Topic > Detroit Plant Strategy - 1053

Case Study Memo To:From:Date:Subject: Detroit Plant StrategyExecutive SummaryDevelop strategy for Detroit WMC plant that is no longer viable due to investment insufficient, labor problems and product-process mismatch. This led to a negative return on assets, a high load rate (6.00) and low sales figures. The report investigates the problems that caused the situation. Based on the results, a recommendation will be made for action on the Detroit plant. Problem Analysis Detroit Plant Environment Detroit manufacturing is unique when compared to other Wriston plants. Runs are typically low volume, involve higher setup times relative to run time, and vary significantly due to the volume of different product lines, families, and models. Capital investment has traditionally been slow in Detroit, and equipment has been outdated and inefficient, resulting in higher maintenance costs. Purpose-built, the layout of the Detroit plant is piecemeal; production typically required complex flows. Therefore, the environment contributed to a poorly motivated workforce. Poor work habits are rampant, including high weekday absenteeism and high turnover. Financial Practices WMC's accounting practices incorrectly attribute fixed production costs to the three Detroit groups in a proportional manner, leading to the lack of profitability of Group 3. The discontinuation of Group 3 pushes a greater percentage of fixed costs onto the other groups, impacting the their ability to be profitable. Furthermore, WMC does not consider the degree to which production at the Detroit plant contributes to the operations and profitability of other plants. Currently each plant is accounted for individually. WMC should reevaluate and consider... half of the document ......on Word- 989Appendix 1 Detroit Burden RateDetroit Burden Rate Group 1 Group2 Group3Variable Burden Rate 2.12 2.13 2.128Total Burden Rate 8.596 7,139 4,653Appendix 2 ROA % of Facility ROA Burden Rate % Burden Rate Sandusky, Ohio 29 3.58 Essex, Canada 18 5.3 Detroit, Michigan -7 6 Saginaw, Michigan (2) 48 4.1 Lima , Ohio (1) -12 5.05 Lebanon, Pennsylvania 37 2.64 Tiffin, Ohio 30 3.5 Fremont , Ohio 36 3.65Lancaster, Ohio NA NAMaysville, Kentucky 26 2,351. The company should evaluate the Lima plant's processes to better understand, and then implement improvements, to address that plant's negative ROA and poor sales.2. Since the Saginaw plant handles 10 product families and 110 product models, the introduction of the flexible manufacturing system will be beneficial. This will address high variability and reduce overall costs.