Wriston Manufacturing Case Writeup

786 Words May 3rd, 2014 4 Pages
Tatiana Krymsky
Artem Bolshakov
Alexander Rubinchik
Matan Kurman
Wriston Manufacturing:
Redistribution vs. Factory Termination vs. New Plant

Recommendation: The Detroit plant is an inefficient factory and ought to be closed as soon as possible. Products should be transferred to other plants for benefits in both operational and financial gain.

Assessment of Option 1: Close the Plant (Transfer Products to Other Plants)

Financial Analysis
Selling the plant would cause immediate cash inflow of $4,000,000 and $6,000,000 loss from employee termination. While this does net in a $2,000,000 loss, this option results in the highest net present value for Wriston Manufacturing. In this option the Detroit products are segmented into
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However, we would still be producing the same diverse product line and struggle with the complex and ideally inefficient nature of our operation. Additionally, we will still run the high risk of employee union pressures forcing an employment guarantee in our projected horizon (20 years).

Assessment of Option 3: Retooling Detroit Factory (Continue Operations 5-10 years)

Financial Analysis:
This option is initially appealing because it does not involve an initial investment. However, it does entail $2 million investment once a year for factory retooling and maintenance. Even with the annual investment, we would continue current trends (losses of $928,000/yr). This option yields a net present value of $-11.1 million (for 5 years projection) OR $-17.99 million (10 years projection).

Qualitative Analysis:
Although this seems unappealing, there are a few benefits to this option in that we retain our employees and 100% of our customers. Overall, however, these benefits do not outweigh the financial losses and the high risk of employee union pressures in the horizon of 5 to 10 years.

Conclusion: We should go with Option 1. While we will have to terminate employees, which will cost us $6 million, segmenting our products across under-utilized factories will increase productivity and efficiency in our product line therefore resulting in a higher NPV and future

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