CASE ANALYSIS: MUENSTER PUMP
* Muenster Pump is family owned and operated.
* Muenster makes its own cast pump housings at a higher cost than what is currently available in the market place. * Uncle Ned (management) considers the cast pump housings of a quality not equaled in the industry. * Uncle Ned (management) is opposed to outsourcing as it would cause several employees to lose their jobs. * Uncle Ned (management) believes Muenster’s response time is unmatched in their industry.
Muenster Pump currently manufacturer’s a case pump housing at a cost twice that of their competition. The company must decide whether or not to continue to manufacture in-house, or to outsource and buy the product from another company. Considerations such as quality, delivery, customer relations, cost, and volume of orders must be taken into account.
* As a proponent for keeping a stable workforce, Muenster needs to look at increasing production and sales to deal with the fixed cost applied to the cost of the pump. Fixed cost does not flux with sales, however, if you have $100 dollars in fixed cost, and 1 case housing that is being sold then the whole of the fixed cost is applied to that 1 case housing. * Material cost are not significant, but perhaps there are suppliers who can save the company money, therefore it is worthy of consideration. * While no one wants to take a pay cut, the fixed cost make up 70% of Muenster Pump’s overhead. Because it is a family owned and operated company, in a seemingly small town, then perhaps management can take a small cut in pay and in return have a day off each week. * Consider a cost reduction in benefits, while it certainly is not good to have fewer benefits, it is better to have fewer benefits and a job. * Consider outsourcing the product but finding another area in the company where the...
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