CASE 11-1 3D Printers for the Masses Bobby Cook is trying to capture the attenti

Question

CASE 11-1 3D Printers for the Masses

Bobby Cook is trying to capture the attention of Black Friday shoppers for OptiShop, a discount chain with 1,500 stores in Canada and the United States. Bobby wants to offer a tabletop 3D printer at a price point of $299 that rivals more expensive options from Dell and Flashforge. He believes that it will be possible to sell 150,000 units during the holiday season and 15,000 units per month over the subsequent 12 months. After much effort to ensure feasibility of the initiative, evaluate product quality, and compare supplier capabilities, Bobby has narrowed his focus to three options. Each supplier offers a reasonably priced, high-quality home 3D printer that meets OptiShop specifications. However, each supplier is in a different country, which gives Bobby some concerns about delivery costs, risks, and foreign exchange rate exposure. Highlights of each proposal are provided below. Option 1—purchase printers from Takena Electronics in Nagano, Japan, a longtime supplier of products to OptiShop. Takena works on an open account basis and promises to make shipments of 2,500 units in 40-foot containers under terms Incoterm DAP, Port of Long Beach. The price offered per unit is 19,000 JPY (Japanese Yen). Option 2—purchase the printers from TriTex Industries, a Kuala Lumpur, Malaysiabased manufacturer. TriTex has a solid reputation and Bobby nearly purchased virtual reality goggles from them last year. Their offer is based on 1,300 units shipments in 20-foot containers under Incoterm FOB, Port of Tanjung Pelepas. The price offered is 727 MYR (Malaysian Ringgit) using Letter of Credit payments. Option 3—purchase the printers from Luca Enterprises, an electronics distributor in Bucharest, Romania. Luca sources printers from contract manufacturers in Eastern Europe. Their offer is based on OptiShop taking control of the product at the Luca distribution center under Incoterm EXW. The price offered is 625 RON (Romanian Leu), cash in advance. As Bobby considered his options, he consulted an online currency converter to evaluate the quotes. He found the following exchange rates: 1 USD = 110.20 JPY 1 USD = 64.12 MYR 1 USD = 3.86 RON

CASE QUESTIONS

1. What is the price per 3D printer in USD for the Takena Electronics offer? What costs, responsibilities, and risks does OptiShop assume under DAP, Port of Long Beach?

2. What is the price per 3D printer in USD for the TriTex Industries offer? What costs, responsibilities, and risks does OptiShop assume under FOB, Port of Tanjung Pelepas?

Explanation / Answer

1. Price per 3D printer for the Takena Electronics= 19,000 JPY

Given: 1 USD = 110.20 JPY  

Price in USD= 19,000/110.20= $172.41

The cost OptiShop assume will be cost of printers (2500*172.41= $4,31,034.48) plus import duty, local taxes etc

Responsibilities will be supplying of the printers, loading goods, processing customs clearance for the imported goods and taking care of all import duty charges , local axes etc under DAP(delivered at place).

basically the risk is borne by Takena here but it will transfer to OptiShop once the items will be available for unloading

2.The price per 3D printer in for the TriTex Industries: 727 MYR

USD = 64.12 MYR

Price in USD=727/64.12= $11.33

Under FOB, Optishop has to bear the expense for the carriage of the goods from the named port of shipment.

Its Optishop responsibility to obtain any import licence or authorization and expense at its own risk and take care of all import formalities during transit.

TriTex will bear all cost and risk of loss or damage till the time goods reach the named port of shipment. OptiShop has to bear all costs and risks from that point of time.

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