Management Needs

Recommendations: ML need to have a good marketing manager who can do market analyses to identify trends in the fastener market in order to identify the proper product mixes for coming fiscal years. Market and competitor analyses would also be helpful with R&D innovations. Based on Exhibit 1, Prongs and Tacks appear to be MLs best products. The marketing manager should do some customer surveys and attend some trade shows to get a sense of the demand for fashion line fasteners before the company starts heavy investment into this initiative. With regards to the attaching machines, even though renting provided regular revenues, offering automatic attaching machines for sale would allow them to unbundle the fastener and attaching machine costs. They also would not be responsible for providing service to customers. Management needs to also track accounting costs of refurbishing, storage, and handling or old machines. In addition, management needs to develop a strategy to reconcile the difference between the $7,000 and $10,000 in fastener sales per rented machine. Further, ML should reward its customers who are complying with their attaching machine agreement with a better purchasing price range for their orders.

Fastener and Attaching Machine Production Processes

ML was broken up into two types of production: attaching machine production and fastener production. ML had a dedicated floor for attaching machine production. Machine parts consisted of 30% of the total cost of automatic or semiautomatic fastener machine. All fastener-specific parts were produced by ML. Costs were considerably smaller for manual machines. Some machine production activities were outsourced. Machine production required highly skilled labor. In addition, ML valued precision in their machine’s functionality. Testing was an important part of the production process. They would run 10,000 fasteners through the machine before delivering it to a customer. Further, thirty percent of the engineering staff’s time was spent on research and development activities.

The company also produced some of its own production machinery, including automated material-handling machines. ML relied heavily on the technology developed for the attaching machines. Interchangeable parts were used for each machine which may have allowed them to have some cost savings by purchasing parts in bulk. The machining department was split into two groups: 1) a group that manufactured new attaching and production machines; 2) a group that refurbished and refit returned attaching machines. The vast majority of machine manufacturing focused on producing fastener attaching machines. In addition to machine production, a tooling department manufactured and repaired tools that were used in the production of machines and fasteners. Machine tools were very costly while fastener tools were inexpensive. Tools would be repaired or replaced depending on their use.

Fastener