Currently, the majority of the cotton used in Natun’s linens is sourced from India, but there has been a recent shift by the industry to re-shore cotton growing and weaving for some of the higher end bed linen products.

The manufacturing of the bed sheet sets is currently done in China by Shanghai General Textile Co. (SGT). Natun also utilizes manufacturers in Vietnam and Bangladesh for some of their lower end products for discount retailers. These are manufactured where they are sourced.

Recent threats of tariffs on Chinese produced products has made Natun vulnerable to these additional costs that are out of their control and could jeopardize their business. Natun has been considering reducing their dependence on overseas manufacturing and in the longer term, perhaps bringing their manufacturing capability back “in house”. However, in the near term, it is more feasible to continuing outsourcing, but to bring it back to the US.

Tim Major has asked his VP of Supply Chain, Tom Brady to perform a sourcing analysis to see if “re-shoring” the manufacturing operation to the United States. Tom was able to gather the following information from their current supplier in China.

  • SGT produced 750,000 bed sheet sets last year
  • 30 shipping containers were delivered to the Columbus, OH distribution center
  • The unit cost for the sheet sets from SGT was $25 per sheet set
  • Transportation from SGT to the port is $500 per container
  • Ocean freight from Shanghai to Charleston is $5000 per container
  • Transportation from the port of Charleston to Columbus, OH is $700 per container
  • Freight forwarding fees are $800 per container
  • US Port Handling fees are $1,200
  • There is s 5% import duty fee on products from China
  • Inspections conducted by the Freight Forwarder in Shanghai are $1,200 per container
  • In-transit inventory is 2 weeks and valued at 15% of the unit cost (holding and carrying costs combined)

Tom issued an RFP to five US based linen manufacturers and the best proposal was from Wolverine Inc at a unit cost of $30 per sheet set. Wolverine’s plant is located in Ann Arbor, MI and transportation costs are $500 per trailer to Columbus, OH.

Address the following questions:

  1. What is Natun’s current supply chain? Create a map showing suppliers, manufacturers, distributors, retailers and customers. Compare the current network to the one being considered.
  2. Natun’s current strategy is to outsource raw materials and manufacturing. What factors should be considered in evaluating a re-shoring strategy? Using the data provided, should Natun consider manufacturing their own sheet sets? Include both quantitative and qualitative factors in making your recommendations.
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