This paper relates to the case study concerning Albatross Anchor (AA). AA is a small business, which is owned by a family. The study especially highlights the operational difficulties that the business is facing. A number of the challenges stem from operational inefficacies, which are exemplified by its disorganized and dilapidated administrative spaces, or offices, and its technology-disadvantaged and old-fashioned plant. To make certain that the company returns to considerable profitability, the challenges ought to be addressed accordingly. This paper offers various recommendations on how the challenges may be tackled effectively.
Presently, AA manufactures two versions of anchors. It manufactures snag hook form of anchors, whose pound production cost is US$11.00. As well, it manufactures the bell form of anchors, whose pound production cost is US$8.00. The firm’s total production costs comprise of marketing expenses, insurance, administrative outlays, facility rent, utilities, and salaries. Given that its administrative offices are run poorly, it is not possible to determine precisely whether its clients meet their payment obligation to it within the set timelines (Torek & Cordon, 2002). As well, it is not possible to determine precisely whether its suppliers get their payments within the agreed timelines. Delayed payments can result into increased costs owing to penalty claims from suppliers, discount losses when purchasing materials in large quantities or even called off contracts and poor credit ratings.
Albatross Anchor should seek for ways of bringing down the production costs to enhance own profit margins. It can bring down its fixed production costs by enhancing production (Bunge, 1967; Mitchell, 2015). That will assist the firm spread own production costs over more and more units, bringing down the production cost for each unit significantly. The company can have the costs reduce by ensuring that raw materials in its warehouse are used more rapidly than they are presently. Holding the materials in its warehouse for long occasions increased costs in relation to holding them in the firm’s inventory. Notably, the costs compare inversely with levels of production. If AA brings down the costs via heightened productivity, it will recapture the margins of profits lost owing to inefficacy. As well, it will be capable of offering the anchors at lowers prices than its rivals, enhancing its competitiveness in the market.
One of the principal challenges facing the firm is the throughput times of own manufacturing processes. That is because each of the two forms of anchors it manufactures requires a specific set of equipment leading to the loss of considerable time switching between the two production lines at the firm. The switching consumes significant times and presents staff with added work (Goldratt, Cox & Whitford, 2008; Menawat & Garfein, 2007). Albatross Anchor should remain keen on improving its time management, hence performance, especially in terms of production turn around duration. If it enhances its productivity, its average product cost will reduce as noted earlier. It can enhance its performance by improving its production capacity or dominating the production of one form of the anchors that it produces presently.
The firm will be very well served by resolving to be producing just one form of the anchors and growing the volume it manufactures as regards that particular form of anchors. This recommendation is informed by the actuality that, presently, the turn around duration when switching the processes of the two forms of anchors is 36 hours long. The 36 hours can be put into profitable use if the need for switching the processes is eliminated. It can be eliminated by having the plant produce only one form of the anchors.
As earlier noted, AA is rather technology-disadvantaged. Its present technological base is old-fashioned. The company is still running on aged technology, with only a few repairs and changes made to it as necessary. The company should benchmark its technological applications with those of industry leaders, especially. It should invest in and adopt the technological solutions used by the leaders for use within its plant.
As noted earlier, AA should remain keen on improving its time management, hence performance, especially in terms of production turn around duration. As well, as noted earlier, it can enhance its performance by improving its production capacity or concentrating on the production of one form of the anchors that it produces presently. It can enhance own performance by reconfiguring its present floor plan which impedes smooth process flow. For instance, raw materials are stored rather far away from where they are used (Torek & Cordon, 2002). The manufacturing area is rather limited. To manage performance well, AA should adopt the metrics and schemes used by industry leaders to determine performance.
AA should take into consideration these proposed changes. First, AA should shut down the production line for one of the two forms of anchors. That will eliminate the time it wastes switching the two production lines. Second, it should move the foundry to the area currently used as a warehouse for finished products and move the area currently used as a warehouse for finished products to the area deemed as the foundry. In its current position, the foundry exposes those in the administrative offices, the shipping area, the parking area, and receiving area to more pollution and explosion-related threats than it would when moved to the area currently used as a warehouse for finished products.
The production process will be continuous. There will be not costly turn-around times related to the switching of production lines (Goldratt, Cox & Whitford, 2008). The productivity of AA will rise.
AA may be compelled to lay off a considerable number of staff members. Those involved in the production line for one of the two forms of anchors whose production will cease will have been rendered redundant. That would especially be so if the company will not be capable of absorbing them to work in the remaining production line.
The moving of the foundry will limit the pollution and explosion-related threats faced by those working in the company’s administrative offices, the shipping area, the parking area, and receiving area.
The moving of the foundry will entail significant costs as regards the shifting of machinery. As well, there will be added costs as regards moving the finished products to the current foundry area prior to the transporting out of the AA premises to the market.
The shutting down of the production line for one of the two forms of anchors will see the firm’s productivity go up.
Albatross Anchor will be forced to look for additional markets to cater for its increased production capacity (Torek & Cordon, 2002).
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