5-5 Harrison Products
Harrison Products Inc. (HPI) is a global manufacturer of molded plastic products and metal products that are used in the auto industry, food and beverage industry (containers), and in a variety of other products and packaging materials. HPI has several manufacturing plant located world-wide, generally in locations convenient to the company’s most significant customers.
The present case considers one of HPI’s products, a one gallon metal can container used for paint and other chemical products. The product is produced in two U.S. locations, Los Angeles, CA, and Youngstown, OH. These plants produce several million of these cans each year.
The competitive environment for HPI is challenging. Competitors in all parts of the world challenge HPI on cost, which is the primary order-winning factor in the business. All HPI customers expect very high quality and prompt service, so competition on price and reliability in meeting delivery dates are critical to its competitive success.
Operating Data and Strategy
HPI has focused its production of the one gallon metal cans in the two plants, in Los Angeles and Youngstown, Ohio. The summary information in Exhibit 1 shows the plant capacity, normal production, price and cost information. Currently, management believes that production costs are driven by volume; management’s goal is to meet competitive cost pressures by increasing volume and improving efficiency to bring costs down. For this reason, product costs are based on volume, as illustrated in Exhibit 1. The unit cost for the Los Angeles plant is $1.10, while the unit cost in the Youngstown plant is $1.00. The cost difference reflects the higher facilities cost at the Los Angeles plant, which is the newer of the two plants. The Los Angeles plant has similar equipment and manufacturing flow design to that of the Youngstown plant, but a key difference is that the Los Angeles plant was designed to be more efficient...
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