Barbco Engineering Co.: Strategy-Driven Costing and LeanManagement
Reading the 2008 financial statements, Barb Lutz's sons knew their company was in trouble. Their family-owned California manufacturing company had just experienced a reported loss of $350,000-a loss that was approximately one-third of the company's equity. The company is small, with $4-6 million in sales. Although it had sought business with original equipment manufacturers (OEMs), sales are primarily to custom-designed equipment end-users. Sales are obtained through bids based on the custom design characteristics of the parts Barbcomanufactures.
The company is now in its second generation of family management and adheres to the same strategy initiated by Barb Lutz, the company's founder-making sales by adding value to customers' equipment. Its foundry-castings business segment is largely outsourced for manufacturing and is not the focus of this case. Barbco's other activity, and now its largest business segment, is themanufacture of uniquely specified steel blades that are bolted to the edges of customers' heavy equipment, such as road grader original-equipment blades or earth-moving tractor buckets. Barbco's engineers workwith customers and add their expertise to design the application of tungsten carbide to these add-on blades (called "bolt-ons"). Their unique tungsten carbide process hardens the edge and saves the equipment from abrasion and wear. The manufacturing process is called "tungsten carbide impregnating," or TCing.