Bridgeton Industries: Automotive Component and Fabrication Plant Essay

In 1985, Bridgeton Industries, a study supplier to Big-Three domestic automobile manufacturers, is facing a competitive surround with advent of foreign competition and rising gasoline prices, steer to shoplifting pool of production contracts. Bridgeton reacts by closing ACF diesel engine position and hiring strategic consulting firm to classify their products on competitive position.Based on analysis, Bridgeton outsourced oil pans and muffler exhaust (classified as Class 3) and introduced programs, such as lowering time required to change dies, to improve product, quality and productivity. However, contempt of these measures, manifolds were downgraded from Class II to Class III in 1990 model family budget. Now, Bridgeton faces the challenge to decide if manifolds be outsourced and, more importantly, what more to do (in toll of strategy) to keep the business?Bridgetons Organization Cost System It comprises of materials, result labor and crash. Per Exhibit 2, during period 198 7-90, the overhead rank have change magnitude as shown below especially after outsourcing in 1988. With outsourcing, the overhead toll have not clipd at same rate as labor live, leading to higher costs for the remaining products such as manifolds. Thereby, outsourcing manifolds shall lead to higher cost for the remaining products such as render tanks and doors and shall push them down to Class III. Revenue and Profit Outsourcing manifolds will reduce cost however, the sales will be reduced even more, since Bridgetons highest revenue is from Manifolds, which account for 41% ($93,120/$226,542) of their total sales in 1990, leading to lower profit.Business Market With higher efficiency standards, demand for innocent steel manifolds such as those produced at ACF could be increased dramatically and so, probably, would their selling prices. This will lead higher revenue and profits from sales of manifolds (if not outsourced) assuming no significant increase in the cost (material). Therefore, outsourcing Class III manifolds (per Consulting Firms recommendation) shall not be vantage for the ACF plant. Clearly, reduction in plant production volume and high overhead cost has caused ACF plant to be less cost competitive.Recommendations Following atomic number 18 the recommendation to utilize ACF plant resources expeditiously and thus, improve overhead rates for existing products Increase technology capability, thereby, increasing production of existing products employ Activity Based Costing (ABC) to actually analyze the individual cost incurred for these products and opportunity for its reduction Initiate reforms in manufacturing and admin process Sell un-used outdated machinery that are causing big depreciation and insurance cost incite cost-cutting but preserving quality Set budgets and review them on a weekly, periodic and yearly basis.Through this we can utilize overhead expenses more efficiently and allocate it amongst current products to be cost co mpetitive and keep the determine within reasonable limits, helping us to maintain our profitability and grocery store shares.