Hong Kong Vs Mainland China

Objective

The purpose of this analysis is to identify the risks and benefits associated to sourcing to Hong Kong and mainland China in correlation to Marshall Fisher’s integrated framework known as accurate response. This method links operational changes and planning approaches to improve a firm's ability to match supply with demand for new products. By the end of this analysis, a recommended first round order will be implemented based off of the sample buying committee’s forecast of ten styles of women’s parkas. A look ahead plan will also be put in place to improve the supply chain’s performance.

Hong Kong vs Mainland China

One of the primary areas of difference between Hong Kong and China is the labor costs.

• China = RMB 0.91 (RMB 5.7 = US$1)

 Product Quality is a concern

• Hong Kong = HK$30 (HK 7.8 = US$1)

Hong Kong is better equipped to produce because of their smaller minimum order requirements.

• Hong Kong = 600 units in same style

• China = 1,200 units in same style

Finally, Hong Kong has a much better output to working hours ratio.

• Hong Kong = 19 parkas in 48 hours/week

• China = 12 parkas in 58.5 hours/week

Given these numbers, China does have the capabilities to meet the high volume requirements of some of the less volatile styles. The main area of focus will need to be the quality, as these items are top sellers. Hong Kong can produce the lower volume, high volatile styles at a much quicker rate, while ensuring quality is up to par.

The group forecasting procedure is extremely beneficial in the sense that it provides an overall illustration of individual forecasts as a whole, which allows one to not only equate an average forecast but also a standard deviation. The standard deviation can be used to identify the more volatile items, which can ultimately be seen as the ‘high risk’ items.

1st & 2nd Round Orders

Due to the minimum requirement of 1,200 units per style, it is recommended to produce the Seduced, Assault, Electra, and Entice styles in China. All four of these styles sport a high average forecast and relatively low standard deviation in connection to their average (low volatility / lower risk). While the Anita and Daphne