Emerson Elec. Subpak Case

Introduction

This is a messy situation.  You have to make some assumptions.   For better or worse, these are characteristics of most real-world decisions.  

Memo

Include a print-out of your spreadsheet (discussed below) with your memo.

Questions to get the wheels turning

• Assuming the landed total cost does not provide a true picture of all the relevant costs and benefits, use the spreadsheet to incorporate as many costs (or risks) as you can.  Are there additional qualitative factors?
• Thinking beyond the costs, what are the sources of risk to Emerson (ACP) in each of the alternatives?  What are the pros and cons?

As usual, please follow the class guidelines for analyzing the case.  Bring a copy of your spreadsheet on disk or transparency to class.

Note on the spreadsheet

Attached is a spreadsheet to analyze the options.  A lot of the analysis is already done for you.  Most of numbers are completed.  You fill in the blank ones (It is probably best to leave the zeros as is).  You'll have to make some assumptions besides those listed below.   There may be assumptions imbedded in the spreadsheet that you want to question/change.  (concentrate on the blue part of the spreadsheet).  You can change the exchange rate near the top of the spreadsheet.

Assumptions & Background

Let's assume these assumptions are correct:

• Inland freight via rail
• 4,000 subpacks per 40' container
• 30,000 subpaks per year
• Tooling from Taiwan lasts 4 years, from US lasts 8 years.
• Ignore letter of credit transaction fee

Page 20 of case (may have been left out of packet)