20 Jan SUPPLY CHAIN MANAGEMENT –

SUPPLY CHAIN MANAGEMENT -Chopra & Meindl Chapter 5 Exercise 4

Sleekfon and Sturdyfon are two major cell phone manufacturers that have recently merged. Their current market sizes are as shown in Table 5-9. All demand is in millions of units.

Sleekfon has three production facilities in Europe (EU), North America, and South America. Sturdyfon also has three production facilities in Europe (EU), North America, and the rest of Asia/Australia. The capacity (in millions of units), annual fixed cost (in millions of $), and variable production costs ($ per unit) for each plant are as shown in Table 5-10.

Transportation costs between regions are as shown in Table 5-11. All transportation costs are shown in dollars per unit. Duties are applied on each unit based on the fixed cost per unit capacity, variable cost per unit, and transportation cost. Thus, a unit currently shipped from North America to Africa has a fixed cost per unit of capacity of $5.00, a variable production cost of $5.50, and a transportation cost of $2.20. The 25 percent import duty is thus applied on $12.70 (5.00 + 5.50 + 2.20) to give a total cost on import of $15.88. For the questions that follow, assume that market demand is as in Table 5-9.

TABLE 5-9 Global Demand and Duties for Sleekfon and Sturdyfon.

Market

N. America

S. America

Europe (EU)

Europe (Non-EU)

Japan

Rest of Asia/Australia

Africa

Sleekfon Demand

10

4

20

3

2

2

1

Sturdyfon demand

12

1

4

8

7

3

1

Import duties (%)

3

20

4

15

4

22

25

TABLE 5-10 Plant Capacities and Costs for Sleekfon and Sturdyfon