Case Prompt:The CEO of a car manufacturer (OEM) in the US is considering moving their production to China. They have us on board to determine whether or not they should do so. what factors should they consider ?
Which Structure is better ?
- What is the size of the demand?
- Does the "Made in X" matters to the consumer? Would it impact their purchasing power (to avoid compromising the consumer satisfaction)
- Demand volatility? brand perception?
- Cost of moving production into location X (investment cost and ongoing costs) vs Status Quo -> are there any cost synergies?
- Capacity and lead time (can we meet the demand in a timely manner?)
- Quality Control
- Supply chain impact: Raw material (Procurement, supplier relationships), manufacturing (availability of technology and labor), Inventory Management, Transportation (Shipping Cost, Transportation time)
- Barriers and Risks:
- Regulations: Approvals and permits in location X (X =China in this case)
- Geo-political Stability, Economy Stability
- Language Barriers
- Management (local management strategy might not be applicable to how business is done in new location)
- Import Penalties and Taxes imposed by local government
1- Economics : analyze possible cost synergies
2- Demand versus Supply : a- Demand Factors (as bucket 1 above) , b- supply factors (as bucket 2 above, ,minus the cost)
3- Barriers and Risks
Which is better?