Wriston Manufacturing Corporation

...

The closure of Detroit will have a domino effect on the rest of the plants under HED. The first step would be to transfer Saginaw’s production to Lima. Lima has excess capacity and is a high volume plant. It would be able to take Saginaw’s work load while Saginaw is a medium volume plant it would be more suited to absorb Detroit’s lower volume and more varied products. A 3 to 5 year period

---------------------------------------------------------------

would assist in the transition as employees get acquainted with the new products.

Lancaster will absorb Group 2 products from Detroit as well as the prototyping responsibilities. Being a new plant, with state of the art facilities this plant would be the most conducive environment to create new prototypes. Furthermore, as it has high capacity and new technology it would also be the best plant to bring these products to fruition.

Human Resources

Employees will be told well in advance of the pending closure of plant. Rather then sacking them, employees should be competing for jobs at Saginaw and Lancaster. With an increase in production at both of these plants there would be jobs available. The senior level employees have time to train the junior employees within this three year period. Furthermore, by not having to terminate these employees $6 million can be saved in termination costs. It also, removes the need to pursue hiring once the transfer has occurred.

Customers

With delay in the closure of the plant, customers have ample notice. This would help to maintain customer relationships built. Sales can also attempt to cross-­‐sell other products in HED’s suite. By delaying the time to closure we can try to keep WMC’s customers satisfied.

---------------------------------------------------------------

Accountability and Investment Policy

Plants should not be looked as in silos, from profitability to cultural levels. As these plants are not mutually exclusive as we’ve seen from Detroit. Rather accounting and investment policy making decisions should be looked at from a HED perspective. There needs to be a change here as Lancaster will be taking on the burden of prototyping and should not be punished for the benefit of WMC as a whole.

The Detroit plant of the Heavy Equipment Division is the central source of concern in the operations

of the Automotive Supplier Group, primarily because of the following reasons :-

- The plant has been producing only a residue of low-volume products.

- Product variety has been incredibly high with two lines of products with their own families and models.

- Although visibility is low in the company as a whole, the Detroit plant has a higher visibility due to the existence of the servicing facility for the company’s three product lines and the potential visits of customers who came to the head office which was situated in Detroit.

The usual implications of the above combination are high job repetition, less systemization and high unit costs.

The main reason for low profits out of the products in Detroit is a high total overhead burden rate (highest among all the plants in the group). On top of that, the development of the layout of the plant has been completely unplanned and haphazard, leading to deficiencies in the electrical system, water and fire sprinkler systems, and more importantly, storage and machine layouts.

Continued production with high overburden costs would only lead to very low investment on the plant (as investment on a plant is currently dependant on the plant’s return on assets) and in turn, poor motivation levels and performances of the employees in the plant.

Recommendations –

With 60% of the plant’s sales from on-highway axles and the remaining 40% from off-highway axles,

- Production of all the on-highway axles should be transferred to one or more of Lebanon, Tiifin, Fremont, or the upcoming plant in Lancaster by allocating the different product families to the appropriate plant, so that there is a high amount of systemization, as later stages of manufacturing in many product families require more specific processes dependant on customer specific features.

- Production of the off highway axles should be completely transferred to the plant in Lima, which is also producing off-highway axles, but has a massive gap between capacity and actual sales.