Albatross Anchors Case Study Unit 3

MT435 Operations Management

January 8, 2013

Introduction

In 1976, Albatross Anchor opened with just four family members. Today, it employs 130 people and is situated on twelve acres in Smalltown, USA. They sell at a wholesale level rather than a retail level, which has been worked in the company’s favor all these years. Their issues do not lie with their pricing; they lie with how they handle their operations as a whole. The idea that KU Consulting wants to show Albatross is how to maximize profits while reducing costs to manufacture. By adjusting how the company operates, Albatross will not only stream line their manufacturing and distribution, but they will be able to run a more structured company all while turning maximum profits. With that, KU Consulting would highly suggest outsourcing some of their processes in order to cut costs and increase profits. In 2011 alone, 53% of the manufacturing companies outsourced. (Job Outsourcing Statistics, 2012) By outsourcing, those companies saved on the cost of production and increased their profit margins. As well as suggesting outsourcing, KU Consulting suggests finding out how to streamline the current production process. “The best factories routinely conduct scientific experiments to improve their processes, and the best factory managers are teachers and innovators as well as leaders of people” (Shih, W., 2012).

Question One

Based on the information presented in the scenario/case study discuss Albatross Anchor’s competitiveness in relation to (please address all items in the below list and provide support for your conclusions):

1. Cost

a) Cost of Production: The current cost of production at Albatross is $8.00 per pound for the mushroom/bell anchor and $11.00 per pound for the snag hook anchor, which is the same price as their competitors. However, because of how their manufacturing process works, their profit margin can be up to 35% less than their competitors’. In order to fix...