Farouk Systems Inc. is a manufacturer of high quality, hand-held hair care products such as hair dryers, hair irons and professional quality shampoos and hair colorings. The company has annual sales volume in excess of $1 billion and sells its products in over 100 countries. But what is unusual about this company is that in spite of its vast and diversified customer base spanning much of the globe, all of Farouk Systems manufacturing is done in the U.S. at a large factory in Houston, Texas. The company had done some manufacturing in China but decided to discontinue this overseas manufacturing to consolidate all manufacturing in Houston. Farouk Systems believes that not only will product quality be enhanced by not outsourcing production, but inventory costs will be substantially less than if products were produced in multiple overseas locations.
Do you agree with Farouk Systems’s strategy? Can you make a case for confining production to just one home plant even though products must be supplied to customers in over one hundred countries around the world?