Bobby Cook is trying to capture the attention of Black Friday shoppers for OptiShop, a discount chain with 1,500 stores in Canada and the United States. Bobby wants to offer a tabletop 3D printer at a price point of $299 that rivals more expensive options from Dell and Flashforge. He believes that it will be possible to sell 150,000 units during the holiday season and 15,000 units per month over the subsequent 12 months.
After much effort to ensure feasibility of the initiative, evaluate product quality, and compare supplier capabilities, Bobby has narrowed his focus to three options. Each supplier offers a reasonably priced, high-quality home 3D printer that meets OptiShop specifications. However, each supplier is in a different country, which gives Bobby some concerns about delivery costs and responsibility, financial risks, and foreign exchange rate exposure. Highlights of each proposal are provided below.
Option 1—purchase printers from Takena Electronics in Nagano, Japan, a longtime supplier of products to OptiShop. Takena works on an open account basis and promises to make shipments of 2,500 units in 40-foot containers under Incoterm DAP, Port of Long Beach. The price offered per unit is 19,000 JPY (Japanese Yen). 1 USD = 112.3 JPY
Option 2—purchase the printers from TriTex Industries, a Kuala Lumpur, Malaysia-based manufacturer. TriTex has a solid reputation and Bobby nearly purchased virtual reality goggles from them last year. Their offer is based on 1,300 units shipments in 20-foot containers under Incoterm FOB, Port of Tanjung Pelepas. The price offered is 727 MYR (Malaysian Ringgit) using Letter of Credit payments. 1 USD = 4.1 MYR
Option 3—purchase the printers from Luca Enterprises, an electronics distributor in Bucharest, Romania. Luca sources printers from contract manufacturers in Eastern Europe. Their offer is based on OptiShop taking control of the product at the Luca distribution center under Incoterm EXW. The price offered is 625 RON (Romanian Leu), cash in advance. 1 USD = 3.9 RON
CASE QUESTIONS
1) What is the price per 3D printer in USD for the Takena Electronics offer?
2) What is the price per 3D printer in USD for the TriTex Industries offer?
3) What is the price per 3D printer in USD for the Luca Enterprises offer?
4) Which of the three options creates the greatest supply chain costs and responsibilities for OptiShop?
5) Which of the three options creates the lowest financial risk for OptiShop?
6) Which of the three options should you recommend? Why?