ShoeCo must decide whether to offshore shoe production and where. By analyzing operating costs, lead times, quality, and capital requirements across the US, Vietnam, and Dominican Republic, the recommended solution is to offshore ~17% of production to the Dominican Republic, which balances lower costs (20% margin vs 15% domestic) with acceptable lead times (3 weeks vs 2 weeks) and quality (97% yield).
Key Insights:
- Operating margin alone is insufficient for offshoring decisions; lead time and quality are equally critical in fast-moving consumer goods industries
- Dominican Republic emerges as superior to Vietnam despite lower operating margins (20% vs 30%) because customer-proximity and lead-time requirements outweigh margin optimization
- Break-even analysis reveals that only 16.7% of annual production needs to be offshored to justify a $50M capital investment with a 3-year payback period
- Framework approach (MECE structure across Demand, Supply, Capability, and Macro factors) is more valuable than jumping to financial analysis
- Offshoring decisions require consideration of non-quantifiable risks: IP theft, political backlash, and supply chain disruption