please answer 5 questions below, my deadline is coming in tomorrowInformation are all in 2 pictures 476OPERATIONS RESEARCHPart Seven Case StudiesEXHIBIT 4 Operating metrics by plant location.Production costU.S.MexicoChinaCapital expenditures, equipment moving costs, andstartup costs (thousands of US$)U.S.MexicoChinaAnnual demand for Side-by-SidesShipping cost from ChinaCost per unitSide-by-Side units per containerGround transportation cost (US$)Cost per mileSide-by-Side units per truckOtherTariff for China importTransportation cost (US$)Miles to Distribution CenterFrom RoseauTacoma, WA1,6362,161Los Angeles, CAIrving, TX1,267A factory in Mexico would require hiring sixty newemployees, the same as in China. Side-by-Sides wouldbe shipped to the United States by truck in batches of26 units at an average cost of $2.30 per mile per batch.Although trucking companies claimed they could crossthe U.S. border and deliver the products in two days, inpractice it took between two and seven days.Capital expenditures, equipment moving costs, andstartup costs for a Mexican factory would total $9.5 million.Under the provisions of NAFTA (North American FreeTrade Agreement), Polaris would pay no tariffs on importsfrom Mexico into the United States.EXHIBIT 5 Demand assumptions.Annual Demand(units)Distribution Center LocationTacoma, WA3,650Los Angeles, CA7,050Irving, TX3,800Cost per unit400 USD4,560 MXN1,950 CNY9,50010,00014,500 units5%190262.3026FromMonterrey2,2611,505437United StatesA third option for Polaris's senior management was tomaintain the status quo for production of Side-by-SidesEXHIBIT 6 Exchange rate history.CNY/USDMXN/USDYear200020018.289.348.289.6620028.2810.8020038.2811.2920049.1910.9020057.9710.9020067.6110.9320076.9511.1620086.8313.5020096.7712.6320106.6512.40CNYChinese yuMXN - Mexican pesoUSD US dollarEXHIBIT 7 Map of Polaris locations in 2010.Wyoming MNproductdevelopmentao Spirit Lake IARoseau MNmanufacturingVermillion SDdistribution centermanufacturing)Monterrey MXpossible plant sitewithout incurring additional costs. Polaris had tradition-ally been associated with a strong "Made in America"Еculture, and management believed that the company'semployees and customers were proud that all Polarisproducts were manufactured in the United States. Inaddition, the proximity to headquarters and productdevelopment facilities enabled managers to collaboratequickly and easily with design engineers and technicalstaff in the manufacturing plants.RECOMMENDING A SOLUTIONAs Krishna reviewed the data for each option, he knewhe needed to consider qualitative as well as quantitativefactors to find the best solution for Polaris. Should herecommend keeping production in the United States, orshould he recommend siting a new plant in eitherMexico or China?Discussion Questions1. Which location provides Polaris the greatest costadvantage? Calculate the NPV of the three locationsusing a 10% discount rate.Polaris Industries Inc.: Global Plant LocationPolaris Industries Inc.: Global Plant LocationOsceola WImanufacturingMedina MNheadquarters4772. Would your recommendation change if the foreignexchange rate increased or decreased by 15%?3. What other factors should be considered in makingthis decision?4. Calculate a weighted scoring model. Decide onqualitative factors that you think are important inthis decision, e.g. location near R&D, quality, lossof intellectual property, and currency risk. Thenhow much weight you would attach to factorssuch as NPV and each of the other factors to total100%. Then assign a score (1 to 10) to each factorfor each of the three locations. Calculate a totalweighted score by multiplying the weight times.the factor score and adding over all factors foreach location.5. Which of the three locations do you recommend andwhy? 474OPERATIONS RESEARCHPart Seven Case StudiesEXHIBIT 2 Polaris sales by product.On-roadvehicles4%Snowmobiles10%Parts andaccessories17%ATVs andside-by-sides69%Polaris was the dominant player in the ORV marketbased on market share. In 2010 ORVS accounted for69 percent of Polaris's sales, with Side-by-Sides com-prising the majority of sales in this segment. Lookingahead, the company was excited by the potentialgrowth in emerging markets. From Latin America toAsia, Polaris had begun to invest heavily in marketing toincrease awareness of its brand. For example, in Chinathe company placed off-road image advertising in rac-ing and extreme sports enthusiast publications. Simi-larly, in Latin America Polaris was leveraging its brand inthe utility vehicle space to penetrate the substantialagricultural industries.MANUFACTURINGIn 2010 all of Polaris's manufacturing operations werelocated in the northern Midwest. In addition to its corporateheadquarters in Medina, Minnesota, and product develop-ment and innovation center in Wyoming, Minnesota,Polaris operated three manufacturing facilities in Roseau,Minnesota; Osceola, Wisconsin; and Spirit Lake, lowa.Roseau, the birthplace of the Polaris snowmobile, housedresearch, development, and manufacturing for the snow-mobile, ATV, and Side-by-Side divisions. Roseau alsoincluded a small state-of-the-art injection molding plantthat produced plastic parts for the Roseau and Spirit Lakefactories. As demand grew for ATVs and on-road vehicles,Polaris established an additional manufacturing facility in1994 at Spirit Lake. This facility produced select ATV.watercraft, and Victory motorcycle models. Osceola wasprimarily an engine and components supplier for the othertwo facilities.All other components were sourced through morethan 450 global suppliers. In 2010 Polaris sourcedalmost 40 percent of its components and materials fromoutside the United States, up from 30 percent in 2008.The company was also increasing low-cost country(LCC) sourcing, almost doubling its LCC spend toapproximately 24 percent in 2010.To support its production capabilities in and aroundthe northern United States, Polaris had three warehousefacilities in Minnesota for raw materials, export process-ing, and distribution. When demand for parts, apparel,and accessories exceeded the company's warehousecapacity in 1997, a new distribution center was openedin Vermillion, South Dakota. In addition to its U.S. loca-tions, Polaris also owned and operated regional salesand distribution centers in Winnipeg, Canada, and inNorthern Europe and Australia.REDESIGNING THE SUPPLY CHAINKrishna had to consider the tradeoff between manufac-turing and transportation costs when redesigning thesupply chain for Side-by-Side products. On one hand,manufacturing in markets with low labor costs couldresult in significant savings. Although labor rates in tra-ditional LCCs such as China were rising. U.S.-basedlabor was still more costly. On the other hand, with oilprices rising steadily, Krishna knew transportationcosts would be far lower if he kept production closeto customers.Senior management at Polaris was also concernedabout a manufacturing talent gap in the United States.Over the past twenty years, decreased funding for com-munity colleges and trade schools had resulted in tech-nical workers becoming increasingly difficult to find.Moreover, young trade school graduates were lessinterested in moving to the locations where Polaris oper-ated, which were small towns with only one largeemployer. By comparison, well-trained technical talentwas relatively easy to find in many South American andAsian countries.Lastly, Polaris expected much of its future salesgrowth would come from overseas markets, particularlyemerging markets. There were multiple ways to enterthese markets, including acquisitions and joint ventures,but building a facility in an emerging market couldpotentially help Polaris capture future demand.CHOOSING A MANUFACTURING LOCATIONKrishna and his team considered several options fortoptimizing the manufacture of Side-by-Sides and thedesign of the supply chain. They concluded that thebest options were either to continue production in exist-ing American factories or to build a new plant in Chinaor Mexico.Beyond the specific pluses and minuses of eachlocation, Krishna needed to consider the following inmaking a final decision:. The majority of demand for Side-by-Sides was in thesouthern United States. The states with the highestshare of sales volume in 2010 were Texas and California.• Side-by-Sides were high volume-to-weight/low value-to-weight products, which meant that shipping costsaccounted for a large fraction of their retail price.• Polaris's senior management placed a high value onease of communication with its manufacturing plantsand believed that in-person interaction among manag-ers, design engineers, and production staff was a keydriver of the company's long-term product innovation.• If Polaris moved production of Side-by-Sides abroad,the company planned to lay off sixty workers at itsRoseau plant. Each worker would be paid a one-timeseverance of $20,000.. Given the weak economic environment, Polaris as-sumed that demand for Side-by-Sides would remainflat for the next five years.Data on labor costs, production costs, transportationcosts, capital expenditures, and exchange rates for eachlocation are included in Exhibit 3 through Exhibit 6.ChinaPolaris's senior executives were excited about the lowcosts in China, but labor costs had been rising in themanufacturing-heavy eastern region; over time the com-pany would likely have to look further inland to find low-cost labor, which would further increase the length andvariability of product transportation. Polaris also hadEXHIBIT 3 Labor assumptions.Monthly Wages1999200020012002200320042005200620072008Hourly wageWorking months/yearUnited StatesChina (CNY)649.5729.2814.5916.81,041.31,169.41,313.11,497.21,740.32,016.0$26/hour12Polaris Industries Inc.: Global Plant LocationPolaris Industries Inc.: Global Plant Locationconcerns about its ability to successfully collaboratewith a Chinese factory due to time-zone differences andcultural dissimilarities.Operating a factory in China would require Polaris tohire sixty new employees on location. It also wouldresult in a one-time charge of $10 million for capitalexpenditures, equipment moving costs, and startupcosts. Polaris would have to pay a 5 percent tariff on allproduction and transportation costs when importingproducts into the United States.Side-by-Sides made in China would be transportedto the United States on container vessels, with eachcontainer holding twenty-six vehicles. The cost to shipone vehicle to the United States from China was $190per unit, or $4,940 per container. Although shippingcompanies claimed the containers would reach theUnited States in about twenty days, in practice shippingtime was highly variable, with a range of nineteen tothirty-three days.MexicoPolaris's senior management saw several qualitativeadvantages to operating a foreign manufacturing facilityin Monterrey, Mexico. (See Exhibit 7 for map.) Monterreywas relatively close to the United States, which wouldallow for easier in-person collaboration between themanufacturing facility and Polaris's staff. In addition togeographical proximity, managers believed culturalfamiliarity would make collaborating with a Mexicanworkforce easy. Lastly, although Polaris believed thatlong-term sales growth would come from emerging mar-kets in Asia, it also believed that near-term growth wouldoccur in the United States-particularly in the southernUnited States, an area close to Monterrey.Annual Wage Growth (%)Mexico (MXN)2,392.02,910.53,367.63,537.53,737.73,858.83,983.84,112.94,246.24,383.7China (CNY)121213141212141616Mexico (MXN)2216wwwwwar55534753

Question

please answer 5 questions below, my deadline is coming in tomorrowInformation are all in 2 pictures 476OPERATIONS RESEARCHPart Seven Case StudiesEXHIBIT 4 Operating metrics by plant location.Production costU.S.MexicoChinaCapital expenditures, equipment moving costs, andstartup costs (thousands of US$)U.S.MexicoChinaAnnual demand for Side-by-SidesShipping cost from ChinaCost per unitSide-by-Side units per containerGround transportation cost (US$)Cost per mileSide-by-Side units per truckOtherTariff for China importTransportation cost (US$)Miles to Distribution CenterFrom RoseauTacoma, WA1,6362,161Los Angeles, CAIrving, TX1,267A factory in Mexico would require hiring sixty newemployees, the same as in China. Side-by-Sides wouldbe shipped to the United States by truck in batches of26 units at an average cost of $2.30 per mile per batch.Although trucking companies claimed they could crossthe U.S. border and deliver the products in two days, inpractice it took between two and seven days.Capital expenditures, equipment moving costs, andstartup costs for a Mexican factory would total $9.5 million.Under the provisions of NAFTA (North American FreeTrade Agreement), Polaris would pay no tariffs on importsfrom Mexico into the United States.EXHIBIT 5 Demand assumptions.Annual Demand(units)Distribution Center LocationTacoma, WA3,650Los Angeles, CA7,050Irving, TX3,800Cost per unit400 USD4,560 MXN1,950 CNY9,50010,00014,500 units5%190262.3026FromMonterrey2,2611,505437United StatesA third option for Polaris's senior management was tomaintain the status quo for production of Side-by-SidesEXHIBIT 6 Exchange rate history.CNY/USDMXN/USDYear200020018.289.348.289.6620028.2810.8020038.2811.2920049.1910.9020057.9710.9020067.6110.9320076.9511.1620086.8313.5020096.7712.6320106.6512.40CNYChinese yuMXN - Mexican pesoUSD US dollarEXHIBIT 7 Map of Polaris locations in 2010.Wyoming MNproductdevelopmentao Spirit Lake IARoseau MNmanufacturingVermillion SDdistribution centermanufacturing)Monterrey MXpossible plant sitewithout incurring additional costs. Polaris had tradition-ally been associated with a strong &#34;Made in America&#34;Еculture, and management believed that the company'semployees and customers were proud that all Polarisproducts were manufactured in the United States. Inaddition, the proximity to headquarters and productdevelopment facilities enabled managers to collaboratequickly and easily with design engineers and technicalstaff in the manufacturing plants.RECOMMENDING A SOLUTIONAs Krishna reviewed the data for each option, he knewhe needed to consider qualitative as well as quantitativefactors to find the best solution for Polaris. Should herecommend keeping production in the United States, orshould he recommend siting a new plant in eitherMexico or China?Discussion Questions1. Which location provides Polaris the greatest costadvantage? Calculate the NPV of the three locationsusing a 10% discount rate.Polaris Industries Inc.: Global Plant LocationPolaris Industries Inc.: Global Plant LocationOsceola WImanufacturingMedina MNheadquarters4772. Would your recommendation change if the foreignexchange rate increased or decreased by 15%?3. What other factors should be considered in makingthis decision?4. Calculate a weighted scoring model. Decide onqualitative factors that you think are important inthis decision, e.g. location near R&D, quality, lossof intellectual property, and currency risk. Thenhow much weight you would attach to factorssuch as NPV and each of the other factors to total100%. Then assign a score (1 to 10) to each factorfor each of the three locations. Calculate a totalweighted score by multiplying the weight times.the factor score and adding over all factors foreach location.5. Which of the three locations do you recommend andwhy? 474OPERATIONS RESEARCHPart Seven Case StudiesEXHIBIT 2 Polaris sales by product.On-roadvehicles4%Snowmobiles10%Parts andaccessories17%ATVs andside-by-sides69%Polaris was the dominant player in the ORV marketbased on market share. In 2010 ORVS accounted for69 percent of Polaris's sales, with Side-by-Sides com-prising the majority of sales in this segment. Lookingahead, the company was excited by the potentialgrowth in emerging markets. From Latin America toAsia, Polaris had begun to invest heavily in marketing toincrease awareness of its brand. For example, in Chinathe company placed off-road image advertising in rac-ing and extreme sports enthusiast publications. Simi-larly, in Latin America Polaris was leveraging its brand inthe utility vehicle space to penetrate the substantialagricultural industries.MANUFACTURINGIn 2010 all of Polaris's manufacturing operations werelocated in the northern Midwest. In addition to its corporateheadquarters in Medina, Minnesota, and product develop-ment and innovation center in Wyoming, Minnesota,Polaris operated three manufacturing facilities in Roseau,Minnesota; Osceola, Wisconsin; and Spirit Lake, lowa.Roseau, the birthplace of the Polaris snowmobile, housedresearch, development, and manufacturing for the snow-mobile, ATV, and Side-by-Side divisions. Roseau alsoincluded a small state-of-the-art injection molding plantthat produced plastic parts for the Roseau and Spirit Lakefactories. As demand grew for ATVs and on-road vehicles,Polaris established an additional manufacturing facility in1994 at Spirit Lake. This facility produced select ATV.watercraft, and Victory motorcycle models. Osceola wasprimarily an engine and components supplier for the othertwo facilities.All other components were sourced through morethan 450 global suppliers. In 2010 Polaris sourcedalmost 40 percent of its components and materials fromoutside the United States, up from 30 percent in 2008.The company was also increasing low-cost country(LCC) sourcing, almost doubling its LCC spend toapproximately 24 percent in 2010.To support its production capabilities in and aroundthe northern United States, Polaris had three warehousefacilities in Minnesota for raw materials, export process-ing, and distribution. When demand for parts, apparel,and accessories exceeded the company's warehousecapacity in 1997, a new distribution center was openedin Vermillion, South Dakota. In addition to its U.S. loca-tions, Polaris also owned and operated regional salesand distribution centers in Winnipeg, Canada, and inNorthern Europe and Australia.REDESIGNING THE SUPPLY CHAINKrishna had to consider the tradeoff between manufac-turing and transportation costs when redesigning thesupply chain for Side-by-Side products. On one hand,manufacturing in markets with low labor costs couldresult in significant savings. Although labor rates in tra-ditional LCCs such as China were rising. U.S.-basedlabor was still more costly. On the other hand, with oilprices rising steadily, Krishna knew transportationcosts would be far lower if he kept production closeto customers.Senior management at Polaris was also concernedabout a manufacturing talent gap in the United States.Over the past twenty years, decreased funding for com-munity colleges and trade schools had resulted in tech-nical workers becoming increasingly difficult to find.Moreover, young trade school graduates were lessinterested in moving to the locations where Polaris oper-ated, which were small towns with only one largeemployer. By comparison, well-trained technical talentwas relatively easy to find in many South American andAsian countries.Lastly, Polaris expected much of its future salesgrowth would come from overseas markets, particularlyemerging markets. There were multiple ways to enterthese markets, including acquisitions and joint ventures,but building a facility in an emerging market couldpotentially help Polaris capture future demand.CHOOSING A MANUFACTURING LOCATIONKrishna and his team considered several options fortoptimizing the manufacture of Side-by-Sides and thedesign of the supply chain. They concluded that thebest options were either to continue production in exist-ing American factories or to build a new plant in Chinaor Mexico.Beyond the specific pluses and minuses of eachlocation, Krishna needed to consider the following inmaking a final decision:. The majority of demand for Side-by-Sides was in thesouthern United States. The states with the highestshare of sales volume in 2010 were Texas and California.• Side-by-Sides were high volume-to-weight/low value-to-weight products, which meant that shipping costsaccounted for a large fraction of their retail price.• Polaris's senior management placed a high value onease of communication with its manufacturing plantsand believed that in-person interaction among manag-ers, design engineers, and production staff was a keydriver of the company's long-term product innovation.• If Polaris moved production of Side-by-Sides abroad,the company planned to lay off sixty workers at itsRoseau plant. Each worker would be paid a one-timeseverance of $20,000.. Given the weak economic environment, Polaris as-sumed that demand for Side-by-Sides would remainflat for the next five years.Data on labor costs, production costs, transportationcosts, capital expenditures, and exchange rates for eachlocation are included in Exhibit 3 through Exhibit 6.ChinaPolaris's senior executives were excited about the lowcosts in China, but labor costs had been rising in themanufacturing-heavy eastern region; over time the com-pany would likely have to look further inland to find low-cost labor, which would further increase the length andvariability of product transportation. Polaris also hadEXHIBIT 3 Labor assumptions.Monthly Wages1999200020012002200320042005200620072008Hourly wageWorking months/yearUnited StatesChina (CNY)649.5729.2814.5916.81,041.31,169.41,313.11,497.21,740.32,016.0$26/hour12Polaris Industries Inc.: Global Plant LocationPolaris Industries Inc.: Global Plant Locationconcerns about its ability to successfully collaboratewith a Chinese factory due to time-zone differences andcultural dissimilarities.Operating a factory in China would require Polaris tohire sixty new employees on location. It also wouldresult in a one-time charge of $10 million for capitalexpenditures, equipment moving costs, and startupcosts. Polaris would have to pay a 5 percent tariff on allproduction and transportation costs when importingproducts into the United States.Side-by-Sides made in China would be transportedto the United States on container vessels, with eachcontainer holding twenty-six vehicles. The cost to shipone vehicle to the United States from China was $190per unit, or $4,940 per container. Although shippingcompanies claimed the containers would reach theUnited States in about twenty days, in practice shippingtime was highly variable, with a range of nineteen tothirty-three days.MexicoPolaris's senior management saw several qualitativeadvantages to operating a foreign manufacturing facilityin Monterrey, Mexico. (See Exhibit 7 for map.) Monterreywas relatively close to the United States, which wouldallow for easier in-person collaboration between themanufacturing facility and Polaris's staff. In addition togeographical proximity, managers believed culturalfamiliarity would make collaborating with a Mexicanworkforce easy. Lastly, although Polaris believed thatlong-term sales growth would come from emerging mar-kets in Asia, it also believed that near-term growth wouldoccur in the United States-particularly in the southernUnited States, an area close to Monterrey.Annual Wage Growth (%)Mexico (MXN)2,392.02,910.53,367.63,537.53,737.73,858.83,983.84,112.94,246.24,383.7China (CNY)121213141212141616Mexico (MXN)2216wwwwwar55534753

Accepted Answer

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Mexico or China? Discussion Questions 1. Which location provides Polaris the greatest cost advantage? Calculate the NPV of the three locations using a 10% discount rate.