Problem: Dr$.$ Smart$$s Supply Chain Strategy

Dr$.$ Smart at the University of Iowa $($Iowa City, Iowa$)$ invented a small device $($with a high value$-$to$-$weight ratio$)$ that can perform house cleaning chores. The main components of this device include a regular computer chip $($that are currently used in all PCs$),$ a set of specialized robotic arms, and a sophisticated computer program. Market survey indicates that people from big cities such as New York, Chicago, and Los Angeles are most likely to buy this device. However, the demand for this device is highly uncertain. Dr$.$ Smart wants to establish a company to produce the device. Help him on the following supply chain$-$related problems:

There are a lot of companies that can supply computer chips; each can ensure a short lead time if the order size is not too big. Intel can ensure short lead time no matter how large the order size is$.$ However, it requires a long$-$term contract that prohibits Dr$.$ Smart from using other suppliers $($who may offer lower price in the near future$).$ The quality and performance of computer chips from different companies are comparable. Should Dr$.$ Smart sign the contract with Intel? Why?

ABB and Flexbot are two potential suppliers for the robotic arms. Flexbot has a slightly higher price but is more flexible in terms of scaling down or ramping up production. ABB has a lower price and it also provides quantity discount, but it requires a minimum purchase quantity per month and a long lead time if the order size is large. Which company should be chosen and why?

The assembly plant for the house cleaning device will be based in the United States. A development center to maintain and enhance the software program is also needed. Should Dr$.$ Smith set up the development center in India $($which has talented programmers with a lower cost$)$ or in the United States near the assembly plant $($so that programmers can work closely with plant engineers$)?$ Why?

Dr$.$ Smart is not sure whether he $(1)$ should have separate distribution centers near big cities or $(2)$ should have a central distribution center at Iowa City. What are the pros and cons of these two choices $($assuming facility costs are roughly the same$)?$ Which choice makes more sense?