Scotts Miracle-Gro: the Spreader Sourcing Decision Essay
3493 WordsJun 2nd, 201114 Pages
SCOTTS MIRACLE-GRO: THE SPREADER SOURCING DECISION
IVEY BUSINESS CASE STUDY 908M78
Introduction This paper provides a case analysis and case solution to an Ivey School of Business case study on Scotts Miracle-Gro, the biggest company in North America’s lawn and garden industry and the world’s leading supplier and marketer of consumer lawn and garden care products (Gray & Leiblein, 2008, p. 1). The time setting for the case is the summer of 2007. The case focuses on questions about where to optimally locate Scotts’ manufacturing operations for its fertilizer spreaders. Based in Marysville, Ohio and with a history dating back to the 1868 founding of the Scotts Company, the contemporary Scotts Miracle-Gro Company was created by a…show more content…
As indicated by the table on the following page, there are significant differences between the estimated first year costs at a Chinese contract manufacturer versus the Temecula plant. The Chinese building cost of $200,000, is just 6.6% of the $3,000,000 annual lease on the Temecula facility. The current Chinese cost per kilowatt of 6.5 cents is just 35% of the current California rate of 18.5 cents per kilowatt. It is not possible from the information provided in the case to estimate actual cost differences, since no data are provided on total energy requirements or usage. In assessing the difference in energy costs, however, it is important to consider the likelihood that the Chinese plant will be less energy efficient than the California plant, which will to some extent offset the lower electricity rates (Kumar & Koptizke, 2008, p. 107).
Annual Cost Estimates, Temecula versus Chinese Manufacturer
|COST Factor |TEMECULA |Forecast |CHINA |Forecast |China v. |
| |Cost $ |Change % |Cost $ |Change % |Temecula |
| | | | |
Essay on Scotts Miracle-Gro Case Solution
1363 WordsAug 19th, 20136 Pages
Name: Elcra Brown Subject: Supply Chain Management (Intro) Paper Subject: Scotts Miracle-Gro Date: July 23, 2013
Scotts Miracle-Gro is the largest company in the North American lawn and garden industry. It is also the world’s leading supplier and marketers of consumer products for do it yourself lawn and garden care, including products for professional horticulture. This paper is mainly centered on two decisions which include either to make and or buy. In other words whether Scotts Miracle-Gro should keep manufacturing in Temecula located in California, outsource production to a contract company in China or to build a company in China and relocate production there. The paper will be divided into three parts in…show more content…
Nonetheless, upon close examination of the production line, it was concluded that there were a lot of disadvantages associated with the outsourcing of production some of which includes and is not limited to:
• Loss of quality
• Loss of cross functional collaboration between production line workers and R&D department which will result in the loss of innovation
• Providing the equipment, knowledge and training to perform in-mold labeling to an outside contractor, something that once differentiates us from other major competitors or just foregoing in-mold labeling capabilities.
• Risk of increasing labor costs faster than expected which could directly impact the pricing of the products
• Increase lead time; defective products will not be caught until they arrive in the United States
• The inability of quick response (QR) due to the increase in lead time
• Risk of utility rates increasing faster than expected; due to the growing pressure on the Chinese government to improve environmental record.
• Possibly damaging the company’s goodwill in terms of not playing their part in CSR by increasing the carbon foot print by using China’s cheap energy source.
• Risk in changing policies as it relates to the importing of tax and duty free agricultural products
• Uncertainty of the Chinese government as it relates to the overvaluing of the Yaun.
• Transition costs associated with the move