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Essay on Strategy for Detroit Plants

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Case Study Memorandum To: From: Date: Subject: Strategy for Detroit plant Executive Summary To develop a strategy for WMC’s Detroit plant that is no longer viable because of underinvestment, labor issues and product-process mismatch. This has lead to negative return on assets, high burden rate (6.00) and low sales figures. The report investigates the issues causing the situation. A recommendation to address the Detroit plant will be made based on the findings. Issue Analysis Detroit Plant Environment Detroit’s production is unique when compared to other Wriston plants. Runs are typically low volume, involve higher set up time than run time and vary significantly due to the sheer volume of different product lines,…show more content…
Additionally, unlike some of the other plants, Detroit has organized its machinery to resemble more of a batch production system as compared to the line production found in other plants and this decision ultimately impacts output and cost of production. Finally, the process of transferring products and employees between plants creates distortions in the allocation of costs between plants and, as a result, would contribute to inter-plant overhead variance. Operational Variability Wriston’s study group report suggests that some products may be profitable if transferred to alternate plants. However, the burden rate for each of these potentially ‘profitable’ groups is well above normal, apparently reflecting the complexity and variability inherent in Detroit’s assigned products. Variability, coupled with low volume, suggests the need for a flexible manufacturing system (FMS); the Detroit shop is instead closer to a flow shop configuration. This represents a product-process mismatch. As the majority of the division’s plants are also flow shops, it seems at best uncertain whether any of Detroit’s products could be better-produced at other plants; any product transfers would almost certainly
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