Fabtek is a company specialized in fabricating and selling titanium and equipments made of titanium. Recently, Fabtek is failing to maintain market share and losing money because of long delivery schedule and late deliveries due to shortage of capacity and unreliable internal forecast.Two executives of Fabtek recognize that marketing division and operations division should cooperate with each other to improve the efficiency and profitability of fabricating business. They agree to become more selective in taking orders. At this point, they have four prospective fabricating orders and must decide which order to take.In this case, I see two issues. First, ...view middle of the document...
In this case, there are two kinds of criterion and these two share some aspects and contradict some aspects. Among four orders offered, it is recommend to take one from Pierce-pike and one from Worldwide paper. Even though the capacity of welders is short in late 1991, it can be resolved by scheduling and these two orders will give the chance of diversifying the market to Fabtek. The order from Refco is a big deal but it's more labor-centric and hard to meet the delivery date with present capacity. The order from Kathco is one shot deal and can be executed within capacity but strategically might be discarded to hinder the expansion of the competitor.* Issues should be considered to select orders- What is the best order?- Who is the best customer?- Open capacity: Besides Kathco, Fabtek is not available to take any order without delaying deliveries- Strategic impact of orders- Political/human implications: B2B situation, it matters a lot and it can influence whether to take a certain order → Refco &- Lightfoot, Vitali -& Pierce-pikeFabtek is operating almost at full capacity but losing money. Because:- Pricing process (which it doesn't have)- Inaccurate estimation of labor cost: No difference in mark-up between labor and material (Welding needs to charge higher mark-up than fabrication/machining)- Factory overhead: 200% of direct labor* To make this company turn into successful- Effective cross-functional cooperation- Proprietary products- CEO's leadership/overarching goals with clear R&R- Astute pricing- Order selection process- Good management of new/existing accounts