Albatross Anchor is a small family owned business located in Smallville, MA. Albatross Anchor is located on 12 acres of land. They started out with four employees in 1976 and grow over the years to over 100. The company manufactures two types of anchors in different sizes. The types are the mushroom/bell anchor and the snap hook anchor. Albatross Anchor has many manufacturing problems which are the cause of the company not doing as well as it should be. The company is antiquated, worn and does not meet government guidelines. Albatross can be a company of the future with the application of much need upgrades and expansions.
Question one A. Albatross Anchor‘s competitiveness in relations to cost below their competitors. They are 30% lower than their competitors. The cause of this is all the operation inefficiencies. They need to correct all of their problems in order to get in line with the competitors. The cost to manufacture is the same as the competitors $12. 00 per/lb. for mushroom/bell anchors and $6. 00 per /lb. for snag hook anchors. But, with the high price of shipping raw materials in finished goods not shipping out, and the cost of raw material, these are just some of the problems causing the company to lose money.
The cost of the manufacturing process is hurting Albatross. The down time in between set up of the different anchors is a downfall of the company. They are paying workers to be there to wait for work to begin. The cost of raw material is high, since the company smaller than most. They will not get a better price as a large company would who manufactures more product. Cost efficient companies keep its capital, labor, and operating costs lower than its competitors. Then they must also provide a good price to its customers.
Albatross Anchor should take on the method of Six Sigma This will help to achieve a level of quality, reduce costs related to scrap, rework, inspection, and customer dissatisfaction. B. The speed of manufacturing is a slow process; this is due only being able to produce one type of anchor at a time, which is called batch manufacturing. The time to switch from one process to another is 36 hours. The plant space is limited; it does not have enough room to have enough equipment to manufacture each anchor at the same time. The company needs to implement a score card to help with the operations strategies. The balanced scorecard has evolved from its early use as a simple performance measurement framework to a full strategic planning and management system. ” (http://www. balancedscorecard. org/BSCResources/AbouttheBalancedScorecard/tabid/55/Default. aspx) C. The flexibility of filling an order with Albatross Anchor is non-existent. The manufacturing area is too small to make both anchors at the same time. If an order comes in and need to be produced in a hurry they are not able to do this, because of the lack of technology in having a machine to produce both without a long set up time.
Flexibility is important if a company is to respond quickly to changes in the industry. Time is money. Companies that can design, produce, and distribute their products faster than the competitors will have the upper hand. (Russell & Taylor, 2007, Operations Management: Creating Value Along the Supply Chain, pg. 124. ) D. The technology at Albatross Anchor is antiquated and deprived and is no longer up to standards. The manufacturing process is not capable of continuous production. The time to switch from one process to another is too long.
The equipment and process should be update, or replaced. The funds for these projects are considered to be a capital investment. Albatross should consider making this investment to have a positive effect on the manufacturing process. Once the company makes the investment into new equipment, they will also have to invest into training the employees to run the new equipment. The company may need to have new hires, ones that can possibly do the job with less training. E. The capacity and facilities have out grown what the company has now. The company was designed to be a small manufacturer.
Albatross is sitting on 12 acres of land they would be able to expand to make room for better technology. They have plenty of land to become an aggressive modern company, who is producing a top quality product. They can be the top producer of anchors with the changes that need to come about. Capacity is the maximum amount capable of producing. Another why to expand the capacity is to consider outsourcing. Outsourcing would come into play when they cannot set up the equipment and they need to produce product to satisfy an order. Some things to consider are the cost of making the product, such as labor, raw materials, and overhead.
The facilities need to be made larger. The area that holds the raw materials should be expanded and should be close to the receiving area. Finished products should be close to the shipping area. This would cut down on time by not having to move product from such a long distance. The receiving and shipping should be together on the side where imports and exports are done. F. Service to customers is not very good. Long lead times and bad shipping methods are cause for problems. Accessibility and convenience are also a cause for concern.
By offering a quality product, be able to meet orders and a touch of individualized customer service, you add value to your offering and your customers experience a higher level of satisfaction. The process of benchmarking can also help solve some of the problem and help to become a better company. “Benchmarking is the process of measuring an organization’s internal processes then identifying, understanding, and adapting outstanding practices from other organizations considered to be best-in-class” (http://www. benchnet. com/wib. htm) The scorecard will also help determine where the problems lie within the service area.
Albatross needs to come up with new designs of anchors to be more competitive, this will give the customers more options to choose from, bit the company needs to know how to make the process of making the anchors go smoother and faster. Based on the needs and perceptions of their target customers, they should either improve their products or reduce the cost of the product to enhance customer value. There are six things that influence a customer’s buying decision they are selling price, quality, dependability, flexibility, time, and service. These are all thing that a company must keep in mind to gain and keep customers.
Customers do not want to buy products of the companies that they cannot trust. They want dependable producers. Question Two There are many ways that mushroom/bell anchors may be manufactured. Albatross Anchor is considering two new manufacturing processes (Process A and Process B) to reduce costs. From the available information below determine which process has the lowest breakeven point (this validates the process is more cost effective) and report your analysis and supporting conclusion. For each process the following fixed costs and variable costs have been identified: