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Consumer and Ophthalmic International Division,17 that B&L Hong
Kong assemble sunglasses in Hong Kong. Mr. Godfrey approved the
decision on behalf of B&L Inc. to establish a sunglass assembly
facility in Hong Kong. His decision was based on the following
factors: (1) Because the parts for different SKUs of Ray-Bans
were interchangeable, B&L Hong Kong could reduce its finished
goods inventory yet process customer orders faster by assembling
the sunglasses in Hong Kong;18 and (2) because labor and overhead
costs were cheaper in Hong Kong than in the United States, the
17 The Consumer and Ophthalmic International Division succeeded
the Ophthalmic Division as the division of B&L Inc. responsible
for overseeing B&L Hong Kong.
18 For example, B&L produced different SKUs of sunglasses that
used the same type of frame, but lenses of different colors.
Lenses of the same design also were used interchangeably in
certain different styles of sunglass frames. Each style of frame
with each color of lens represented a different SKU. If B&L Hong
Kong had not decided to assemble sunglasses in Hong Kong, it
would have needed to maintain a finished goods inventory for
every SKU in order to process orders quickly. By maintaining a
sunglass assembly facility in Hong Kong, B&L Hong Kong was able
to process an order without needing to maintain a finished goods
inventory for every SKU. Rather, it simply needed to maintain an
adequate supply of the interchangeable parts. By way of illus-
tration, if B&L Hong Kong had not conducted assembly operations
in Hong Kong and had estimated that it would sell 100 pairs of
large metals, but had been unable to estimate whether its sales
would be for large metals with green or with gray lenses, it
would have needed to stock 100 finished pairs of each of those
SKUs. However, if B&L Hong Kong were to conduct assembly
operations, it could fill an order for 100 large metals with gray
lenses, 100 large metals with green lenses, or some combination
thereof simply by maintaining 100 pairs of frames for large
metals, 100 pairs of gray lenses, and 100 pairs of green lenses.
Thus, the total number of frames in B&L Hong Kong's inventory
could be less than the number of frames in its inventory if it
maintained enough finished goods inventory to fill those orders.
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