Strategy for Detroit Plants

1053 Words3 Pages
bulb-icon

Recommended: Strategic management case study analysis

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, families and models. Traditionally Capital investment has lagged in Detroit and the equipment is out dated and inefficient resulting in higher maintenance costs. Built in an ad-hoc manner, the layout of the Detroit plant is piecemeal; production typically required complex flows. Thus, the environment has contributed to poorly motivated workforce. Bad labor habits are rampant including high absenteeism on weekdays and high turnover.

Financial Practices

WMC’s accounting practices incorrectly attribute fixed manufacturing costs to the three Detroit groups in a proportional manner, leading to Group 3’s lack of profitability. Discontinuation of Group 3 pushes a greater percentage of the fixed costs to the other groups impacting their ability to be profitable. Additionally, WMC does not consider the degree to which production at the Detroit plant contributes to the operations and profitability of the other plants. Presently, each plant is accounted for individually. WMC should reevaluate and consider the...

... middle of paper ...

...on.

Word- 989

Appendix 1 Detroit Burden Rates

Detroit Burden Rates Group 1 Group2 Group3

Variable Burden Rate 2.12 2.13 2.128

Total Burden Rate 8.596 7.139 4.653

Appendix 2 ROA% Vs Burden Rate

Plant ROA% Burden Rate

Sandusky, Ohio 29 3.58

Essex, Canada 18 5.3

Detroit, Michigan -7 6

Saginaw, Michigan (2) 48 4.1

Lima, Ohio (1) -12 5.05

Lebanon, Pennsylvania 37 2.64

Tiffin, Ohio 30 3.5

Fremont, Ohio 36 3.65

Lancaster, Ohio NA NA

Maysville, Kentucky 26 2.35

1. The company should assess the processes of the Lima plant to better understand, and then implement improvements, to address the negative ROA and low sales of that plant.

2. As Saginaw plant handles 10 product families and 110 product models, introduction of Flexible manufacturing system will be beneficial there. This will address the high variability and reduce the overhead costs.

Show More
Related

  • Rocket-Blast Case Study

    1062 Words  | 3 Pages

    Rocket-Blast, LLC, a beverage maker, has seen its profit margins reduced which presents a real problem for the company going forward (Precord & Macdonald, nd). Management has decided that operating costs must be reduced in order to increase profit margins to

    Read More

  • GMFC: Planning for a Union-Free Plant

    1815 Words  | 4 Pages

    The case study of GMFC provides an example of a company attempting to avoid unionization of its workers. GMFC is expanding by building a new U.S. plant which will manufacture motorized recreational equipment. The company plans to hire about 500 production workers to assemble mechanical components, fabricate fiberglass body parts, and assemble the final products. In order to avoid the expected union campaign by the United Automobile Workers (UAW) to organize its workers, GMFC must implement specific strategies to keep the new plant union-free. GMFC’s planning committee offers suggestions with regards to the plant’s size, location, staffing, wages and benefits, and other employee relations issues in order to defend the company against the negative effects of unionization and increase...

    Read More

  • Deere & Company Case Summary

    451 Words  | 1 Pages

    Deere & Company (Deere) has been experiencing a decrease in its profit margins for one of its aftermarket resale products, specifically the gatherer chain, over the past couple of years. Currently, the cost-price ratio is at 80% compared to last year’s 50%. The purchase cost for the gatherer chain has been steadily increasing, while the aftermarket price has been decreasing. Deere has been budgeting its price to match that of a major competitor, which has been causing the decrease. The company’s main supplier of its gatherer chain is Saunders Manufacturing, with which Deere has established a long term relationship. The owner of Saunders has a reputation of being a tough negotiator, and is someone who is known for not willing to share financial information about the company. However, the U.S. Department of Commerce has provided financial estimates in Saunders’ industry as follows: material spend, 42%; direct labor, 16%; indirect labor, 6%; Overhead, 20%. These percentages are helpful to Deere because they can be used in the negotiation process with Sanders. Since Sanders will not share any specific cost information, Deere is able to use these estimates as a way to justify Sanders reducing its prices. Using these estimates during the negotiations might also incentivize Sanders to provide accurate numbers for its specific manufacturing costs.

    Read More

  • Job Redesign And Workplace Rewards Assessment

    1506 Words  | 4 Pages

    Organizations face massive challenges in attracting and retaining a high-quality and productive workforce. Companies are continually looking for new ways to keep their employees satisfied at all levels in order to harness greater productivity and ideas from people while keeping them motivated and happy. One real challenge examined earlier is the need to transform General Motors to be a much more productive and fully utilized organization by examining the hourly workforce. This is a great change from the traditional "us versus them" mentality of the past between management and the union.

    Read More

  • Labour Unions and General Motors

    1677 Words  | 4 Pages

    The last bolt is screwed on as a relieved automotive worker marvels at his wondrous creation: a car. With the roar of an engine, the car slowly disappears into the distance. The worker gradually turns around, picks up his tools, and continues to work on a new car. As a consumer, we rarely wonder how things are made; we simply take everything we own for granted. For once, have you wondered how many hours of hard labor many automotive workers must go through? The automotive industry has been around for many years, but it has not always been as efficient as it currently is. As the industry continues to evolve, many new innovative ideas are still being developed. In the past, automotive workers have had to work in harsh conditions without much security or job benefits. Nevertheless, through the continuous development of organized collective bargaining, workers are being treated as they should be. Being the largest automobile manufacturer in the world, General Motors Corporation has been greatly affected by the needs of their workers. Rick Wagoner, CEO of General Motors, is currently in charge of “running the show” at GM. Being the most successful automotive company since 1931, it is obvious that he not only has to satisfy customers, but also the workers within the company. From the smallest things such as a work raise to bigger things such as the working condition, the management of General Motors has been pressured to make both positive and negative changes to the way the company is run as a whole in order to satisfy the workers who are part of the UAW Union. Therefore, the formation and development of unions encompasses both pros and cons.

    Read More

  • Rhetorical Analysis Of Making It In America

    961 Words  | 2 Pages

    In the essay, "Making It in America," author Adam Davidson describes the current conditions for the average workers in American factories and how they have changed. He describes his findings on the changes in manufacturing since the late 1900s, early 2000s: "Factories have replaced millions of workers with machines" (Davidson 318). To elaborate on the situation more thoroughly, he tells the story of a few workers in a Greenville, South Carolina factory. Davidson’s approach of using average people to tell his story is effective in pulling on a person’s sympathy and empathy. Also, using personal research rather than someone else’s statistics to support his claims makes his argument more valid.

    Read More

  • Achieving World Class Business Performance

    864 Words  | 2 Pages

    Achieving world class business performance is a major challenge in today’s society. Manufacturing companies continue to face increased competition and globalization from its competitors. (1, p. 148). The automotive industry is one of the most volatile manufacturing industries that we have, which was evident in the 2008 – 2010 automotive industry crisis. (2) This global financial downturn served notice to the American automotive manufactures to raise the bar, in order to achieve word class business performance. General Motors, one of the country’s largest automotive manufactures, had to receive a government bailout to survive. During this time many with the corporation asked themselves, if we were a world class business, would we be facing this pending crisis. The answer was a resounding “NO”. General Motors has come out of bankruptcy and is focused on being a world-class business organization.

    Read More

  • Roger and Me

    1063 Words  | 3 Pages

    Some of the many factories to be affected by these economic changes were those owned by GM in Flint, Michigan. By first laying off thousands of workers and then closing the plants altogether, GM ultimately eliminated over 30,000 jobs in the city of Flint.

    Read More

  • Analysis Of Mac Mcclelland's I Was A Warehouse Wage Slave

    424 Words  | 1 Pages

    “We run to grab the wheeled carts...We run past each other and if we say something, we say it as we keep moving” (McClelland 400). A practically inhuman speed is expected from the workers, forcing them to rush from place to place. They do not have time to spare for walking. They are even deprived of socialization, which is essential to human satisfaction, due to a lack of time. There is not a moment of peace as long as they are clocked-in, no matter how hard or long they work. Enjoyment is impossible, and no effort is made to reduce the highly stressful environment of the workers. The company shows no concern for its workers’ mental well being.

    Read More

  • Essay On Primark And 4vs

    2201 Words  | 5 Pages

    This report comprises of the explanation of two different companies working in different market fields, the two companies I’ve chosen are Primark and Samsung I am going to write about the influence of the 4vs which are the volume of output, variation in demand for output, visibility of production, and variety of output. I am also going to look at the performance objectives in each of the companies. Example, for a given year and how they are able to reach their objectives, and also the effect on the cost efficiency of the operations.

    Read More

  • Detroit is Dying

    1468 Words  | 3 Pages

    Detroit was once the mecca for workers pursuing the American dream. In the early 1900’s an innovative inventor named Henry Ford brought mass production of the automobile to this area, turning Detroit into a beacon of opportunity and economic success for many. This Automotive Industry has been at the base of Detroit’s economy for decades; however, it’s not like it once was. During the 20th century the auto industry had many high and lows. Many factors lead to the recent downturn of this industry that led to mass layoffs and displaced workers, which had a negative impact on Detroit, as well as the United States economy.

    Read More

  • BMW

    1885 Words  | 4 Pages

    Through Dupont analysis, we have been able to see the specific strengths and weaknesses of BMW and Audi’s management. BMW’s lower profit margin and asset turnover indicate less efficient cost management and asset management. Their debt multiplier indicates that they’re taking advantage of debt, but the benefit of this isn’t realized because of their problems with cost and asset management. Due to Audi’s more efficient use of their assets, and better cost efficiency, it can be said that their management has performed better than BMW’s over the past year.

    Read More

  • Workplace Alienation

    1181 Words  | 3 Pages

    Producing goods or services are dictated not by employees but by their employers. If profits exist, employers are the ones that benefit more so than the regular worker. “Even when working people experience absolute gains in their standard of living, their position, relative to that of capitalists, deteriorates.” (Rinehart, Pg. 14). The rich get richer and the poor get poorer. Hard work wears down the employee leaving them frustrated in their spare time. Workers are estranged from the products they produce. At the end of the day, they get paid for a day’s work but they have no control over the final product that was produced or sold. To them, productivity does not equal satisfaction. The products are left behind for the employer to sell and make a profit. In discussions with many relatives and friends that have worked on an assembly line, they knew they would not be ...

    Read More

  • A Critical Analysis of Free Trade

    1373 Words  | 3 Pages

    McCormack, Richard. "The Plight of American Manufacturing." The American Prospect. The American Prospect, Inc, 21 Dec. 2009. Web. 28 Sept. 2011. .

    Read More

  • Mass Production Essay

    755 Words  | 2 Pages

    Today, mass production still reigns supreme. Products move along an assembly line much the same way, being assembled in a formulaic manner by unskilled workers. Modern businesses have developed strategic operations in order to provide higher volumes with more customer choice, such as mass

    Read More

More about Strategy for Detroit Plants

Open Document