Straight Supply is a major supplier of medical components to large pharmaceutical co Show more Straight Supply Straight Supply is a major supplier of medical components to large pharmaceutical corporations.

Straight Supply is a major supplier of medical components to large pharmaceutical co Show more Straight Supply Straight Supply is a major supplier of medical components to large pharmaceutical corporations.
Bonnie Straight is a second generation CEO of the company founded by her father forty years ago. Originally established in Moorhead Minnesota Bonnie moved the company operations to Denver ten years ago so she could see the mountains from her office window. The Denver location proved profitable for Straight Supply as the company could take advantage of a larger pool of labor and find and train skilled employees to assemble quality products efficiently. The location also made it easier for shipping around the country as many trucking companies were looking for loads out of the Denver area. Additionally Bonnie could more easily take advantage of business and medical conferences. An unexpected benefit of being headquartered in Denver was the close proximity to Colorado Springs and the many Christian organizations based in the area like Focus on the Family. Bonnie became an active contributor to several of these organizations and was invited to serve on the board of some of them. Her work in the medical supply area also provided opportunities to help worthwhile causes through the donation of medical supplies and materials to these organizations. At least ten percent of company profits were donated to Christian organizations every year. One of Straight Supplys most successful products is an insulin-monitoring pump which monitors and measures insulin concentrations and automatically injects insulin into diabetic patients. Due to the technical nature of this pump and its critical function exacting standards are needed in its design and manufacture. There are several critical components requiring highly skilled labor and the finest quality materials. Recently a competitor began promoting a similar insulin monitoring and pump type product. One of the large pharmaceutical companies which has been a major customer of Straight indicated that they were giving serious consideration to the competitors product. This customer wanted to give Straight Supply every opportunity to continue business with them since they have a good relationship which has existed over a number of years however business is business. Bonnie learned that the competing product was close in quality but definitely lower in price. While this other insulin pump did not have as long a history for product reliability the competing company had introduced several successful medical products over the last few years. There was every indication that the competitors insulin pump could reach the quality standards required by these major companies at a favorable price. Straight anticipated that if they wanted to remain a product leader in the insulin monitoring pump product area and maintain their current customer base they were going to have to make their product more competitive. Given that competitors were able to offer a similar quality product at a lower price meant that Straight would have to consider lower its selling price. However at the same time they wanted to maintain as much of the profit margin as possible as this was a critical product to the overall success of the company. Bonnie realized that they were going to have to reduce production costs. Given that the company had produced this product for some time they had pretty much taken advantage of the learning curve phenomena. All production efficiencies and the resulting cost savings had pretty much been incorporated into the current cost of the product and it would be difficult to introduce additional efficiencies of cost savings into the production process. Material costs were somewhat out of their control as they had to rely on other suppliers to provide materials and additionally material costs was not that great of a component of the total costs of the product. When it came to overhead costs the company used activity based costing to attempt to get as accurate a measure as possible of appropriate indirect costs to allocate to this particular product line. While there is never a guarantee of complete accuracy with the allocation process top management believed that their costing procedure was reasonable. This process of determining total costs was further confirmed by an independent consulting firm which recommended and implemented their current cost allocation system. Outsourcing was quickly becoming the only option for production of this product. The production process was fairly labor intensive involving a skilled workforce to insure that the critical intricacies and components of the product were properly assembled. Straight had depended on some of their most talented work force to assemble this important product. Naturally the labor cost on a per part basis was relatively high due to many factors. The product was made in the Denver plant which also had a high cost of living and the demand for qualified employees was critical which resulted in a higher wage rate. Also well-trained technically skilled individuals were needed in many disciplines which also demanded a higher wage rate. The employees working for Straight were some of the more dependable with a greater number of years working at the company which added to the labor costs. The potential for considerable cost savings in labor was available if the product could be assembled overseas. Straight identified a medical supply company in India that apparently employed a highly skilled work force with appropriate training in the assembly of similar products. The labor rate was considerably lower enough so that the product could be shipped to India and back by air for just the assembly process and money could be saved. Before making any critical decisions of this nature Bonnie thought it best to conduct a financial analysis of alternative proposals for a five-year time period. The choice for Straight Supply in this situation was to either continue production in Denver or have the product assembled in India. The production and finance departments came up with some critical cost factors to aid in the decision process. At the Denver plant 25 employees worked on this specific product. Their average wage rate including benefits is $30 per hour. Employees at the Denver plant are able to produce 75 of the insulin pumps per hour on an eight-hour shift for 250 days in the year. Indirect costs related to the production of the insulin pump were allocated to the product at 180 percent of the direct labor costs. Wage rates will increase at 6 percent per year. The cost to ship the product to their pharmaceutical customer in Chicago was $0.75 per item and that s

Having Trouble Meeting Your Deadline?

Get your assignment on Straight Supply is a major supplier of medical components to large pharmaceutical co Show more Straight Supply Straight Supply is a major supplier of medical components to large pharmaceutical corporations. completed on time. avoid delay and – ORDER NOW

Do My Paper

Our website has a team of professional writers who can help you write any of your homework. They will write your papers from scratch. We also have a team of editors just to make sure all papers are of HIGH QUALITY & PLAGIARISM FREE. To make an Order you only need to click Order Now and we will direct you to our Order Page at Litessays. Then fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.