392 $2.2906 $1.8928 $1.6842
Profit per unit $3.648 $3.7494 $4.1472 $4.3558
Total Profit $364,800 $374,940 $414,720 $435,580
Lead Time 12w 8w 12w 10w
Orders per year
Total Year Profit 4.3

$1,634,640 6.5

$2,657,110 4.3

$1,882,296 5.2

$2,391,016