1. The proposal of option #3 is an in-sourcing method. It constructs a new building in Kalamazoo and produces the PCBs by itself. Once the facility was up, the company can use it to run the business and provide the PCBs to other departments.

The main benefit of this proposal is the high reliability because the company would have high control degree based on the quality and delivery of their own products. If the company implements this proposal, the account payable period to the manufacturer would increase from 30 days to 120 days. The fact that payment was not due for 120 days means that its customers typically would pay Stryker for finished goods before Stryker was required to pay its materials supplier. This benefit would increase the company’s cash flows and liquidity. Also, the managers and engineers already master the knowledge of using the equipment and systems needed to produce the PCBs and familiar with the manufacturing equipment. Therefore, the Stryker can use its own employees rather than hiring other people outside the company or training their own employees to produce the PCBs, resulting in the low labor cost. Last but not the least, the company already has its own factory that can be used for constructing the new facility. So the Stryker doesn’t need to buy or rent the factory for this proposal, which lower its equipment cost.

Although this in-sourcing proposal has a lot of benefits, it also has some potential risks. The biggest risk is that the company has to invest large amount of money at the beginning, which may results in the company’s shortage of the cash flow, even worse results in the company’s bankruptcy.

Comparing with the option #1 and option #2, the option #3 would have higher long-term return and higher reliability. The option #3 is the best choice because it avoids the risk of other weak suppliers, comparing with the other