The total cost concept is a technique that is commonly used in making a number of supply chain management decisions. The concept requires you to identify cost components that are relevant in a decision-making situation and accurately estimate those cost components. Analyze the problem below and answer questions a) to c) that follow. Appropriately label your responses.

A clothing manufacturer can produce dress shirts in its Houston plant for $8 per shirt (including the cost of raw materials). Chicago is a major market for 100,000 shirts per year. The shirt is priced at $15 at Houston. Transportation and storage charges from Houston to Chicago amount to $5 per cwt. Each packaged shirt weighs 1 lb. Alternatively, the company can have the shirts produced in Taiwan for $4 per shirt (including the cost of raw materials). The raw materials, weighing about 1lb. per shirt would be shipped from Houston to Taiwan at a cost of $2 per cwt. The shirts are then shipped directly to Chicago at a transportation and storage cost of $6 per cwt. The manufacturer pays an import duty of $0.50 per shirt.

a) From a supply chain cost standpoint, where should the shirts be produced?

b) What additional considerations, other than economic ones, might be considered before making a final decision?

c) Supply chain decisions are classified as strategic, planning, and operational. What type of supply chain decision is this? Why?