Scotts Miracle Gro Outsourcing Decision Synopsis Scotts Miracle Gro was created in a 1995 merger between Scotts and Miracle Gro companies and is now the world’s leading supplier of do it yourself garden and lawn care in North America in Marysville, Ohio. It is backed by the established history of its founding companies: Scotts and Miracle Gro. The long Scotts history dates back to 1861 when Orlando McLean Scott founded the company by distributing grass seeds in 1907 and later producing seed spreaders in the 1930. Horace Hagedon started Miracle Gro in 1951 which was the leading brand in lawn care chemicals industry. Even though this is a corporation of great success with $2.7 million dollars of net sales in 2007, they had some difficulties on deciding between outsourcing a contract manufacturer in China or continue to manufacture in the United States. Since 2001, Scotts Miracle Gro decided to lease its current 412,000 square foot facility in Temecula, California after realizing that their three separate buildings were not cost effective. The annual cost for the property was $3 million dollars and they were contracted for 15 years. In the five years between 2002- 2007, Bob Bawcombe, the director of operations for Scotts Miracle Gro, greatly improved their productivity through continuous investment in their products and better process innovations. An example of this kind of improvement was the development of a new hand spreader assembly process, requiring six people to make the product. The redesign of the process as an automated assembly line allowed the plant to develop and build in-house requiring only four people. The Temecula Plant was also the developer of “in-mold labeling,” which allowed labels to be molded into the plastic products. Raw materials, labor costs that employed 195 people, electricity costs, and overhead that included the building lease, were the main cost drivers of the plant. Although Scotts Miracle Gro
Essay on Scotts Miracle-Gro Case Solution
1363 WordsAug 19th, 20136 Pages
Name: Elcra Brown Subject: Supply Chain Management (Intro) Paper Subject: Scotts Miracle-Gro Date: July 23, 2013
Scotts Miracle-Gro is the largest company in the North American lawn and garden industry. It is also the world’s leading supplier and marketers of consumer products for do it yourself lawn and garden care, including products for professional horticulture. This paper is mainly centered on two decisions which include either to make and or buy. In other words whether Scotts Miracle-Gro should keep manufacturing in Temecula located in California, outsource production to a contract company in China or to build a company in China and relocate production there. The paper will be divided into three parts in…show more content…
Nonetheless, upon close examination of the production line, it was concluded that there were a lot of disadvantages associated with the outsourcing of production some of which includes and is not limited to:
• Loss of quality
• Loss of cross functional collaboration between production line workers and R&D department which will result in the loss of innovation
• Providing the equipment, knowledge and training to perform in-mold labeling to an outside contractor, something that once differentiates us from other major competitors or just foregoing in-mold labeling capabilities.
• Risk of increasing labor costs faster than expected which could directly impact the pricing of the products
• Increase lead time; defective products will not be caught until they arrive in the United States
• The inability of quick response (QR) due to the increase in lead time
• Risk of utility rates increasing faster than expected; due to the growing pressure on the Chinese government to improve environmental record.
• Possibly damaging the company’s goodwill in terms of not playing their part in CSR by increasing the carbon foot print by using China’s cheap energy source.
• Risk in changing policies as it relates to the importing of tax and duty free agricultural products
• Uncertainty of the Chinese government as it relates to the overvaluing of the Yaun.
• Transition costs associated with the move