Industrial Grinders Essay

With the entering of less costly ductile go by company, Henri Poulenc, industrial Grinders is approach with a decision of a total metamorphoseover from blade peal to tractile peal for their machines that would also fit similar machines manufactured by other companies. Henri Poulenc has introduced the less dear(predicate) moldable ring in a sm tout ensemble(a) securities industry affecting 10% of industrial Grinders sales . Industrial Grinders believes the market will eventu tot everyyy flip-over to all plastic go. Industrial Grinders essential decide a convictionline for changing outturn. It is estimated that take could begin by mid-September. With black mark and make peal already in schedule, IG mustiness sell-off subsisting armory earlier changing total production to all plastic rings.a. Plastic peal versus Steel RingsSteel rings last or so 2 calendar monthsPlastic rings last approximately 8 months one hundred poise rings cost $263.85 to produce100 pla stic rings cost $66.60 to produceAt a each week profit/Loss, Net income for 690 brace units would be $390.00 At a weekly profit/Loss, Net income for 172.5 plastic units would be $437.80If sales continue at 690 units per week from May to mid-September, 10,350units will have been change, leaving 15,100 steel rings in record at a cost value of $39,713. This would claim approximately 22 more weeks of sales to deplete inventory. As steel rings will last for two months, the sale of be steel rings will have a faster turn- around cartridge clip for continued depletion of stock. Knowing that Henri Poulenc is affecting sales in besides a small portion of Industrial Grinders territory, retooling for plastics should also begin small-arm steel rings are being phased out. Industrial Grinders can continue to iron heel the same amount, or more, for its plastic rings, as Henry Poulenc has set the threadbare in pricing. During the upcoming slack period, the company will employ workers at 70% of regular wages to finish all steel production, while full-time staff completes retooling on available machines.Examine alternative theories, assumptions and ideasa. Rings account for a substantial portion of Industrial Grinders revenue. b. Plastic rings, sold by Henry Poulenc, are sold for at least the same amount asIndustrial Grinders steel rings.c. Only 10% of Industrial Grinders market is abnormal by Henry Poulenc. d. Henry Poulenc is the only company producing plastic rings. e. Shipping weight for plastic rings is less than steel rings. f. As plastic ring use spreads, the customer will demand the overnight lasting plastic ring. g. Steel ring production will be phased out due to market demand for plastic rings.As the succeeding(a) production of rings in spite of appearance the industry will undoubtedly flip-flop from steel to plastic, Industrial Grinders must take swift action to detect up with industry changes and customer needs jumping ahead of moreover competiti on. However, taking into consideration the 8 month life of plastic rings and their lower production cost as opposed to the 2 month life of steel rings at a higher production cost, sales must increase to sustain the higher profit delimitation of plastic rings. Determine the appropriate actions, alternatives or conclusions for the caseIndustrial Grinders should change to plastic ring production. As plasticrings have been introduced by competitor, Henry Poulenc, rings with a lifelong life will be in increasing demand by customers. Industrial Grinders must function ahead and heavily market the plastic rings as a better product for their customers. The plastic rings are less expensive to make, less costly to ship but have a eight-day life on machines. Although some revenue will be disconnected due to the longer life of plastic, Industrial Grinders will recoup losses with added sales.2. InventoryAnalyzing the induct of the problem or situationA passage to plastic rings poses a pro blem for Industrial Grinders. Its inventory of especial(a) steel and inventory of produced steel rings must be dealt with before or during the production of plastic rings. a. Raw SteelThe new(a) steel inventory cost value is $26,444. The steel can non be sold to some other party and will have to be used or counted as a loss to the company.b. Steel RingsThe steel ring inventory cost value is $67,149. These rings could be sold at bottom the subsisting market.The total cost of raw steel and steel rings inventory exceeds $93,000.00. The decision whether to use all raw steel and sell all animated steel rings becomes a major concern within Industrial Grinders management. Examine alternative theories, assumptions and ideasa. Industrial Grinders wants to change from steel rings to more cost effective plastic rings. b. circumspection does not want to absorb the cost of unused inventory. c. Not all management agrees on use of raw steel inventory.d. The introduction of plastic rings will spread throughout the industry. e. Industrial Grinders could produce steel rings while retooling some machines for plastic production. f. Industrial Grinders could sell existing steel rings and take a loss on raw steel. Determine the appropriate actions, alternatives or conclusions for the caseIndustrial Grinders is faced with a financial decision regarding dispositionof current inventory. Believing that the future lies with the more cost effective plastic rings, IG should continue to sell existing steel ring inventory while producing further steel rings, development the raw steel inventory on elapse. The plant down time could use excess labor to deplete the raw steel. During this period, retooling could also befall and plastic ring production would begin. The machining changeover would be possible with a minimal cost of $1800.With Henry Poulenc affecting only 10% of IG sales, Industrial Grinders should deplete stock and introduce plastic rings. 3. Management ConcernsAnalyzing t he vitrine or problem of the situationWithin management, it is hold that plastic rings should be produced. However, the disposition of inventory on hand is not agreed upon between sales management / engineering and plant management/ refer company management. a. Sales Manager, Harry Greiner, believes inventory could be counted as a loss. Plastic production should begin and steel rings should no longer be sold. Selling both steel and plastic would be deliver for market retaliation. b. Development Engineer , Anders Ericsson, is concerned about inventory not being depleted by plastic ring production in September. c. German Plant General Manager, Lawrence Bridgeman, is concerned about inventory. He believes, at the onset, that plastic rings should only be sold in markets affected by Henry Poulenc. d. Parent Company Head, Hein Van Boetzalaer, agrees to plastic rings but states that IG must use inventory. Examine alternative theories, assumptions and ideasa. in all but the Sales Manag er are concerned about inventory cost. b. Selling plastic rings within some markets may cause steel ring sales to slump when other customers learn of the plastic rings and their longer life. c. The raw inventory could be in production during plant down time. d. The existing steel rings could be sold while the raw steel could be accepted as a loss. e. Henry Poulenc is the only company producing plastic rings. f. IG has time within the industry to sell all existing inventory while retooling for nimble production of plastic rings. Determine the appropriate actions, alternatives or conclusions for the caseIndustrial Grinders upper management should implement the course of using and selling the existing inventory while retooling for plastic rings. Although sales and engineering opinions are taken into account, the idea of taking a loss for inventory on hand is unacceptable in IGs current position. Henry Poulenc only affects 10% of IGs current market. Upper management must make the deci sion on the companys future operations. It is not proven that IGs total market must straightaway receive plastic rings. Depleting inventory, while offering plastic rings in the affected market , is an acceptable alternative. Depleting inventory first, then changing to all plastic rings is also an acceptable alternative. However, the parent company must decide the fate of inventory and future plastic production.