Question
A manufacturing firm has been in business for 25-years. Annual sales revenue is approximately $50 million per year. Market competition has created poor profits for
A manufacturing firm has been in business for 25-years. Annual sales revenue is approximately $50 million per year. Market competition has created poor profits for the past 5-years. Additionally, COVID-19 has caused a large price increase for raw materials and healthcare costs are projected to jump 15% next fiscal year. There have been no wage increases at this organization for the past 4-years.
The VP of Operations and Finance is proposing to invest $5 million in equipment. The considerations are as follows:
- Higher production capacity - Approximately 20% increase in 18-months.
- Better precision - Precision will increase from 0.001 millimeters to 0.0001 millimeters and open the company up to more business opportunities.
- Cutting oils are non-toxic, compared to the current machinery that uses strong solvents and petroleum oils.
- Machine guards are layered and redundant. They also reduce machine noise to non-actionable levels.
- Finance is projecting a 6% profit margin increase.
- Operations is projecting that 6 fewer machine operators are needed.
- Production disruptions are expected for a minimum of 6 months related to equipment changeover, troubleshooting, and training.
The VP of Operations and Finance has asked for your assistance in building and presenting the proposal to the executive team and senior workers on the production floor. She admits she is great with numbers, but not so good with people and getting her point across.
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