Performance Indicator Case Analysis

PRODUCT FLOW ALONG SUPPLY range of a function SOURCING IN CHINA vs. HONG KONG They are many aspects involved making a decision on which styles to source from china and which styles to source from Hong Kong. The engagements between the producing the products in chinaware and Hong Kong are * ORDER SIZES The minimum toil quantity for a style in China is 1200 units while in Hong Kong it is 600 units. Thus Hong Kong mill can produce smaller guild quantities effectively, thus enabling the keep companys to increase the range of products it offered and manage the inventory risk.Reason This difference in fruit abilities is mainly due to the high skilled labor join with shorter production lines in Hong Kong compared to the low skilled and long production lines in China * LABOUR The workers in Hong Kong worked about 50% faster compared to the workers in China. As a result the parka line in Hong Kong requires scarce 10 workers to complete all the operations whereas the parka line in C hina require up to 40 workers. This resulted in the longer production lines.In spite of the high quality of workers in Hong Kong, the unemployment rate in the untaught is very low and most of the younger workers prefer office jobs. thusly it is difficult to acquire labor in Hong Kong. Reason The differences in the susceptibility might be due to the variances in the trainings given to the workers in China and Hong Kong. The workers in Hong Kong were more cross functional and were trained to work in broader range of jobs compared to the Chinese workers. * TOTAL COST The overall cost of production is lower in China as compared to Hong Kong.Though there is a certain(prenominal) cost advantage, there are strict quota restrictions by the U. S regime on shipping goods from China when compared to Hong Kong. Reason The lower production cost in China can be mostly attributed to the low profit rates compared to the wage rates nonrecreational in Hong Kong. The workers are give $0. 16 per hour in China compared to $3. 84 per hour paid in Hong Kong. * QUALITY Another main difference between sourcing in China and Hong Kong is the quality of the products. The quality and reliability of the products from China is relatives low when compared to Hong Kong.Reason The difference in quality could mainly be attributed to the labor skill and ability in both the regions. The workers in Hong Kong have the capability to ramp up the production faster and thus they had the shorter production lines. Longer production lines in China led to the greater imbalances both in the quality and measure required in manufacturing the product. Recommendation Based on our analytic thinking we ground the severalise quantity for distributively of the 10 parkas. A detailed order quantity for each of the 10 parkas is given in appendix 3. step for calculating order quantity For Obermeyer we have Cu = $27 and Co = $9 from this we steer CSL for Obermeyer = . 75. This means that there is 25% proba bility for a stock out applicable for each of the 10 parkas. * We used deuce standard deviations for the normal distribution of demand. * By using the formula Q=Z. S. D+mean for 25% stock out the overall quantity to be ordered is calculated to be 26412. * Since we need to order 10,000 units the summation of order quantity of all the 10 parkas is equal to 10,000. * We assume that the demand for each of the 10 parkas will be in same proposition.Using this we calculate for Z Z=1. 06. * Using the z value, mean and standard deviation we calculate the order quantity for each of the 10 parkas. (See appendix 3) * Also nub expected profit for 10 parkas is approximately $2. 3 Million and median(a) left over quantity is 69 units per parka. APPENDIX 1) Cost analysis at different stages of production. OBERSPORT cost if do in hongkong $60. 08 cost if made in China $51. 92 weighted amount cost $56. 00 Greig flummox fabric $9. 00 Finishing of Shell fabric $3. 90 Finis hed line drive fabric $3. 90 Insulation $4. 80 Zippers $3. 60 Thread $0. 60 Logo,Patches etc $3. 00 Snaps $0. 90 Dyeing of snaps $0. 30 $30. 00 Agent fee Hong Kong 3. 49 China 2. 98 Labor cost per unit China 0. 78 Hong Kong 10 Tranportation cost (weighted average ) Quantity charge/unit total naval 160000 1. 4 224000 Air 40000 5 200000 weighted average 200000 424000 weighted average/unit $2. 12 Appendix 2 Appendix 3