Custom Fabricators, Inc. Case Study

Custom Fabricators, Inc. Case Study

With the constant change in demand, businesses must consistently review various strategies, customer needs and core competencies to determine all are in align with the company purpose and mission. Manufacturing companies are endeavoring to be order winners in the various markets today. They must differentiate between the competition and core competencies in a very challenging economy.

Custom Fabricators, Inc has been the primary manufacturing company for Orleans Elevator since the late 1980’s. This partnership with Orleans began with manufacturing the control panels for elevators. Now with the concept of outsourcing, the manufacturing company provides more than just parts, they provide whole subassemblies, entire control panels and elevator motor housings.

The CEO, Ben Lawson, advises he “was in the right place at the right time when Orleans got into just-in-time and lean manufacturing” (Chase, Jacobs and Aquilano, 2006, p. 45). Just-in-time manufacturing is the methodology which dictates that resources, labor, parts and equipment are produced as needed and in the quantities required. This insures that Orleans gets their exact items at the correct location when needed. With this system, there is no need to stock inventory, which would assess costs to the company. This philosophy provides for the elimination of waste, and increases productivity, performance and quality while reducing costs (Heizer and Render, 2007, p. 201).

The partnership between both companies has been very companionable. Orleans Elevator, a subsidiary of United Technologies, provides Custom Fabricators with a monthly schedule and all products are made to order and delivered either to the nearby Orleans plant site or directly to the construction location. Custom Fabricators creates value for Orleans by delivering quality and great service with the speed, reliability and flexibility of the manufactured items they produce.

Custom Fabricators, Inc does most, if not all, of its manufacturing business with Orleans. The manufacturing company is fortunate that Orleans purchases all needed raw material so costs to Custom Fabricators is limited to land lease, the plant, equipment and employee costs. This allows for revenue margins to maintain at approximately 30 percent. This prosperity is transferred to the Custom Fabricator’s employees who have shown their loyalty through increased productivity as business increases. Employee satisfaction has enhanced the company’s reputation of quality and timely products.

Custom Fabricators has been able to maintain their competitive advantage in keeping the Orleans business due to their customer perspective strategy. They have developed a close relationship with Orleans. The manufacturing company understands the business and is able to provide the exact products whenever needed and Orleans can depend on the quality and the service provided to successfully achieve their goals in completing elevator contracts. Location has also influenced their competitiveness as a primary Orleans Elevator manufacturer.

Recently Orleans has included Ben Lawson in their search to find new suppliers of raw material. The company has been using local raw material suppliers but they are researching the outsourcing option for a possible decrease in cost for the supply of these materials. The main focus of the search has been in Mexico. Orleans seems to feel that the lower cost of labor in Mexico will substantially decrease their raw material supply costs. Therefore, they have hired a firm, FreeMarkets, to obtain contract bids on the service from a variety of Mexican suppliers.

This possible shift in suppliers concerns the CEO of Custom Fabricators because he understands that if the quality of products provided from a Mexican firm is not up to par then it will take a week or longer to get replacement materials. Currently, due to the close proximity of the existing raw material supplier, it takes a matter of hours to a couple days to correct this same type of issue. Custom Fabricators realizes that the purchasing of raw materials from a distant location could drastically increase the risk of manufacturing elevator products for Orleans. The manufacturing company could have an impact on product quality and the timeliness of production which could hinder success as an order winner and maybe even as an order qualifier for Orleans.

It has become obvious to Ben Lawson that there has been a change in Orleans Elevator’s priorities. They seem to be moving from qualifying products based on quality and reliability to basing them on price using the criterion of cost as they as they consider who will be awarded the contract (the order winner) and this