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Midterm Case Study

Nirali Makwana

Polk State College

MAN4504 Operational Decision Making

January 24, 2021

Midterm Case Study

First, it is clearly stated in the case study of B & L Company that all departments within the organization are independent of each other based on the products they handle, for example, finished products and raw materials. Since these departments are independent, outsourcing production processes at some point during processing is likely to affect the production process. Some of the ways outsourcing may affect the production flow may include time wastage as one department waits to complete its outsourcing process before it can continue with the processing process. Although Mayes is considered local supplies and therefore will not be affected by time constraints, it is necessary to consider the time it will take to finalize the outsourcing process, including receipts. This likely to take more time than if the company could produce the outrigger brackets. Additionally, I believe that outsourcing does not guarantee quality products in the industry, and therefore the company may receive less value for their money. Therefore, I would like to recommend that the company do not just consider the lowest bid but also how long it will take and the quality of the brackets that the company with the lowest bid will deliver to the company.

According to the production requirements of the company, each trailer that is manufactured requires 20 brackets. Every year, B & L Company produces 40 trailers. Considering the number of trailers produced every year, B & L Company will require 800 brackets to meet its production requirements. For a seamless production process, the company will be required to hold these inventories. Having the brackets in store guarantees the company continuous production without stopping and source for more brackets. However, by holding more inventories, despite its advantages, the company will have to incur additional costs that may be detrimental to the company's financial performance. Some of the company's inventory holding costs will have to suffer, include maintenance costs and security costs. The first recommendation that I can offer for this situation is for the company to settle for a supplier that can implement a just-in-time production process. For instance, the company can negotiate with Mayes Company to produce the Brackets just when they are required for the trailers. This production process will ensure that neither Mayes Company nor B & L Company will have to hold inventory. Therefore, each company will save finances associated with holding inventory.

Considering the total fixed costs that the company will incur consists of the cost involved in bracket manufacturing share, and this is made up of 20%. This amount of money will not be recovered from the process if the products are outsourced from Mayes Company. Additionally, this financial burden is likely to increase if the company's future will present any more processes. Producing these brackets has an extensive on the company's financial position given the fact that it plans to outsource these products. There are several recommendations I would like to make towards reducing the fixed cost of the organization. The first recommendation that I will make is that the company should go ahead and outsource the brackets because this will go a long way in reducing the number of financial resources the company will have to incur if they produced the brackets internally. Another recommendation that I would like to make to reduce the fixed cost is B & L Company. It should require Mayes Company to deliver brackets required for a specific period, for example, instead of delivering 800 brackets; only 200 or 400 can be delivered. Delivering in batches means the company will not need to add more space to store the brackets.

The B & L Company's main goal in the case study is to reduce the costs involved in the manufacturing process of brackets. The company believes that outsourcing the brackets is the best way to cut the costs; however, I do not believe that this is the case because it is likely that the future is not constant. Therefore, any changes are likely to increase outsourcing the brackets' outsourcing costs, thus further impacting the company financially. I recommend that the company find the necessary resources to produce the brackets in-house because, this will only be expensive initially. Eventually, it will reduce the production costs that the company will have to face. Additionally, by producing the brackets in-house, the company is likely to guarantee their quality, meaning that it will only supply high-quality trailers to the market. The company should look to cut costs but still implement production processes from within the company since this is the only way to ensure stability in production expenses even if changes occur in the industry. The future of the company is based on the decision that it will make on whether to outsource the brackets from Mayes Company or to produce them from within the company.