TABLE 11.11 Production and Shipment Costs per Bag by Production Location San Francisco China Comments Hourly...

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TABLE 11.11 Production and Shipment Costs per Bag by Production Location San Francisco China Comments Hourly wage $12.50 $1.25 Includes benefits Labor content 49 minutes 63 minutes Materials $13 $13 Other manufacturing $1.50 $0.75 expenses Includes items such as insurance, equipment maintenance, and warranty expenses Shipment to San $0 $1 Francisco By ocean carrier. Air freight is $15 per bag. Shipment from San $3 $3 Francisco to customers Of course, Table 11.11 doesn't tell the entire story. There would be costs associated with finding a good supplier and monitoring th supplier. And it isn't clear how Timbuk2's customers would react to the move-from its start, Timbuk2 emphasized with pride that it w made in San Francisco. Does moving production to China eliminate part of the brand's cache with customers? 1. What is the total cost of making a bag in San Francisco? What is the total cost of making a bag in China, including the transportation cost of shipping the bag from China to the United States? Page 36 2. Suppose Timbuk2 does move production of wholesale bags to China. Let's say it can place orders with its Chinese supplier every four weeks; that is, one period equals four weeks. Its lead time is two periods; that is, L-2. Average demand for one type of wholesale bag is 200 bags per period (i.e., they sell, on average, 200 bags every four weeks), with a standard deviation of 100 bags. The holding cost for each bag each period is $1, and it would operate with a 2.5 safety factor. How much inventory, on average, would it have on order and on hand? What would be the inventory holding cost per bag? 3. Should it move production of custom bags to China? Should it move production of wholesale bags to China? TABLE 11.11 Production and Shipment Costs per Bag by Production Location San Francisco China Comments Hourly wage $12.50 $1.25 Includes benefits Labor content 49 minutes 63 minutes Materials $13 $13 Other manufacturing $1.50 $0.75 expenses Includes items such as insurance, equipment maintenance, and warranty expenses Shipment to San $0 $1 Francisco By ocean carrier. Air freight is $15 per bag. Shipment from San $3 $3 Francisco to customers Of course, Table 11.11 doesn't tell the entire story. There would be costs associated with finding a good supplier and monitoring th supplier. And it isn't clear how Timbuk2's customers would react to the move-from its start, Timbuk2 emphasized with pride that it w made in San Francisco. Does moving production to China eliminate part of the brand's cache with customers? 1. What is the total cost of making a bag in San Francisco? What is the total cost of making a bag in China, including the transportation cost of shipping the bag from China to the United States? Page 36 2. Suppose Timbuk2 does move production of wholesale bags to China. Let's say it can place orders with its Chinese supplier every four weeks; that is, one period equals four weeks. Its lead time is two periods; that is, L-2. Average demand for one type of wholesale bag is 200 bags per period (i.e., they sell, on average, 200 bags every four weeks), with a standard deviation of 100 bags. The holding cost for each bag each period is $1, and it would operate with a 2.5 safety factor. How much inventory, on average, would it have on order and on hand? What would be the inventory holding cost per bag? 3. Should it move production of custom bags to China? Should it move production of wholesale bags to China?