Case: Emanon Project

Emanon Aircraft is a major manufacturer of aircraft parts, specializing in landing gear parts and assemblies. They are located in a highly industrialized midwestern state. The local area suffers from somewhat higher than average unemployment, partly because Emanon has experienced a downturn in business. In the past three years, they have lost out on several landing gear contracts, being underbid by competitors from other areas of the country. Senior management studied the problem but has not concluded what can be done. They have hired a consulting team from a nearby university to study the situation and make a recommendation.

Business in the aircraft industry is not significantly different than in many other industries specializing in the building of complex machines. Aircraft builders are primarily assembly operations. They build planes from subassemblies and parts manufactured by themselves or by subcontractors. When an order is received to build some number of a given type of plane, the builder (prime contractor) requests bids for the proper number of a certain part or subassembly from appropriate subcontractors.

The consulting team studied three aspects of Emanon's landing gear operation: the manufacturing process, the cost structure, and the bidding behavior and profit structure on landing gear bids.

First, they determined that the manufacturing process was reasonably efficient and not significantly different from Emanon's competitors. Second, they found that all competitors were using approximately the same level of mark-up when determining their cost-plus price. When examining the cost structure, however, they noted that in the past three years, the firm consistently ran negative cost variances in material accounts. That is, the amount of material used in the construction of landing gears was approximately 10 percent less than the plan indicated. The team was unsure of this finding because there were only a few winning contracts for landing gears during the past three years.

Third, an investigation was conducted on the estimating and purchase of materials for this department. It exposed the following facts. 3.5 years ago, Emanon was late making delivery of landing gear parts. The firm paid a large penalty and was threatened with loss of further business with the prime contractor. The late delivery resulted when Emanon ordered an insufficient quantity of a special steel alloy used in landing gear struts and was unable to purchase any on the open market. The steel company required a manufacturing lead time of more than 90 days, so Emanon's delivery was late.

As a result, the purchasing official who had responsibility for this contract was demoted. The new purchasing official straightforwardly handled the problem by regularly inflating the material estimates by 10 percent. The cost of material is about half of the total cost of landing gear production, which resulted in bids that were approximately 5 percent above the competition.

Question:

Develop a comprehensive SWOT analysis. What are the major business strategies you would suggest to Emanon to strengthen their business?

• You are encouraged to use external resources (e.g. websites, literature, etc.) to understand the project better. Also, please state all the assumptions you had to make for answers.