Eureka Case 30 min Undergrad

The Plate Decision

You are Sebastián Larráinzar-Oyervides, 47, COO at Hornos Bajío, a Querétaro mid-cap appliance OEM (ovens, ranges, dishwashers) — MXN 4,800M revenue, 1,650 staff, supplying Whirlpool, Mabe, and Bosch as private-label plus your own HBajío brand. The PCBA contract is up for renewal in eleven weeks. The decision is in front of you.

The situation

Hornos Bajío makes almost everything in-house — sheet metal, enamel, motors, glass — except the printed-circuit-board assemblies (PCBAs) that turn each appliance into a smart appliance. Those have always been outsourced to Electrónica Tepeyac, a Tier-1 EMS in Guadalajara. The contract is single-source. Three years ago that was MXN 380M/yr; this year it will be MXN 870M/yr as smart-appliance share of mix climbed from 22% to 33%. Forecast: 48% by 2028. The PCBA is the most expensive non-metal component in your bill of materials and the only one a customer holds in their hand when the appliance breaks.

Tepeyac has just raised pricing 14% citing component costs. A second EMS, NovaCircuit in Tlaquepaque, has bid 8% below today's price with an 18-week onboarding. Your engineering group has drawn up an in-house option: build a PCBA line in Querétaro at MXN 720M capex, 18-month build, plus 110 new hires and a foreman cadre you'd need to recruit from CDMX or Guadalajara. Your CFO wants the cheapest dollar. Your VP Product wants the design-to-manufacture integration that only in-house gives. The board reviews the recommendation in eleven weeks.

Your job in this case: read the three-option decision matrix across cost, risk, and strategic-fit lenses; stress-test the model under different smart-appliance share and demand-volatility assumptions; and recommend a five-year sourcing plan to the board. The Whirlpool category director told you last month: "We're going to ask all our private-label partners which way they're going on smart electronics. We want a clear answer."

The decision

What do you recommend to the board?

  • A · Build the PCBA fab in Querétaro
  • B · Dual-source EMS (Tepeyac + NovaCircuit)
  • C · Hybrid — in-source the 4 high-runner platforms, EMS the tail

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