Case Scenario:
Ross and Pugett:
Ross and Pugett is the 4th-largest manufacturer of consumer products in the United States and 12th-largest consumer products company in the world. Company growth has been primarily through the acquisition of companies with underperforming products or poor marketing strategies.
As a result, Ross and Pugett owns manufacturing facilities around the world. Some of these divisions have high technology and new facilities, but the bulk of them have older equipment. Capacity planning is a big problem because some plants are at capacity while others are highly underutilized.
For example, the cosmetics division has manufacturing facilities is France, England, Switzerland, Germany, Norway, and the Czech Republic (which makes all of the packaging materials). None of these facilities operates for more than one shift, and the French plant utilizes 20% of its capacity. With more price competition, the company needs to consider consolidation in Europe. All product and package development is done in the United States at the Minneapolis headquarters.
Complicating the cosmetics division is the fact that raw materials are manufactured in the United States and Puerto Rico before being shipped to Europe. The international shipping and inspection costs have been very high, and the overall time to produce most cosmetics for the largest markets is quite long: 8 months-too long for a product with a short product life cycle.
Within the Food and Beverage Division, a recently acquired organic juice company has experienced tremendous growth of market share due to product reformulation. The market share has increased from 2% to 16% in the past 3 years. The current equipment cannot keep up with demand.
In addition, the raw materials for the product, primarily fresh fruit, are expensive to store, and scrap product due to aging has been causing costs to increase dramatically. The company needs to improve how it orders its raw materials for the organic juice division.
You are recently hired as a midlevel manager for Ross and Pugett. You have been hired with the expectation that you will look at several methods to improve efficiency and effectiveness for Ross and Pugett. You will use quantitative and qualitative methods to make recommendations for the improvements.
Scenario:
The cosmetics industry is very competitive, with technology, color palettes changes, and packaging changes as key differentiators. The product life cycle also tends to be less than 36 for most products, but colors can have a life cycle of 9-12 months in some cases.
Accelerated product development, streamlined manufacturing, and packaging launches are critical. Cost savings are becoming more and more important as more competitors enter the market.
Assignment:
Analyze whether or not to continue manufacturing in multiple locations in Europe, fewer locations in Europe, or move it all back to the U.S. You are the director of production planning for this division and need to write qualitative reasons stating the advantages and disadvantages of plant consolidation.
Draft your recommendation to management including estimated costs and benefits of shutting down or keeping open the European facilities, and then support your recommendation with a 12-month based action plan.