aDE *Bridgerton Case.pdf X + X C File | C:/Users/kilbu/OneDrive/Desktop/Grad%20School%20Classes/Winter%202022/ACC251-%20Shannon%20Anderson/Bridgerton%20Case.pdf . . . of 7 Q + Page view | A Read aloud | () Add text | Draw Highlight Erase | & | 6 9 This file has limited permissions. You may not have access to some features. View permissions X Bridgeton Industries: Automotive Component & Fabrication Plant The union has worked with us and has even led in cost reduction programs. Now corporate is talking about outsourcing additional products. What more can we do to keep the business? Mike Lewis, plant manager The Automotive Component & Fabrication Plant (ACF) was the original plant site for Bridgeton Industries, a major supplier of components for the domestic automotive industry. The history of the plant dated back to the 1840s when the adjoining river attracted mills processing the rich lumber resources in the area. The site progressed through several industrial uses, including an early wagon works, until finally purchased by the founder of Bridgeton. He opened his first office there in the early 1900s. All of the ACF's production was sold to the Big-Three domestic automobile manufacturers. Competition was primarily from local suppliers and other Bridgeton plants. As long as the market was growing and dominated by U.S. automobile manufacturers, this strategy worked. It became less effective when foreign competition and scarce, expensive gasoline caused domestic loss of market share. Suppliers found themselves competing for a shrinking pool of production contracts. Throughout the 1980s, the ACF experienced serious cutbacks due to this competitive pressure. However, as the 1990 model year budget approached, the ACF was still considered a critical plant. Model years ran from September 1 to August 31 and were the bases for planning and budgeting. The model year running from September 1, 1989, to August 31, 1990, was designated the 1990 model year. Production contracts were usually awarded for a model year. The Engine Plant Shutdown The ACF first felt the effects of domestic loss of market share in 1985. After the first oil crunch in the mid-1970s, Bridgeton had built two plants for manufacture of fuel-efficient diesel engines in anticipation of a continued growth in the market. One of these plants was at the ACF facility. When the growth in diesel-powered cars was not sustained, one of the operations had to be shut down. Research Associate Patricia J. Bost prepared this case under the supervision of Associate Professor Robin Cooper as the basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. 9:59 PM 1/9/2022aDE *Bridgerton Case.pdf X + X -> C File | C:/Users/kilbu/OneDrive/Desktop/Grad%20School%20Classes/Winter%202022/ACC251-%20Shannon%20Anderson/Bridgerton%20Case.pdf . . . 2 of 7 Q + 2 0 Page view A Read aloud | T) Add text | Draw Highlight Erase | 8 | 6 9 This file has limited permissions. You may not have access to some features. View permissions X 190-085 Bridgeton Industries: Automotive Component & Fabrication Plant Special studies were made of the relative costs of the two plants, and the ACF's facility was the one selected for closing. When the production workers at ACF were told they were not cost competitive, they took actions to reduce unit product cost, bringing it down to within a few cents of the competing source. Despite these efforts, the ACF's facility was closed. "Management told us we were not cost competitive. We worked ourselves into the ground and lowered the unit cost, and still lost the business," recalled Ronald Peters, a longtime production employee who had worked in the engine facility that was closed. When the engine plant closed at the end of the 1986 model year, all of the related production jobs were eliminated. The skilled trades positions were eliminated where possible. However, tradespeople who had unique skills that were needed in other areas of the plant were retained. The physical machinery, equipment, and building were written down and taken off the plant books. Strategic Analysis During the 1987 model year, Bridgeton Industries hired a strategic consulting firm to examine all of Bridgeton's products and classify them in terms of "world-class" competitive position and potential. Four criteria were considered: (1) Quality, (2) Customer service, (3) Technical capability (engineering and sophistication of plant processes), and (4) Competitive cost position. The data used to evaluate quality included warranty failure rates, product rejects per million, percent scheduled maintenance versus breakdown maintenance, customer complaints per million, and published user rating service scales. To evaluate customer service, in addition to interviews, the study examined percent on- schedule production and shipments, percent variation in these schedules, time response to requests for information, time response to customer complaints, lead time from design of concept to production of product, and degree of manufacturing flexibility. Technical capability was largely estimated by interviewing customers. Internal data were gathered about product feature innovations, degree of technological proprietary, and depth of engineering expertise. Competitive cost position was evaluated by interviewing financial, purchasing, and engineering personnel, and by undertaking a cost analysis that examined the cost of production by breaking each product cost into three elements: materials, direct labor and benefits, and overhead. The product costs used for the study were total full factory costs based on examination of the manufacturing cost reports generated by the facility's cost system. The details were provided by the plant's financial personnel. Comparative competitive costs were obtained through plant tours and interviews with engineering and purchasing people at other Bridgeton plants (internal competitors), information from competing component suppliers (external competitors), and discussions with financial personnel. The budgeted unit costs provided by the plant for the 1987 model year study included overhead (burden) applied to products as a percent of direct labor dollar cost. The overhead percentage was calculated at budget time and used throughout the model year to allocate overhead to products using a single overhead pool. The overhead rate used in the study was 435% of direct labor dollar cost. O 9:59 PM 1/9/2022aDE *Bridgerton Case.pdf X + X -> C File | C:/Users/kilbu/OneDrive/Desktop/Grad%20School%20Classes/Winter%202022/ACC251-%20Shannon%20Anderson/Bridgerton%20Case.pdf . . . 3 of 7 Q + [ Page view | A Read aloud | T) Add text | Draw Highlight Erase | & | 6 9 This file has limited permissions. You may not have access to some features. View permissions X Product costs were analyzed by the consultants to classify products by degree of cost competitiveness. Product classification was finished and reviewed at the corporate level with little plant adjustment or involvement after initial data collection. Products classified as world-class (having costs equal to or lower than competitors' manufacturing costs) were considered Class I. Products that had the potential of becoming world-class (having costs 5% to 15% higher than competitors' costs) were classified as Class II. Products that had no hope of becoming world-class (having costs more than 15% higher than the major competitor) were classified as Class III. The other criteria (quality, customer service, and technical capability) were weighted into a factor that determined the final classification of the products. The consultants recommended that Class products should remain at their present locations. Class II products were to be watched closely for improvement or deterioration. Class III products were designated to be outsourced (i.c, the business was awarded to another Bridgeton location or purchased from an outside competitor) or eliminated. The consultants advised the ACF's management that its products fell into the following classifications (for a description of these products see Exhibit 1): Class I-Fuel tanks Class II-Manifolds, front and rear doors Class III-Muffler-exhaust systems and oil pans Product Outsourcing At the end of the 1988 model year, oil pans and muffler-exhaust systems were outsourced from the ACF. This outsourcing resulted in a loss of 60 direct labor (production) jobs and 30 indirect (skilled) jobs. These 90 people were transferred to a retraining job pool, which was administered and paid by the union. The job pool cost was not a part of plant burden costs. With this second major cutback, plant management and labor moved toward more cooperation and openness in efforts to retain the remaining business. Several programs were introduced to improve product quality and increase productivity. These programs stretched the traditional union and management boundaries as both sides worked toward creative solutions to meet these challenges. One of these efforts led by Fred Simmonds, an experienced die maker, involved union formation of teams to lower the time required to change dies, a major constraint in the production process. By combining union labor classes and skill levels on press line die-change teams, the ACF lowered the required time to change dies from 12 hours to 90 minutes. This was the best in Bridgeton. Other locations averaged between 4 and 5 hours. The "world-class" times of Japanese assembly lines, approximately 10 minutes, required special plant layouts. Another productivity improvement program created by Simmonds and Peters used "hourly to time hourly." In this program, hourly workers kept track of the causes of downtime and categorized them as being related to personal time, tools and equipment, or start-up. People from the retraining job pool formed by the union at the time of the prior layoffs were asked to time the lines. The production workers' knowledge of the process and experience on the line resulted in highly accurate activity times for the operations they observed. Their reporting emphasized the positive side of the information using "uptime reports" to show progress toward the "world-class" goal of 80% uptime set O 9:59 PM 1/9/2022aDE *Bridgerton Case.pdf X + X -> C File | C:/Users/kilbu/OneDrive/Desktop/Grad%20School%20Classes/Winter%202022/ACC251-%20Shannon%20Anderson/Bridgerton%20Case.pdf . . . 4 of 7 Q [ Page view A Read aloud ) Add text V Draw Highlight Erase | 8 | 6 9 This file has limited permissions. You may not have access to some features. View permissions X Dec 2021 to Mar 2022. For the exclusive use of D. Kilburn, 2022. 190-085 Bridgeton Industries: Automotive Component & Fabrication Plant by the Japanese. By identifying problem areas and working with industrial engineers, they increased their uptime from an average of 30% to 65%, the best in Bridgeton. In spite of these improvements in the production process, manifolds, designated Class II in the initial study, were downgraded to Class III in the 1990 model year budget and identified as candidates for outsourcing. (For the 1987 through 1990 model year budgets, see Exhibit 2; Exhibit 3 describes the overhead accounts used at the ACF.) Any decision to outsource manifolds was complicated by the possibility that increased emission standards would require new vehicles be fitted with lighter weight, more efficient manifolds. If this occurred, the demand for stainless steel manifolds such as those manufactured at the ACF could increase dramatically and so, probably, would their selling price. Reacting to the change in classification of the manifolds, Lewis called together his plant superintendents and union representatives: This doesn't make sense. I know we are more competitive. We have made all kinds of improvements, but our costs keep going up, and we're still losing business. What more can we do? O 9:59 PM 1/9/2022