Elkay Plumbing

Background

Elkay Manufacturing Company founded in 1920 is a Chicago-based manufacturer of a wide array of sinks, faucets, fountains, cabinets and countertops including customized products for residential and commercial customers. It produced different variety of sinks in three U.S. plants, high-volume low-priced commodity sinks for wholesaler and retailers in highly automated Ogden plant, high-value residential sinks and commodity sinks for the Eastern U.S. market in Lumberton and the least efficient plants in Broadview that close to Elkay’s corporate headquarters. Competitors included Blanco, for high-end showroom segment, Franke, Kohler and Houzer. John Hrudicka, the vice president joined Elkay in early 2007, spearheaded introduced Discrete Product Costing (DPC) system in associate with Acorn System in order to overcome the weakness and limitation of traditional standard costing system that providing only a partial view of cost performance. By the acceptance results from two pilot DPC projects in Lumberton and Bolingbrook distribution centre, Hrudicka and his DPC team extended the model to all sink factories and all of the distribution centres. In 2008, based on the new P&L report by adopting DPC system, some action plans finally be able to implemented efficiently for those low-profit or loss customers and SKUs because problems and issues could be identified and traced in accordance with accurate cost figures. The DPC data also gave more clearly pictures for management team to make the strategy decision on whether an action for the low-profit SKUs to be redesign and reengineer, re-price, eliminate or do nothing.

Problems and Issues

The major problem that Elkay had is the shrinking profits. The sign of collapse in principal outlet of product line, sharply price increase in raw material, pricing pressure from major customers and challenge from new Chinese competitors in low-priced product lines, were threatened the business. Other than that, the internal...