Eagle Machine Company

Eagle Machine Company

Case Study 1

Case Name: Eagle Machine Company

I. Major Facts

A. Eagle Machine Company may have to close its doors if they cannot find a way to improve its bottom line.

B. At a special management meeting the president states that the company must break even in the next quarter and demands a profit of 5% and an increase in sales of 20% for the next year. He also states that cuts need to be made in labor, material and overhead.

C. Has meeting with the director of supply management, Sally Stone and explains sales can’t get in the game for six months but she can start cutting her department immediately.

D. Eagle machine has $12 million in inventory on hand and a 10% cut would save approximately $300,000 in carrying charges.

E. The president wants a %10 cut in payroll and operating cost from her department.

F. There will be an executive committee meeting in one week.

G. Supply management purchase’s are %12.2 million per year which a majority is in sheet metal, castings, forgings, stampings, fasteners, and subassemblies.

H. Production, inventory control, receiving, and traffic is a function of the manufacturing manager who reports to the president as does Sally.

I. Sally has 3 supply managers and four clerks in her department which is responsible for purchasing and expediting.

II. Major problem: Sally Stones department needs to take the lead on cutting cost for Eagle Machine Company but she has little or no control over the manufacturing manager who has the ability to make the most meaningful cuts.

III. Possible solutions.

A. The supply management department has 1 clerk for every manger. Sally could reduce management by 2 and add 2 clerks which would reduce the salary total. There is also room to reduce cost buy cutting fringes and expenditures.

Advantage: Reducing management while increasing workers (clerks) on an equal scale should reduce Sally’s payroll while maintain her departments productivity. Cutting company cars,...