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The Global Sourcing Decision at Matsicon

Katrina Wolf, a buyer at Matsicon, an Indianapolis$-$based producer of subassemblies for the material handling and warehouse industry, has sent out requests for quotations for a gear motor to three prospective suppliers. Only two of the three suppliers indicated an interest in quoting the business: Original Automation $($Noblesville$,$ IN$)$ and ADI Industrial Assemblies of Guangdong Province, China. The estimated demand for the motors is $3200$ units a month. Both suppliers will incur some costs to retool for this particular gear motor. The motors will be prepackaged in $242418-$inch cartons. Each packaged unit weighs approximately five pounds.

Quote $1$

The first quote received is from Original Automation. Noblesville is about $40$ miles from Matsicon's corporate headquarters, so the quote was delivered in person. When Katrina went down to the lobby, she was greeted by the sales agent and an engineering representative. After the quote was handed over, the sales agent noted that engineering would be happy to work closely with Matsicon in developing the unit and would also be interested in future business that might involve finding ways to reduce costs. The sales agent also noted that they were hungry for business, as they were losing a lot of customers to companies from China. The quote included unit price, tooling, and packaging. The quoted unit price does not include shipping costs. Original Automation requires no special warehousing of inventory, and daily deliveries from its manufacturing site directly to Matsicon's assembly operations are possible.

Original Automation Quote:

Unit price $=$$$83\mathrm{.}00$

Packing costs $=$$$2\mathrm{.}25$ per unit

Tooling $-$ $$11,000$ one$-$time fixed charge

Freight cost $=$$$4\mathrm{.}30$ per humdred pounds

Quote $2$

The second quote received is from ADI Industrial Assemblies of Guangdong Province, China. The supplier must pack the motors in a container and ship via inland transportation to the port of Shanghai in China, have the shipment transferred to a container ship, ship the material to Seattle, and then have material transported inland to Indianapolis. The quoted unit price does not include intemational shipping costs, which the buyer will assume.

ge $1$ of $3$

$968$ words

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