Wriston Case Memo
To: Richard Sullivan
From: im26412
Subject: Proposal for Detroit Plant
Date: May 26th, 2012
Background and Issues
Detroit Plant, serves as the first plant of HED division within Wriston Group, which almost all division products could trace their roots from, cannot achieve an acceptable level of profitability for years even we raise the prices or cut wages. The morale of Detroit is poor and it has been plagued by problems such as absenteeism and high turnover rate. Additionally there is coming the pressure of unionization by UAW which may aggravate our burden of employment obligation when Detroit Plant will be sold out.
After 6 months’ study, the force proposed 3 optional proposals for Detroit Plant: a) close the plant as soon as possible; b) invest in plant tooling and make operational optimization; c) build a new plant to replace it.
Analysis & Comments
Detroit Plant belongs to HED division, a large manufacturer within the Wriston Corporation, mainly produce axles (high-way, off-highway, front or rear) and brakes. HED totally consists of 10 plants which are for different products, process or markets (Exhibit 1):
All mature and mass-produced products have been transferred out (managers decided to transfer out profitable products, because they believe it is more lucrative to produce them in modern plants), Detroit plant has been left with residue of low-volume products and replacement parts for Tiffin, Fremont and Maysville. Obviously Detroit plant is a typical job shop which required higher task variety, labor skill, tooling set up time and unit cost. Detroit plant used to take the most complicated product missions (20 product families and 120 models) per the complexity criteria: product line, product families and product model by Wriston, while the product costing system it adopted is the same as that of other flow-shop plants:
Product Cost = materials cost + direct labor + variable overhead
Considering the low-volume production of Job shop,
From: im26412
Subject: Proposal for Detroit Plant
Date: May 26th, 2012
Background and Issues
Detroit Plant, serves as the first plant of HED division within Wriston Group, which almost all division products could trace their roots from, cannot achieve an acceptable level of profitability for years even we raise the prices or cut wages. The morale of Detroit is poor and it has been plagued by problems such as absenteeism and high turnover rate. Additionally there is coming the pressure of unionization by UAW which may aggravate our burden of employment obligation when Detroit Plant will be sold out.
After 6 months’ study, the force proposed 3 optional proposals for Detroit Plant: a) close the plant as soon as possible; b) invest in plant tooling and make operational optimization; c) build a new plant to replace it.
Analysis & Comments
Detroit Plant belongs to HED division, a large manufacturer within the Wriston Corporation, mainly produce axles (high-way, off-highway, front or rear) and brakes. HED totally consists of 10 plants which are for different products, process or markets (Exhibit 1):
All mature and mass-produced products have been transferred out (managers decided to transfer out profitable products, because they believe it is more lucrative to produce them in modern plants), Detroit plant has been left with residue of low-volume products and replacement parts for Tiffin, Fremont and Maysville. Obviously Detroit plant is a typical job shop which required higher task variety, labor skill, tooling set up time and unit cost. Detroit plant used to take the most complicated product missions (20 product families and 120 models) per the complexity criteria: product line, product families and product model by Wriston, while the product costing system it adopted is the same as that of other flow-shop plants:
Product Cost = materials cost + direct labor + variable overhead
Considering the low-volume production of Job shop,