A Poorly Performing Plants

Under what conditions you would choose to close a poorly performing plant?

A poorly performing plant should be closed under given conditions:

a. When the market for manufactured product is declining and sales forecast for the product in coming future is not promising profit to the company.

b. If the company is facing continuous loss by the plant and there is a huge capital loss every year by retaining the plant. For example: Recently, US Steel has decided to sell its poorly performing plant to Serbia for $1 and the business experts have considered it as a very good decision as it will avoid millions of financial loss by the company every year and it will avoid the layoff of workers of that plant which was otherwise the liability of US Steel. (Source : Triblive Business, Jan 28, 2012)

c. If the company is under a heavy dept due to the plant, which is ruining the credit scores of the company in market and hence may affect the future business of the company.

d. If closing the plant requires much less money compared to what it is losing every year due to poor performance.

e. If the company is working on obsolete technology or the product is obsolete. For example: Floppy drives do not exist in market anymore so there is no business for this product and hence it is better to close a floppy drive making company. Similar kind of decline is now observed in compact disks business.

f. If there are limited and inefficient suppliers for the raw material. In this situation the company completely relies on the raw material supplier for its production and any kind of delay in the raw material can cause the plant to shut down for several days leading to a big loss to the company.

Considering the obstacles to resuscitating the Omaha plan, discuss the strengths and weaknesses of Weber’s plan. As a part of this, you might analyze the proposed layout of Exhibit 11 relative to the existing layout of Exhibit 2.

Strengths of Weber’s plan:

a) Weber’s plan is focused on customer demands which will help the company to sustain longer in the market.

b) Making distinctive parts which are difficult to copy is a very good and wise plan to stimulate aftermarket sales of replacement parts as well as minimize competition.

c) Streamlining strategy is a good way for lowering manufacturing cost and having competitive costs.

d) Improving product quality and expanding the warranty will help to gain the customers trust in the product and services.

e) The idea for grouping the engineers for individual companies will enhance the customer interest in products. Also anticipating the future need of the customer will help the growth of plant.

f) Statistical