Introduction
CASE ANALYSIS H&M
The case, “Fuyao Glass America: Sourcing Decision” discusses the sourcing options
Fuyao Industry Group must consider for a potential bid on an upcoming contract. For starters,
Fuyao s
...
Introduction
CASE ANALYSIS H&M
The case, “Fuyao Glass America: Sourcing Decision” discusses the sourcing options
Fuyao Industry Group must consider for a potential bid on an upcoming contract. For starters,
Fuyao specializes in manufacturing glass for automotive vehicles through a centralized method
that allows for consistent production of specific, custom glass to fit the production line of their
customers. Considering automotive glass can vary dramatically by shape, size, thickness, etc. the
contract and their options prove to be of utmost importance, especially since the contract is
expected to be a few years long.
The two primary routes Fuyao could consider fall between a facility in Tianjin, China and
another in Moraine, Ohio. The difficulty in choosing between the two revolves around which
would be the best match in terms of costs, efficiency, risk, etc. while being able to maintain
production levels – without increasing risk of stoppage and consequentially high fees that would
be enforced by their customers (after all, a disruption in glass production could completely stop
the manufacturing of a line of cars). The two options provide different pros and cons, which
primarily include the differences in labor costs, shipping costs, and overall production potential
(and the possibility of improving such production). While the Tianjin, China facility has
considerably lower labor costs and are far more established than the newer facility in Moraine,
Ohio, the shipping of glass is significantly more expensive than the transportation fees incurred
domestically. The case describes the further difficulty in deciding between these options as the
benefits of both choices both have underlying downsides (e.g. labor costs are lower in China but
are continually increasing), and therefore require a more thorough consideration.
The Issue
ALYSISdocx/4
CASE ANALYSIS H&M
The issue, as mentioned, comes down to choosing the best facility for this production
contract which proves to be difficult due to the wide varying differences (and underlying
consequences) between the facilities. The only pieces of this case that remains central among
both choices are the repercussions of not meeting production numbers – whether it be due to
quality error, breakage on the floor, or poorly executed processes.
The Moraine, Ohio facility differs from that in Tianjin not only because of minimal
shipping costs but also because of the considerable investments Fuyao already committed to the
new factory – roughly $700 million (Shih, 2020). With the factory being new, more floor
employees are working per shift which stacks up labor costs, however, this could change in the
future once the new facility staff have had time to gain experience. Another primary difference of
course is the location, as the Moraine facility is near their customers’ plants of assembly,
minimizing transportation costs while reducing the distance in which breakage from accidents
could occur. Despite this, there are considerable downsides and concerns, primarily revolving
around potential environmental influences and the lack of growth possibility.
The Tianjin, China facility differs from that in Moraine in that labor costs are far lower,
and the facility is more established and mature, as they have been running for longer.
Geographically they also have their own advantage in that there are other glass production
factories surrounding the area which could be beneficial in the event of a stop in manufacturing –
due to the specific concentration of glass production resources and intelligence available and
general greater connectivity throughout the area (Chan, et. al., 2019). Shipping costs and times
are a downside compared to the quick movement Moraine can provide, however, the shipping
itself is quite fast in respect to the distance being travelled. More of these differences will be
further analyzed in the following sections
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