Question 1:

You are designing a grocery delivery business. Via the Internet, your company will offer
staples and frozen foods in a large metropolitan area and then deliver them within a
customer-defined window of time. You plan to partner with two major food stores in the
area. What should be your competitive priorities and what capabilities do you want to
develop in your own core and support processes?

In order to establish an online grocery delivery business there are few factors that need to be
considered in order for this business to be successful.

The first one of them is the partnership with the grocery stores. In this case we will partner with
two brick and mortar grocery stores that currently do not have any type of grocery delivery
business. Further we must be certain that we will have customers who are willing to pay the
extra dollars for the service. The ideal customer for this service is a person who leads an
extremely hectic and busy life, does not like visiting grocery stores and has a medium to high
income.

Furthermore we must also determine what our competitive priorities are. Competitive priorities
are critical dimensions that any business supply chain must satisfy for its customers (Ward,
1998). Some of these competitive priorities are:
1- Cost importance- Corporations and manufacturers are concerned with how much certain
processes will cost because this can make or break the differentiator factor with the
competition. Manufacturing cost-related categories include (direct) production costs,
productivity, capacity utilization, and inventory reduction (Ward, 1998).

2- Quality importance. Engineering, marketing, and manufacturing functions have often been
portrayed as possessing different definitions of quality (Ward, 1998). These include
performance, features, reliability, conformance, durability, and perceived quality.

3- Delivery time importance. On-time delivery is the ability to deliver according to a promised
schedule. In the online grocery business this factor is key for superior competitiveness. The
business unit may not have the least costly nor the highest quality product, but is able to
compete on the basis of reliably delivering products when promised (Ward, 1998).

In designing a grocery delivery business via internet, the manager of the company should focus
on developing an effective operational strategy for closing the gap between competitive priority
and capabilities (Collier & Evans, 2009). In addition, and one other important dimension
of the online grocery delivery process is the method of order fulfillment. There three methods
to choose from, picking up from the store shelf; picking from the store fulfillment center or
picking from a permanent dedicated distribution center. Depending on the location where the
two partners have their local distribution centers will determine which method we may choose.
 Finally, the corporation must invest in a robust and reliable information technology
system as well as a great IT department. After all, all the orders will be coming
through online and the web and this is extremely important for the process.
Customers will rely on this system and if it fails then they will not come back to
place orders and business will be lost.

Hahn Manufacturing purchases a key component of one of its products from a local supplier. The current
purchase price is $1,500 per unit. Efforts to standardize parts succeeded to the point that this same
component can now be used in five different products. Annual component usage should increase from
150 to 750 units. Management wonders whether it is time to make the component in-house, rather than to
continue buying it from the supplier. Fixed costs would increase by about $40,000 per year for the new
equipment and tooling needed. The cost of raw materials and variable overhead would be about $1,100
per unit, and labor costs would be $300 per unit produced.
a. Should Hahn make rather than buy?
b. What is the break-even quantity?
c. What other considerations might be important?

BABE IM PUTTING THIIS IN BOOOLDD

I found this solution but notice the numbers are different but you can get an idea as to what to do
Hahn Manufacturing has been purchasing a key component of one of its products from a local supplier.
The current purchase price is $1450 per unit. Efforts to standardize parts have succeeded to the point
that this same component can now be used in five different products. Annual component usage should
increase from 150 to 750 units. Management wonders whether it is time to make the component in-
house, rather than to continue buying it from the supplier. Fixed costs would increase by about $42,000
per year for the new equipment and tooling needed. The cost of raw materials and variable overhead
would be about $1120 per unit, and labor costs would go up by another $320 per unit produced.
a. Should Hahn make rather than buy?
b. What is the quantity beyond which it is more attractive to make than buy?
c. What other considerations might be important?

Answer

A:The cost for producing each unit in house is

1120+320=$1440 but you also need to factor in the fixed costs:
$42000/750units per year =$56 each
add this to the $1440 gives $1496 per unit
Hahn should continue to buy.

B:It becomes attractive to make when the price per unit is less than $1450 (ie $1449)
So, $1449-1120-320=$9
When the fixed costs come to $9 per unit, they should make them in house:
42000/9=4667units per year

C:As for other factors, I can only think that transport costs would have to be considered. Plus they could
discuss a lower price deal with their supplier because the will be buying so much of their product. (Often
the case with large corporations such as WalMart or WinCo)

Good LUCK!