Machine

shop
Machine shop
Multi
Multi cavity
cavity dies
dies
St.
Peter's plant
plant
St. Peter's

Foundry
Foundry

9
Die-casting machines
machines
9 Die-casting

Spartan
Spartan Tool
Tool and
and Die
Die

Single-cavity
dies
Single-cavity dies
Assembly
Assembly area
area

Chrysler
(800/1,000)
Chrysler (800/1,000)

Contract/presses
Contract/presses

Chrysler
and Laclede
Laclede
Chrysler and
(800/1,000 and
and overtime)
(800/1,000
overtime)

Guardian
Rubber
Guardian Rubber
Spartan
Industries
Spartan Industries
Viking Electronics
Electronics
Viking

Chrysler
and HV6
HV6
Chrysler and
(400/500
(400/500 ton
ton presses),
presses),
Laclede
Laclede (heavy),
(heavy), overtime
overtime
&outsourcing
&outsourcing

Ace
Ace Automotive
Automotive
Bruce
Bruce

95%
chance of
of winning
winning
95% chance

80%
chance of
of winning
winning
80% chance
Price
Price quotation
quotation for
for the
the
Water
Water pump
pump
50%
chance of
of winning
winning
50% chance
Price
Price
OEMs
OEMs

25%
chance of
of winning
winning
25% chance
Quality
Quality

A machine shop is a place for machining (i.e. shaping of metals (part details) with machine tools)

A foundry is a place for casting metal (i.e. pouring metal (parts and part housings) into a shape and removing once
solid)
A sales quotation shows the cost of goods to a buyer
Original equipment manufacturer (OEM) is a company that makes a part or subsystem that is used in another
company's end product.[1] For example, if Acme Manufacturing Co. makes power cords that are used on IBM
computers, Acme is the OEM.
An assembly area is a place used for collecting and combining parts into complete units
A die-casting machine is used for forcing molten metal into a mold cavity under high pressure.
Press tonnage is the force exerted by the press against the molten metal in the die
ELEMENTS OF ANALYSIS
1. CHRONOLOGY
a. Auto parts
b. Spartan Industries acquired Ace in 1987
c. Highly competitive industry
2. ECONOMIC AND POLICY ISSUES AND TRENDS
a. Supplying OEMs used to be lucrative
b. Strong foreign competition from Japan
c. Domestic automakers have reduced workforce and costs
d. Domestic automakers have become sensitive to price and quality
3. INDUSTRY ANALYSIS USING PORTERS 5 FORCES
a. Intensity of competition
i. Buyers market buyer has more power (High)
ii. Suppliers supplier has more power (Not much information)
iii. Barriers to entry (Low)
iv. Threat of substitutes (High)
4. STAKEHOLDERS PGC
a. Bruce McCullough

b.

c.
d.
e.

i. DECISION 1: Decide which contract combination to pursue for 1992 and which presses to use that
will optimize profit:
1. Continue the Chrysler contract, bid on the HV6 using the 800/1,000-ton presses and forego
Laclede
2. Keep both Chrysler and Laclede contracts and cast the HV6 on the 800/1,000-ton presses
while using overtime or outsourcing
3. Run both Chrysler and HV6 on the 400/500-ton presses, with Laclede on the heavy presses
while using some overtime and outsourcing
ii. DECISION 2: Decide on the price for the HV6 water pump
iii. OBJECTIVE:
1. Maximize profit
2. Maximize plant utilization
3. Ensure job continuity
4. Avoid overtime
iv. BIAS 1:
1. Keep costs down by not splitting a job between the 400/500 and the 800/1,000 press
classes
v. PROBLEM: Deal with uncertainty in preparing quotes
vi. ASSUMPTION:
1. Design involvement was a great success
2. The part matched Aces manufacturing strengths
vii. A profit-margin premium would offset the risk that less than 140,000 units would be sold in 1992
General Motors Chevrolet-Pontiac-Canada Group
i. Aces biggest current customer
ii. Preparing to add a new engine the high-value 6
iii. Need at least 140,000 water pumps but cannot commit
GMs Buick-Oldsmobile-Cadillac Group
Laclede Gas Company
Chrysler

f.