So What Club

Sourcing, trade and supply risk

Stay in China, move to Vietnam or move to Mexico?

The prompt

A fictional company sells 1,000,000 kitchen appliances a year in the United States, all made in China. Factory cost per unit: China USD 20.00, Vietnam USD 21.50, Mexico USD 24.00. Freight per unit: USD 1.20, USD 1.30 and USD 0.50. For this exercise, assume extra US tariffs of 25 percent of factory cost on goods from China. Assume 12.5 percent from Vietnam and 0 percent from Mexico (USMCA-qualifying). Days of stock in transit and in safety stock: 60, 55 and 15, at USD 0.02 per unit per day. Moving costs USD 3 million for Vietnam and USD 6 million for Mexico. What should the company do?

Before you reveal anything, plan your own structure and first move on paper. Then reveal one part at a time and compare.

Clarifying questions, with the interviewer's answers

Next case

Read the next worked case the same way: plan your own answer first, then reveal one part at a time.

Next case: Protecting an e-bike maker from a magnet cut-offThe lesson: Nearshoring, friend-shoring and "China plus one"
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