8-16. Hammaker Manufacturing I (AIS for New Manufacturing Firm)

Rick Hammaker has been fascinated with Corvette cars, especially convertibles, since he was a teenager. Rick grew up in Michigan and worked part-time through his high school and college years at a car manufacturer, so he knew the business well. Not surprisingly, when he graduated from college he bought his first car, a used Corvette convertible, and became a member of the local Corvette Club of America. As an accounting graduate, Hammaker was hired by one of the large automobile manufacturers in Michigan and was selected for the fast-track management training program. After 5 years, Hammaker decided to leave Michigan and start a specialty parts manufacturing company strictly for Corvettes. Before he even left Michigan, a potential customer contacted himthe repair shop was replacing the black convertible top on a 1967 Corvette that the owner was going to sell for $76,995! Hammaker decided to locate his company, Hammaker Manufacturing Co. (HMC), in Northern Virginia since this is the site of the oldest Corvette Club of America. Rick knows he will need the appropriate technology to support his company, so he decided to focus on this aspect of his company prior to starting any production activities. His first action was to hire a CFO (Denise Charbonet) who could work with Lloyd Rowland (a software consultant) to determine the inputs and outputs needed for an AIS for the new company. Of particular concern is the data the AIS will need to collect regarding inventories. As Rick, Denise, and Lloyd know, inventory management will be a key factor for the success of HMC since Corvette cars are uniqueparts are needed for cars from the 1960s! Rick believes that an AIS will give him the data and information needed for good decision makingespecially to manage inventory investments. HMCs customers are primarily Corvette specialty repair shops, and they typically demand parts only as needed but exactly when needed. Inventory can be very costly for HMC if they must stockpile many specialty parts to be able to quickly meet customer orders. Hammaker knows from his work experience in Michigan that there are a number of costs associated with holding inventories (warehousing, obsolescence, and insurance costs)money that could be put to better use elsewhere. Rick knows that he will need to buy raw materials from suppliers and hold raw materials inventories plus make-to-stock parts, or customers will find other parts suppliers. Denise and Lloyd meet to discuss the issues. They decide that they need to do two things. First, they need to determine what AIS software package would be best for the new company, one that is particularly focused on inventory control (or one with an inventory control module that would be well-suited for HMC). Second, they need to decide what data elements they need to capture about each inventory item to optimize inventory management and control. Denise notes that while some inventory descriptors are easy to determine, such as item number, description, and cost, others are more difficult. For instance, inventory on hand and inventory available for sale could be two different data items since some of the inventory on hand might be committed but not yet shipped.

8-17. Hammaker Manufacturing II (Business Process Reengineering

or Outsourcing)

Implementation of a new AIS went smoothly, for the most part. It is 15 years later, and now HMC is interested in mapping a variety of their business processes to determine whether improvements can be made and whether business process reengineering should be considered. Hammaker asked Denise to work with the consulting firm analysts to determine the feasibility of these two options and also to consider the possibility of outsourcing. Denise does not know much about outsourcing and she is not sure which process (or processes) Rick might want to outsource. Denise discovers that a number of developing countries have the capacity and the labor to make the parts that HMC is currently producing and at much cheaper prices. Further, Denise discovers that many companies are outsourcing and offshoring a number of processes that used to be accomplished by company employees. Denise makes a note to herself to check the number of employees in each of the following departments: HR, computer support, accounting, and janitorial services. She also decides to query the AIS to determine what performance measures are available to assess the efficiency and effectiveness of each of these departments. Denise places a call to Lloyd Rowland to discuss this issue with him. HMC is not unionized, but Denise ponders the legal and social issues associated with outsourcing jobs, since many of the 365 employees at Hammaker Manufacturing have been with the company for well over a decade.

3. Is producing automotive parts a core business process for HMC? Explain.

4. Do companies ever outsource core business processes? Search the Internet to see if

you can find an example of a company or an industry that outsources core business

processes. What are they? Why are they doing this?

5. What social or legal issues might Denise consider? Be specific and explain why these issues might be important to HMC.