LÊ VĂN PHIÊN PURCHASING

18132050 CASE STUDY CHAPTER 10,11

1. The total cost per unit of purchasing from Original Wire

COST CACULATION PER UNIT ($)
Unit price 30.00
Packing costs 0.75
Tooling $6000/(5000*12*3) 0.03
Freight cost $2.50/10 0.25
Cost per unit of purchasing 31.03
2. The total cost per unit of purchasing from Happy Lucky Assemblies.

COST CACULATION PER UNIT ($)

Unit price 19.50
Tooling $3000/(5000*12) 0.05
Packing costs for containerization 2.00
Cost of inland transportation to port of
$200*3/5000 0.12
export
Freight forwarder’s fee $100/5000 0.02
Cost of ocean transport $4000*3/5000 2.40
Marine insurance $0.50*19.5/100 0.10
U.S. port handling charges $1200*3/5000 0.72
Customs duty 5%*19.5 0.98
Customs broker fees per shipment $150/5000 0.03
Transportation from Seattle to Detroit $18.60/10 1.86
Inventory costs $1.00*40*3/5000 0.02
Cost of hedging currency—broker
$400/5000 0.08
fees
Additional administrative time due to
4*25/5000 0.02
international shipping
Diplomatic costs 20000/(5000*12) 0.33
Cost per unit of purchasing 28.23
3. Based on the total cost per unit, Sheila should recommend supplier from Happy
Lucky Assemblies, because its total cost per unit of purchasing is cheaper than Original
Wire ($28.23 < $31.03)
4. Besides cost, Sheila should evaluate: customs procedures, reputation of the supplier,
possible risks about currency, politics,..., Supply ability
5. International purchasing is more complex than domestic purchasing. Because:
- Relative the custom, import/export tax, foreign trade documents (L/C, B/L, C/O,
Invoice,...)
- Must contract and cost a lot to work with supplier.
- May be have risks in sea shipment
- Long transit time, difficult to respond promptly in unexpected.
Although International purchasing is more complex, we have many benefits, which is
worth the additional effort:
- The total cost is lower then domestic purchasing. And Business owners have found that
their margins can go huge.
- Scour international supply markets in their respective industries and select the right
supplier.
- ...