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KU Consulting - Case Study Example

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KU Consulting Introduction Albatross Anchor is a small-sized family owned business that was commenced in 1976 engaging four members from the family. The company is based on twelve acres in a rural suburb area of a small town in USA. Primarily, the company produces two kinds of anchors which include the bell anchor and the snag hook anchor…
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Download file to see previous pages Moreover, the company’s surroundings and equipments used for the manufacturing process are also old-fashioned, technology-deprived and unhealthy as well. Consequently, the company with its obsolete plant and pathetic surroundings fails to satisfy the US safety and environmental standards. Contextually, the company is required to improve and upgrade its plants and equipments substantially in order to ensure greater profitability along with increasing production of quality products. Competitiveness of Albatross Anchor 1. Cost A) Cost of Production Cost of production can be sub-divided into two general categories namely, fixed costs and variable costs which accumulatively represent the value of total costs. Different companies operate in a market place; however they can be distinguished upon their level of cost efficiency examining their variable and fixed cost attributes which further determine their production efficiency. For instance, a higher level of cost-efficiency can be determined with the assistance of a comparatively lower cost of production. Contextually, Albatross’ current manufacturing costs of mushroom anchors and snag hook anchors are accounted to be $8.00 per pound and $11.00 per pound respectively. It is in this context that the company charges the same per unit as that of its competitors. Notably, the profit margin of the company in certain instances is recorded to be approximately 35 percent less on its outputs produced. The major cause behind the limitation of the company to earn adequate profit can be identified with reference to its operational inefficiencies (Article Directory, 2012). B) Economies of Scale in Material Purchasing The company purchases the required raw materials in bulk from its suppliers that help in acquiring advantages in terms of discounts. The bulk purchases of the raw materials also assist the company to attain competitive advantages from economies of scale. However, the current limitations of the company has been witnessed to incur large volumes of wastes as the raw materials purchased in bulk remain unused for a long time period owing to its inefficient and time consuming production process. Hence, the company can avail the benefits of bulk purchase if it is able to produce products at faster rates (Byrns, 2001). C) Cost of Raw Materials Sitting Idle In the Warehouse The production process of the company is witnessed to be quite time-consuming, as a result of which, the only small units of outputs are produced at a given period of time. This leads toward increased volumes of unused raw materials. Consequently, such activities contribute towards an increase in costs as well as wastage of raw materials to a substantial extent. In such circumstances the company should strive to avoid the unnecessary costs associated with the raw materials and its deterioration. The company can thus invest in productive equipments and raw materials preserving efficient inventory system that can ultimately enhance the production process, rather than investing in unnecessary purchases of raw materials which are kept idle for a long period of time. D) Cost of Finished Goods Sitting Idle In the Warehouse The company’s warehouses are located far away from the main production area that contributes towards an increase in the carrying costs and thereby consumes substantial time and efforts of the ...Download file to see next pagesRead More
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