What action should Hans Thorborg take? Why?
One option Hans Thorborg has is to develop a new marketing strategy to incorporate the remaining inventory into new sales. For example, he can instruct Gerhard Henk the sales manage to offer the customer a new set of replacement plastic rings free after the first rings wear out. The promotion would help PWI to fortify the vendor to customer relationship commitment of quality and satisfaction while potentially increasing sales as well. The assumption would be the plastic rings are produced by the time the rings wear out. Hans would then have to deal with the total cost of two rings ($279.65 + $1107.90 = $1387.55 per hundred). In this scenario Hans would be face with a net loss of $37.55
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Given the insignificant initial investment of $7,500 to manufacture plastic rings, he should be concerned that this new innovation will increase profits short-term but eventually lead to a loss of 480% ($242.1 / $50.37) long-term after other competitors produce the part.
A second option Hans Thorborg can try is to transfer his inventory or raw materials to markets which Henri Poulenc has yet to enter. Since Henri Poulenc, the competitor of Precision Worldwide, only influences 10% of the market share worldwide. As mentioned the new plastic rings would not be produced by any company other than Henri Poulenc for some time. Financials aside, knowing this information would negate the urgency made by sales manager, Gerhard Henk, who commented that if customers found out plastic rings were sold elsewhere then it would be detrimental the sales of Precision Worldwide machines – which are many times the print of a ring. This gives some assurance that this could impact only 10% of total PWI sales, not the entire company. If feasible, Hans can try to relocate these inventory or raw materials using intercompany transaction to locations not impacted by this new plastic rings innovation. Labor and sales cost can be accrued in “due from” and “due to” accounts depending on the branches that currently manufacture and require additional steel material. Hans can even consider
From the first page of the case we have an estimate of $11 million cost of lost sales and backorders and $10 million associated with having too much of the wrong inventory. These costs are stated as being a conservative estimate.
We believe that PWI should use excess labor during slack periods to use the current inventory to produce more steel rings. If Thorborg was to use the slack periods to bulk build steel rings, the company would only save around $58 per 100 rings due to the slack period wage pay. This would drop the labor costs down to $137.55 and total costs drop down to $1048.95 all per 100 rings. By doing this, PWI might be able to recoup some costs prior to the plastic ring launch.
California Surf Clothing Company issues 1,300 shares of $7 par value common stock at $22 per share. Later in the year, the company decides to repurchase 130 shares at a cost of $35 per share.
Xilinx, Inc. designs, develops, and markets complete programmable logic solutions, including advanced integrated circuits, software design tools, predefined system functions delivered as intellectual property cores, customer training, field engineering and technical support. Customers are electronic equipment manufacturers primarily in the telecommunications, networking, computing, industrial, and consumer markets. Products are sold globally through a direct sales management organization and through franchised domestic and foreign distributors. (Source: Company 2007 Form 10-K)
Recommendation:1. Improve Just-in-time systemSpartan Plastic Limited need to improve Just-in-time system, it is control aims to maintain inventory level at zero, with an immediate objective of reducing the capital tied to the inventories. It is an important principle that able to eliminating waste throughout the production system. The waste can occur, through excess inventories and overly large lot sizes, both of which can cause unnecessarily long customer lead times. Let's explain the role of the core JIT practices in enhancing manufacturing performance. JIT manufacturing requires the establishment of JIT supplier relationships with suppliers; Spartan in this case, that is able and willing to deliver the needed quantities of parts as the needs arise and without any defects.
15. An individual receiving both stock and short term notes for appreciated property has no recognized gain because of &351. Answer: True
Option A. Use up all the steel before pressing the plastic rings. Let all the buyers know that in the near future we will be switching over to plastic. How much steel is used for the steel rings? 34, 500 rings can be made with the steel they have. This is late May timeframe. 100 rings $786 from labor and overhead for 1107-material cost = Calculate cost per 100 rings – sell just above that. Start at 1350 and if people run to the plastic rings then adjust the price as needed.
Throw away all inventory and start making plastic rings. As with alternative 2 we could use the slow down period to do a change over process on the machines to start making the plastic rings. We would need to invest $1,800 for the necessary tools and equipment to start producing the plastic rings. During the next three months we should begin marketing the plastic rings and educate our customers on the improved benefits of the plastic rings. This alternative would leave us with zero rings to sell to our current customers leaving us at a disadvantage, both from a financial perspective and a customer service perspective. This alone makes this not a viable alternative.
* I think the final option to consider is to just switch to plastic while they typically slow down production in the summer months anyway. Even if sales remain at 690 rings per week in this timeframe, there will be enough stock left by mid-September to last 21.88 weeks. This way, if the company’s estimate of “mid-September” is a bit too optimistic, they will have plenty of steel to last until the company is switched over. Rather than use their staff to continue to manufacture steel, use this time to convert the shop (whatever that entailed, we were never told) and train them on the new processes. Another unknown is how much more training the staff might
A Make-or-Buy Decision at Baxter Manufacturing Company Scenario Summary Baxter Manufacturing Company (BMC) is a leader in deep-drawn stampings. It has been in business since 1978 as a privately held company. The process for making these stampings is very involved and complex. BMC developed methods for efficiently producing large volumes of stampings while keeping their quality very high. BMC uses state of the art machines to make the stampings and they make all the tooling necessary for those machines. In the years since their founding, many changes have impacted the industry – especially when it comes to computer networks and software. In the 1980s many of BMC's customers went to Just In Time
Since 2008, Bergerac had been exploring the opportunity to begin its own production of cartridge components. Plastic suppliers like GenieTech and Elsinore faced difficulties in responding to demand spikes, leading to production delays. Such supplier unreliability made it challenging for Bergerac to optimize its cartridge production. Thus, the company had to carry more inventory of parts and finished goods than Wyckoff could have liked. The obvious appeal to fully control the supply of plastic lead to a strategy, the company has to decide whether to buy or build this capability. GenieTech owner was interested in retirement and was willing to sell the company for a purchase price of $5.75 million. GenieTech has 8 molding presses each could produce 5 cartridges per cycle with a total capacity of 10,782,720 cartridges per year with 5 days production in a week. The other alternative is to build a unit with 4 molding presses which are more efficient than the presses at GenieTech. The total capacity of the unit will be 6,097,371cartridges per year with 5 days production in a week. It is required to predict the best long term decision among the buy and build options.
Table of Contents ................................................................................................................................................ 1 Assignment Background .................................................................................................................................. 2 Bigg-Glowbell Overview ...................................................................................................................................... 3 The Company History ...................................................................................................................................... 3
We are still losing money after the second year. However, my group realized that new tooling was an important cost. Therefore, we start thinking how to reduce it. We find out that if the demand stays between 300,000 to 345,000 units, the supplier will not need new tools. Then, it will bring the cost of new tooling to 0 for the coming years. Let’s take the worst case scenario and try to compute the savings for year 3, if the pistons are outsourced.
Introduction When a competitor develops and introduces a superior product that is less costly to manufacture and even many times usable and durable, the key to people at Precision Worldwide must decide whether to match the competitor's product, when to do so, how to price or what sustainable competitive advantage it needs to adopt during the next strategic period, given that it holds a large inventory of its now inferior product. This issue concerns the steel and plastic rings which the company, Precision Worldwide, Inc. (PWI) is opting to produce as a matter of competing intensively with a French company, Henri Poulenc, which was at the same time posing a big threat to the viability of the steel rings PWI is
Obviously, if they sale at the same price, 100 plastic rings will get $197.25 more profit than steel rings. However, Anders Ericsson, the development engineer, estimated that the plastic rings could be produced by mid-September, so before mid-September, I.G has to sell steel rings on hand. Fortunately, Henri Poulenc was said to be selling the plastic ring at about the same price as the I.G steel ring, so I.G wouldn’t get strong shock from Henri Poulenc. Of course, Henri Poulenc will get higher profit, but only analyzing from the price, I.G and Henri Poulenc are in the same position, so it depends on demanders’ preference which kind of rings they like. And I.G could sell the steel rings in different markets, which are not covered, by plastic rings of Henri Poulenc. It avoids direct conflict. Steel inventory is a big weakness of I.G, so it’s a good time to consume a large amount of steel. Assuming the sales continued at the current rate of 690 rings per week before mid-September, it would consume 19400 steel rings. During the slack time, I.G could ask labors to convert the steel inventory into rings to satisfy the supply amount before mid-September, because at that time, the labor cost will be about 70% of regular wages so that decreases the cost to produce steel rings. Those steel rings only need to satisfy the supply amounts for 4 months using, because after mid-September, plastic ring will be used instead of steel. If there are more steel rings converted than demanded,