Will outsourcing the company’s inefficient sheet metal operation be a proper strategic move to save the company money and satisfy current and potential customers with respects to quality and delivery lead time? Size up:
Item| So What?|
Machine break-downs| Since break-downs occur at the initial step, the rest of the process gets delayed causing longer customer lead time and extra shifts are required which increases labour expense.| Age of the machines| Considering the turret press was old and broke down often, this causes a delay in customer lead time and unnecessary costs because parts are expensive and hard to find.| Under performing sheet metal operation| Because the sheet metal operation is underperforming, it is causing the company to lose money by not being able to supply customer orders and perform efficiently.| Production efficiency at 40%| Should approach 100% in order to meet customer lead time of less than 6 weeks| Frequently adding second shift| Since the process is taking more than double the time to complete, a second shift must be added to ensure that lead times are met. This is costing the company a significant amount of money.| Aging workforce| Considering the age of the company’s workforce, it is becoming less productive, adding to the reason of running an extra shift and delaying customer lead time. | Unionized work force| Workers will only perform duties within their own job classification and are discouraged to perform at a level above and beyond the company’s expectations. Due to seniority rights, the company cannot allocate labour efficiently.| Elimination of sheet metal operation| Deciding to eliminate the whole sheet metal operation could potentially cause the company to lose a significant amount of business when perhaps the issue could be resolved by purchasing a new turret press and implementing proper training procedures for employees in regards to maintenance as well as management training for root cause analysis. | Analysis:
Strengths – Donna Smith has the opportunity to make a good decision by sourcing out a potentially long term supplier and eventually creating a business relationship that will ultimately lead to higher profit gains by reducing company overhead and improving customer lead time. The decision to outsource the companies sheet metal operation will not only save the company unnecessary costs and improve lead time but will satisfy their customers and allow them to concentrate on their core competencies and improve other processes or functions within their organization. Weaknesses – Outsourcing the sheet metal operation will cause Prism Canada Inc. to lose control over quality control and could potentially end up disappointing customers which would cause them to lose the contracts they currently have. Not only will they lose control over quality issues but they will not be able to implement custom changes to the product by making changes to the process by utilizing the use of time efficiently to satisfy their customers’ requests. Delivery lead time will also be affected negatively because they now have to take into consideration the time it takes them to receive the product form the supplier whereas when the operation was in-house, they did not have to wait to receive the product. Outsourcing the operation will also create shipping costs as well as increased risk of receiving damaged goods if they are not packaged or transported properly. Donna will now become the buyer of a product that was produced in house and now have to allocate time into negotiations with the potential vendors. Opportunities – Outsourcing the sheet metal line will allow Prism Canada to expand their current operation and focus on their core competencies, or implement a new production line or process which would allow them to possibly enter new markets. They can also utilize and allocate labour to more efficient and...