How can Custom Fabricators, Inc. (CFI) prevent a possible business takeover of the Mexican suppliers and at the same time, ensure long-term profitability?
The case is set on the current year.
The Mexican suppliers will win the bid and production will move to Mexico. 3.
In case CFI would switch to contract manufacturing, the contracted volume of units that they will produce is within the range of their production under lean manufacturing. 4.
Orleans would shoulder the cost of shipping products from Mexico to CFI only.
Based on the opportunities of CFI, the group has identified three alternatives for the company to implement: a.
Work closely with Mexican suppliers
This involves establishment of effective communication lines (e.g. through Internet, video conferencing), assigning a representative to monitor quality of products to be shipped, sending quality control machines to Mexico or asking Orleans to require the Mexican suppliers to conduct quality check before shipment. b.
Differentiate product and/or expand market
This involves developing more advanced products (e.g. touch-screen elevator control panels) or expanding its target market (e.g. instead of just supplying control panels for elevators it can also create ones for ATMs, safety vaults etc.) c.
Switch to contract manufacturing
This means instead of producing outputs only when Orleans needs it, CFI would now have a fixed production per month that they would need to deliver.
First, let us identify the major issues in the case. Currently, CFI has several strengths that help them establish a competitive advantage. First is the company’s proximity to the construction site and to the Bedford plant which serves as its supplier as it was able to keep the transportation costs minimal. Another one is its customer intimacy. Because CFI knows exactly what Orleans needs and when to provide it, it is able to cater to their...
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