MT435 Operations Management
Based on the information presented in the scenario/case study discuss Albatross Anchor’s competitiveness in relation to (please address all items in the below list and provide support for your conclusions): 1. Cost
a) Cost of Production: Manufacturing costs are $8.00 per pound for the Albatross mushroom/bell anchor and $11.00 per pound for Albatross snag hook anchor. Albatross sells the anchors for the same price as competitors. However, Albatross can have a 35% less profit margin. (Russell & Taylor, 2011, p. 230).
b) Economies of Scale in material purchasing: company that achieves economies of scale lowers the average cost per unit through increased production since fixed costs are shared over an increased number of goods (Hindle, 2008). As a company grows and production units increase, a company will have a better chance to decrease its costs. According to theory, economic growth may be achieved when economies of scale are realized (Heakal, 2009). There are two types of economies of scale – external and internal. External are economies that benefit a firm because of the way in which its industry is organized. Internal are cost savings that accrue to a firm regardless of the industry in which it operates (Hindle, 2008).
c) Cost of Raw Materials Sitting Idle in the Warehouse:
d) Cost of Finished Goods Sitting Idle in the Warehouse:
2. Speed of manufacturing process from order to finished product. 3. Flexibility in filling order(s)
5. Capacity and facilities
6. Service to customers
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. Analysis of the information below will help determine which process has the lowest breakeven point (this validates the process...