Capacity Strategy at Alden Products

Capacity strategy should embody a mental model of how a firm works in a given industry and geographic region. There are a series of assumptions and predictions about the log-term behaviour of markets, technologies, costs and competitor’s behaviour. Such a model would include the following factors: * Predicted growth and variability of demand for the firm’s products and services * Costs of building and operating different sized-facilities * Likely rate and direction of technological evolution Expected behaviour of competitors * Anticipated availability, capabilities and costs of external suppliers The European organization of Alden Products, Inc. is contemplating a doubling of unit sales over the next ten years. Their largest plant, located in Holland, was set up 25 years earlier to supply all demands of the EEC countries on the continent. It has since expanded six times. The question in mind pertaining to the case is that: * Should it expand again? * Should it build a new plant in Southern Europe? Or should it expand its use of contract fillers? As of 1988, 75% of Alden-Europe’s sales took place on the continent and 25% came from UK. Out of 75% of the continent, * 25% came from France, * 12. 5% came from Italy, * 37. 5% came from Spain and Germany Alden-Europe’s overall growth was expected to average over 40% per year but this varied across various countries. Thus, there was a high degree of uncertainty about the growth rate in several countries. The capacity strategy adopted by API was Policy C: Add Capacity Only after Demand Exceeds It. This policy implies that the company’s capacity plan will contain a negative cushion so that the likelihood of running short is greater than the likelihood of having excess capacity. As per my analysis of the scenario, I feel that API should expand at Uniplant based upon the following factors: How capacity and operations management will interact in case of expansion? An operation’s actual capacity is affected by some important factors. They are as follows: 1. Capacity is technology based: A number of Uniplant’s products used proprietary formulations and ingredients. Opening up a plant in new location would make the management get reluctant to risk the secrecy of these formulations. The same would be applicable if they would go ahead with contract fillers. 2. Capacity depends on the interaction of multiple resource constraints: Uniplant attains the following advantage over Southern Europe in matters like: * No additional land needed * Availability of labour * Fewer additional employees * Cost Advantage in terms of production of own plastic bottles Availability and long-term relationship with suppliers * Speed up the processing time . Capacity is location specific: Holland is a desirable place in terms of access to raw materials, proximity to markets via existing rail lines and highways, labour costs, tax rates and political and social stability. 4. Capacity is mix dependent: The capacity of the plant which was under 90% was greatly dependent on the production mix which included both the product mix and size mix. Different products/services consume different amounts of various resources, so a change in location could affect the product mix as the availability of the various resources could also differ. Capacity depends on management policies: The management was clear about the fact the product quality should be clearly distinguishable as superior to the competition in terms of performance, packaging and design finish. Hence by subcontracting, the company would increase the risk of reduction in quality and customer service and increase in indirect costs. 6. Capacity is affected by the degree of variability of demand: Sales in different countries were expected to grow at different rates. There were also changes predicted to occur in wage and exchange rates. Hence, an increase in the number of plants would just complicate the entire issue. In terms of sizing of capacity increments taking into account scale considerations, the company should attain long term economies of scale. This scale refers to the economies that arise from using one large facility rather than a number of smaller ones. This often results in savings because the processing capacity is roughly proportional to its interior volume and its cost is more closely related to the surface area in terms of where the materials and labour hours are concentrated. We also know that though there is a growth in demand, variability exists across different countries. Greater the variability, there are chances that there would be a greater amount of underutilized capacity and at this stage opening a new plant in a different location altogether could make the entire scenario vulnerable. Drawbacks of not opening a new plant in Southern Europe are as follows: * Loose an opportunity to tap a lower cost labour market * Reduction in transportation costs had a new plant come up in Southern Europe * Would not be able to offset the protectionist sentiment in both France and Italy. Thus we see that by adopting the option of expansion at Uniplant, the company would be in a better state as compared to the other options. However a few recommendations in terms of changes to be mad in the expansion plan are provided below: Uniplant’s mark-up price should be reduced from 10% to 5% initially and then become nil in mere future. This would increase the number of sales from the customer point of view and would also help other countries to price their products competitively even during times when there is any kind of fluctuation in exchange rates. They should equalize the unit transportation costs to all subsidiaries which would make the entire process less complex and fair. This would help in maintaining long term relationships with them. Standardized products could be subcontracted but products involving high-technology shouldn’t be under contract filling as this could increase the risk of quality deterioration and increase in indirect costs.

Management finance Essay Example | Topics and Well Written Essays - 1500 words

Management finance - Essay Example The reporting system in the company is new and shall be changing the norms and the culture of the company. With the introduction of new processes to the company operations then it is usually faced with resistant from the employees. The change in the processes of the company and the introduction of new process or norm is resisted whether it comes from inside or from outside of the company (Leanne, 2009). The reporting system in the company is resisted as well and employees consider it as the means of under estimating their performances in the company and shall not be able to truly evaluate their performances. The reporting system shall be considered as in just for the employees as the manager shall be taken the advantage of the performance and the employees and/or workers shall not be recognized for their performance (Debra & Bradley, 1999). Thus in order to get a better response and acceptability from the employees the report should be the true reflection of the performance of the em ployees. Budget is the most important part of reporting as the actual performance of the department is compared with the budget and thus the evaluation is done. The involvement of the employees shall be playing an important role in the reports as when the budget is prepared with the input from the employees considered along with the management perceptions then the budget prepared shall be much more realistic and achievable and the reports shall be getting a positive and accepted response by the employees (David, 2003). Budget is an integral part of the report and is utilized throughout the process, which involve planning, implementing and control (Mukdad, 2011), as the company enhances its internal controls and thus progress towards a more effective and controlled procedures. The budget in the report shall be much realistic, which involves the employees and the managers of all the departments of the company can attain and thus prepare a realistic and

Starting a new solar panel company in Germany Research Paper

Starting a new solar panel company in Germany - Research Paper Example The sophistication of the economy is in evidence in the way high technology dominates its industries, with cars, chemicals, machineries, and related products constituting the core of its exports to the rest of the world. Outside of Europe too, in the context of the larger world economy, Germany’s economy stands proud as the fifth largest in the world. The sophistication of its products on the other hand also imply one, the presence of a highly technical and highly educated and intelligent workforce, and two, a sophisticated economy with serious and equally sophisticated energy needs. By way of quantifying the economy, in 2013 it was valued at $3.227 trillion at purchasing price parity, making it officially the sixth largest economy in the world. Its per capita GDP on the other hand is pegged at $39,500, making it number 29 in that area in the whole world, and highlighting the prosperity of the country and its citizens in general. The country also boasts of a labor force that i s entirely devoted to industries and to services except for less than two percent of about 44 million German workers. That 1.6 percent of the workforce toils in the agriculture sector. Industry makes up about a quarter of the labor force, while the rest, or close to three quarters, are involved in services (2; 9). Other indicators of economic health, such as economic freedom, also indicate a German economy that has been on the up and up for a long time, and in a way has never been in better shape as now, with the country achieving its highest rating for economy freedom historically in 2014. Moving back twenty years into the past, Germany was deemed as having an economy that was moderately free, but has since moved into the category of mostly free countries in the past eight years, advancing in its ranking consistently throughout that time, to achieve its highest rating at present (13). Elsewhere the prognosis is that Germany has moreover done better than its