I have to find a manufacturing decision that is facing a firm in the terms of how to manufacture the product with these three possible options:
1) Establish the assembly only operation with components that are purchased from local vendors;
2) Establish manufacturing of all components and the final assembly;
3) Outsource the entire manufacturing operation to an offshore company
1. Establish the assembly operation only with components that are purchased from local vendors. If the firm can purchase the components from the local suppliers at a rate which is lesser than the rate at which components can be manufactured by it, then it is better for the manufacturing firm to purchase the components from local suppliers. For example, if the firm requires four components to manufacture final product A and if the price of the four components being $ 30, $ 40, $ 20 and $ 25 respectively, the total cost of all components comes to $ 115 per unit of final product A. If the firm decides to manufacture all the products on its own without relying on the customers, and if total cost of ...