Case Study : Ring Manufacturing Direction

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To: Hein Van Boetzaleaer From: Lawrence Bridgeman Subject: Ring Manufacturing Direction Hein, I hope you are doing well – I am sending you this e-mail in effort to address your direction to establish policies for the production and pricing of machine parts, specifically our rings. To refresh your memory, I will be addressing the concerns with the plastic rings that have been introduced to the market by one of our competitors, Henri Poulenc. During the initial analysis we uncovered key data. We will focus on the need to decide how and when is the appropriate time to switch over to making plastic rings. We must remain competitive in these changing marketing conditions, and make the best direction forward based on these conditions and…show more content…
Labor costs in near term: The next two or three months the plant will not be operating at capacity; during the down periods, the company has a policy of employing laborers at about 70% of regular wages, on various make-work projects rather than laying the men off. This time could possibly be used to convert the steel inventory into rings. Recommendations: Recommendation #1: We could manufacture new plastic rings as soon as we could be setup (see above), but we would wait until the current inventories of the steel rings and the manufactured steel currently in inventory were exhausted. This would leave slightly under 50,000 steel rings to sell at current manufacture rate. At the current sales pace of 690 per week it would take us approximately 72 weeks to sell all of the steel rings. During this time frame it would be expected that plastic rings would be manufactured as the standard ring of choice, by not only us but our competitors, therefore eliminating the demand for steel ring. The special steel in inventory would be manufactured into steel rings. The next few months are usually a slow down time and we will be able to maintain labor at 70%. This will reduce the labor cost and some of the expenses that are directly related to labor costs, therefore creating a
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