Wriston

To: Richard Sullivan

From: xxx

Subject: Wriston

There are two major decisions facing Wriston at this point in time. Firstly, what needs to be done with the Detroit plant? Secondly, what is to be done with 'Group 3' products?

Standing alone, the Detroit plant loses money year-over-year. However, it is difficult to compare Detroit to the other plants in the Heavy Equipment Division (HED). Detroit is a job-shop and has a diverse low-volume product offering. The other plants in the HED are flow-shops and focus on high-volume streamlined operations that maximize profits.

Detroit plays an important role in the HED. The plant is solely responsible for manufacturing replacement and discontinued parts for the HED. In addition, Detroit is the only plant in the company that produces two product lines. Detroit focuses on producing many low-volume products, allowing other plants to specialize on profitable high-volume products. Detroit has also been responsible for developing many new products over the years.

The company has historically evaluated plants based on stand-alone profitability. This is not a fair assessment of Detroit's role within the HED. Detroit, as a job-shop, sacrifices efficiency for variety of products. As a result, primarily because the plant could not compete for capital with other high-volume plants, the company under-invested into Detroit and allowed it to deteriorate into its present condition. Consequently, Detroit has the highest overhead in the entire company and these added costs further decrease profitability.

The deteriorating conditions in Detroit have pushed its workforce into a state of flux. The plant has a high-turnover rate, as workers seek out other stable jobs, likely due to constant rumors of the plant shutting down. Employees are using the company as a starting point for their careers and move to other companies for better job security. This puts a lot of strain on veteran employees, who cannot focus on their core jobs, because they are constantly training new hires. As a result, morale is low in Detroit and the plant is consistently hiring new employees. Training new employees further increases overhead costs which are already high in Detroit.

If the Detroit plant were shut down, the current volume of products would have to be transferred to other plants. Although some of these products could be produced in a flow-shop atmosphere, the lower volume products would cause havoc in these other plants. The company would be risking the efficiency of these plants and that would negatively affect the production of profitable products.

Taking a wait-and-see approach in Detroit is costly and does not solve any of the current problems, in particular what to do with the employees. Although this might be necessary for a year or two until a new plant can be constructed, the best course of action is for the company to build a new Detroit plant. A new plant would immediately reduce the overheads that have spiraled out of control due to the lack of funds invested in Detroit. Also, employee moral would improve. A new plant would be a clear symbol that the company will be staying in Detroit for a long time. The current Detroit plant is wasting a lot of space and has to co-ordinate its operations between 12 different buildings. A new plant would also increase production by eliminating these inefficiencies and allowing management better control over operations.

To ensure a proper transition, it will be important to have a clear leader for the new plant. Since Frank Kravitz has been sick over the past year, a new leader should be selected for the plant. Mr. Kravitz could remain on disability until he is able to return to work. At that time a decision could be made to keep him in Detroit or move him to another plant, which has been done in the past.

To further increase employee morale, a major problem in the Detroit plant, Wriston should consider encouraging employees to be more efficient by implementing a bonus based on the efficiency. This must be done with the Union's support because the company may have to benchmark plants at different levels based on their design and capacities.

Detroit will continue to manufacture Group 1, 2, and 3 products in the new