Bsc From Book

Brief History

A $1 billion subsidiary of a U.S. auto parts manufacturing company, Domestic Auto Parts (DAP) was at the top of its industry holding steady the number two position within its industry. Currently it has dropped to 4th place because Western Auto and Just in Time Automotive passed them up and took over the 2nd and 3rd place spots. We can deduce that Just in Time Automotives core strengths lie within its ability to be on time while keeping inventory costs at a minimum. They can be considered as following a low-cost leader approach able to get products to the customers right on time. Western Auto on the other hand operates as a differentiator. They accomplished this through the use of technology in order to produce high value products and parts. DAP lost its position at the top because it had not introduced a new product to the market in over three years. Its long term goals of being the best had suffered because of cost cutting measures that targeted a reduction in plant investment and technology upgrades focusing at maintaining short term goals. This resulted in maintenance problems in the facilities and inefficiencies in managing inventory. They need to improve the value of their products so that customers would be willing to pay a premium price. The parent company of Domestic Auto Parts hired a new CEO, Ellen Bright, so that she could turn the company around. She was assigned the task of increasing the 9% return on capital so that it would be more competitive. The parent company wanted her to achieve a 12% return-on-capital-employed (ROCE) and a growth rate high enough to catch up to its former top position. If these objectives could not be met within two years the parent company would cease and desist operations at the plant and abandon the company.

Vision Statement

DAP will become the market share leader in the auto parts manufacturing industry through the creation of a superior reputation amongst industry competitors. We will create superior, high quality, and technology sophisticated products just in time and to the proper specifications so we can secure our position as the leading automotive parts manufacturer. Our return on capital will be above the industry average. Our growth rate will be above the industry average to achieve this. The customers need’s will be identified through continuous communication and productive dialogue with our company. In turn, this will create a long-term mutually beneficial relationship that will reduce the customers risk associated with making buying decisions. In addition, we will minimize our total cost structure and become a company located in the lowest-cost quartile in order to maximize our performance.

Mission Statement

DAP will improve its manufacturing processes by reducing down time on machines and thereby producing at a level that will allow it to provide on time delivery through a reduction in turn-times. This will allow it to deliver products to customers and achieve a high fill rate for all orders placed. Through constant innovation DAP will provide the highest quality automotive parts available and with the reduction in the cost structure will be able to provide these products with higher value at a competitive price. To set ourselves above our competitors we must exceed customer’s expectations and look outward to the needs of our customers. To do this DAP will listen to customers and improve its communication with them. Through their feed back on our products, service, innovation, new ideas and anything else that will help the company gain a better understanding of their needs. This will allow us to best serve them. Through this process DAP will continuously improve its products and services tailoring them specifically to their demands. Cross-trained teams will improve communication, cooperation, effort, and creativity within the organization. Through these methods DAP will create strong relationships with the customers and within members of the organization in an effort to achieve financial success.

Strategy/Objectives/Measures

Financial Section

Financial strategies include increasing the growth rate, maximizing revenues. It has not introduced a new product in the last three years. Increasing revenues is the objective for this and will be achieved through innovation and intimate customer relationships so that DAP can increase value added and allow it to charge a premium price. Product innovation and a strong relationship with customers will allow us to increase revenue growth. The target for this revenue growth is to increase it by 50% as stated in the case study. The measure of this will be the percentage increase in year to year revenues. Capital asset utilization is currently at 65% of old assets. It needs to be upgraded and utilized better in order to hit the target of having asset utilization at 90% of new upgraded machines. The way this will be achieved is by upgrading our machines across the board. Customers are currently not willing to pay for a premium on DAP’s product line because none of the products are new. Using upgraded assets will allow us to produce at a lower cost and be able to better manufacture innovative products. Reducing costs is another strategy that needs to be followed through. By aiming this way we can further increase customer value by decreasing the costs that must be passed down to them. The target for this is to become a low cost manufacturer in the lowest quartile in the industry. The measure is the percentage reduction in cost of producing products. Return on capital employed (ROCE) will be used as the ultimate financial measure because its parent company has given the new CEO, Ellen Bright, the task of achieving a 12% return-on-capital-employed within two years. If this measure is not achieved the company will be closed.

Customer Perspective

The customer strategy includes increasing market share, retaining customers, acquiring new customers, and providing high quality service. Target set in the case study is for DAP to achieve and a leadership position within the automotive parts industry. This means achieving first or second place. In order to do this, employees will be cross-trained to increase cross selling and better identification of customer needs. These skills will allow the salespeople to communicate the needs of the customers to the R&D department in a way that they can best utilize the information. The measure for the market share will be the percentage of customers served by DAP within the targeted segment. Acquiring new customers is always more expensive than retaining them. It is more profitable to increase the cross-selling within the current customer