Introduction Clifton Industries Ltd. is a relatively small but independent company within the Berbeck Industries Group. Its purpose is to supply a range of products to aircraft manufacturers and its mission is to manufacture electromechanical products for NA and European markets and electronics products for NA market. As can be seen from the SWOT analysis in Appendix A, the company’s current core competencies are skilled labour and diverse manufacturing capabilities. Clifton’s main products are European electromechanical products (“old OE”) and spares and repairs, but due to predicted decline in future sales of these products, Clifton had begun producing electromechanical products (“new OE”) for the N-American market as well as electronic products. The following sections evaluate Clifton’s main product groups from a manufacturing strategy perspective and proposals of improvements, suggestions of other alternatives, etc. will follow as appropriate. It should be noted that the recommendations set forth below are based on assumptions made in Appendix B.
European Electromechanical Products The European (EU) electromechanical products are currently the core product Clifton Industries manufacture, which are gradually being replaced by the electronic equivalent. At the same time, the electronic product can be deemed to be a core competency due to the overwhelming experience with this product when compared to other products manufactured by Clifton. Five forces (for the electromechanical EU product): • • •
Clifton has low bargaining power with its suppliers as it is one of the smaller companies within Berbeck Industries and doesn’t have domination over the market. Clifton has high bargaining power with its customers due to the nature of contracts (singlesourced). The only rival to this product is the upcoming electronic product which Clifton also manufactures.
The main reason Clifton manufacture the electromechanical product in Europe is because it is still the source of the most income as deduced from Exhibit 9 (and displayed in Figure 1 below).
$250,000.00 $200,000.00 $150,000.00 Total Profit Low vol OE $100,000.00 $50,000.00 $0.00 1 -$50,000.00 2 3 4 5 6 “Old ” type OE ‘New” type OE
Figure 1: Total profits As this product is being replaced by the electronic equivalent, it can be said that the electromechanical product in Europe is nearing the end of its product life cycle. The products are in the mature stage of its life cycle and tend to have high profit margins which make them a “cash cow” for Clifton. The old OE product range is large and is currently produced in large volumes in a batch process. Although OE contracts are generally won on technical merits, delivery reliability is becoming increasingly important and penalty clauses are more often included in the contracts (Ex. 8). Hence on-time delivery is currently an order winning criteria for these products. Forecast sales and recent market analysis are predicting a decline in the sales of Civil contracts and no more Military OE work is anticipated after 1998. The latter is mostly due to the development of the next generation European military aircraft that is expected to be large-scale manufactured in five years time. In this regard, Clifton should adjust its manufacturing processes and capabilities to a decrease in old OE production volume in the near future. Clifton currently adopts a large batch process for the manufacture of this product as this product is currently mass produced with high volumes of similar products. This will reduce the initial cost and improve efficiencies. As the product approaches the end of its product life cycle, it would be best to downsize operations to a small batch process so that Clifton may still supply its potential customers effectively without excessively adding to the cost of overheads.
North-American Electromechanical Products The extension of...