Question: The Doright Door Company is considering outsourcing production of its door to Mexico. Use the weighted scoring method to evaluate the costs and risks of the offshore supplier, Perfect Door Company (Puertas Perfectos). The Mexican company has quoted a price of $83.00 for a standard door in order quantities of 5000 units that will fill demand for a year. The doors can be transported in a semi that holds 250 doors and costs $825 to make the trip from Mexico to the Doright warehouse. It will cost $5,000 to send engineers to prequalify the plant and $1,000 to negotiate and administer the contract. The inventory is carried for an average of 6 months during the year with a 20 percent carrying charge. The company has been producing the doors for $119 in the U.S. The weights and ratings for the order are as follows.
a. What is the total cost of producing in Mexico and how does it compare to the U.S.?
b. What are the total weighted scores for the Mexican supplier and in-house production?
c. Should the company outsource the product and why?