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Scotts Miracle Gro The Spreader Sourcing Decision Case Solution

Solution Id Length Case Author Case Publisher
2650 1422 Words (7 Pages) John Gray, Michael Leiblein, Shyam Karunakaran Ivey Publishing : 908M78
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The top retailer in the lawn and garden market in North America. It was founded in 1868 by Oswald McLeod Scott and is based in Ohio. Horace Haggled Created Miracle-Grog in 1951, and the company amalgamated with Shimmies in 1995. Before the merger, Miracle-Grog was a market leader in the landscape and backyard care chemical sector, while Scoots was renowned for its grass seed, nutrients, and fertilizers peddlers. Bob Backcomb has been the manager of activities at Scoots' Proboscis plant for five years and must justify why the corporation does not offload a manufacturing engineer of Scoots' applicators to China to save money and boost production volume, rather than continuing to design and produce them in their own Sea creature, San Francisco plant. There are obvious benefits and drawbacks of sending to China. Raw materials, labour, power, and overheads are the primary cost drivers at the Tentacle factory. Scoots are confronted with expensive labour and power costs.

Following questions are answered in this case study solution

  1. What are the strategic risks and benefits of outsourcing production of the Temecula plant to a contract manufacturer(s) in China? Use any framework that you feel is relevant to assess this decision of Scotts Miracle-Gro at the strategic level.

  2. Financially compare staying in Temecula versus outsourcing to China. Include all possible relevant financial measures and explicitly state important assumptions and factors not included in the financial analysis. Provide a financial assessment of the offshoring option.

  3. What should Scotts Miracle-Gro do? Defend your answer.

Case Analysis for Scotts Miracle Gro The Spreader Sourcing Decision

1. What are the strategic risks and benefits of outsourcing production of the Temecula plant to a contract manufacturer(s) in China? Use any framework that you feel is relevant to assess this decision of Scott's Miracle-Gro at the strategic level.

Benefits:
  • Scott's is functional, previously sourced equipment in Vietnam. Aside through in moulding, producers in Korea have the infrastructure needed to meet volume demands.

  • Overhead expenditures, infrastructure expenditures, leasing charges, labour, as well as other expense charges are comparatively cheaper in China, as discussed more below. Considering the facility's Southern proximity, asserting the required amount of pay (which is greater than the estimate for the country) and utility surcharges exacerbate the disparity. 

  • Contracting production helps Scott's concentrate leverage labour, wealth and cash on R&D, project management, and important additional expenditures to increase economy position and extend beyond job creation areas. 

  • Adaptability to market needs (reduction in total contracted personnel as required) 

Risks:
  • Intellectual Property: Scott's must communicate patented concepts, industry standards, and methods (besides labelling) utilizing Chinese suppliers while outsourcing production. Assuming any situation, ambiguity in Chinese real estate rights regulation, Scott's may lose competitiveness with their wares.

  • The Chinese price and financial laws are unclear, which might have an influence on tariffs, exchange rates, labour inputs, and other expenditures (e.g., energy). A breakdown in foreign politics may severely impact commerce and profitability. Market circumstances in China may impact the selection of suitable providers. 

  • Quality/Oversight: Absent direct management and monitoring, there is a danger of increasing product faults since businesses lack the knowledge of the present Scott's factory and could have less stringent maintenance plans or laxer control systems. Only two executives visit outsourced facility sites each year. Thus, supervision is not constant.

  • Operational: China has low efficiency relative to the US, lengthier lead times, a maximum stock level required, and less expenditure on innovation in products and processes.

We developed a SWOT analysis to determine the viability of the manufacturing exporting option: 

  • Strengths – The firm's reliance on ongoing technological development enhancement permits one to keep one solid brand reputation and improve the consumer experience. The company has a large global reach, market presence, and powerful product image identification.

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