In determining the future of HED’s Detroit facility, it is important that we recognize the unique nature of the plant and its products and the differentiated role it plays in HED’s plant network. The Detroit plant, as an incubation ground for new products and a stable supplier of replacement parts for legacy products, has a different mission than that of the other plants. Its product mix, plant layout and production process embody the job shop model, where flexible resources are employed to produce low-volume, high-variety products under a functional layout design. The high-overhead cost structure, to a certain extent, reflects the characteristics of this model – longer set-up times and a less streamlined production flow. As such, measuring the Detroit Plant’s performance and returns using the same metrics as those used for the other plants (which are essentially flow shops) overlooks its strategic role and the nature of its products. Past decisions to under-invest on machinery and tooling upgrades – based mainly on its consistently lower return on assets – have further weakened the plant’s operational efficiency, increased overhead costs and led to its decrepit conditions today. Our recommendation to Wriston regarding the Detroit plant is to keep it running, invest the required amounts each year for maintenance and new tools, but discontinue the Group 3 products which have ceased to be economically viable. Reasons behind our recommendation are: •
Due to the incompatible product natures and production processes, transferring production to other plants is not a sensible move. The low-overhead, high-throughput operations at a flow shop like Lancaster or Saginaw depend on the high-volume and standardized nature of the products manufactured there. Bringing a variety of low-volume and customized products into the mix could clash with current production force competencies, disrupt the production flow, and consequently reduce efficiency at the flow shops. In the...
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