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Scotts Miracle Gro case solution

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Scotts Miracle Gro case solution
Objective

The objective of this study is to decide the best decision for Scott’s Miracle-Gro on whether to outsource their production to china or stay in the Temecula plant in California. Factors such as risks/benefits, and cost analysis will be considered in reaching an outcome onto what will be the best option for Scott’s Miracle-Gro in order to maximize profit, efficiency, and long-term growth.

Suggestions

The best option for Scott’s Miracle-Gro is to stay in the United States. This will benefit the company financially and will help keep the product quality standards high. However, some production cost need to be cut down in order to remain competitive and keep profit at a percentage they would make if the company would outsource production. The three main areas where Scotts Miracle-Gro should consider reducing their cost should be:

Raw Material costs.
Labor costs.
Energy costs.

Analysis

Risk and Benefits

Upon review of the production line of The Spreaders, it has been concluded that outsourcing the production line of The Spreaders, holds many risks which include, but are not limited to:
Loss of quality
Forgoing in-mold label capabilities or paying to provide such technology to a contract manufacturer
Loss of production innovation
Currency exchange rate risk; undervalued Yuan
Lead time; Defective batches will not be detected until they arrive from China
Slight risk of change in policies regarding duties and taxes on agricultural imports
Risk of labor and utility rates increasing faster than expected
There are also benefits to outsourcing the production line which include:
Cheap labor
Cheap electricity
The risks heavily outweigh the benefits of outsourcing in this case. Thus the best option for Scott’s Miracle-Gro would be to stay in the Temecula plant in the United States.

Cost Analysis
An analysis of the difference of manufacturing costs in Temecula and in China reveal that Scotts Miracle-Gro saves between $4 million and $5 million per year by using a
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