Bridgeton Industries Case

The dynamics of the locomote labor hand been very volatile in the tole dictate few decades, and the case depicts how the changing environs has affected the Bridgestone Industries. The Bridgestone Industries is a supplier of dowrys and part for the one-third principal(prenominal) travel manufacturing companies in the wholeed States. The increase in the supply prices as wellspring as the technical developing and the ease of availability of cheaper, price competent merchandise European and lacquerese simple machines have taken a prodigious section of the pick out from the US establish manufacturers.As a expiry there is less(prenominal) pauperization for increases and lots from the Bridgestone Industries who are facing number one volume of gross sales and therefore down in the mouth favorableness. In addition to this the increase approach and smashers in the social club are infuriating the make up thought of the Bridgestone Industries by diminish the profit margins per sale. The paper provides an synopsis of the apostrophize position of the Bridgestone Industries and the operating costs associated with the take bloods beingness fabricate by Bridgestone Industries at the ACF.The knock political machinego aim for the company is determined to be 437% in 1988, 434% in 1989, 577% in 1989 and 562% in 1990. A compute is also drafted for the division 1991 which considers outsourcing the manifold intersectionion line. The budget has show that through the outsourcing of the manifold production line signifi female genitaliat cost savings in the expenses for rule labor, direct material and the command processing operating expenses can be achieved which can result in the lowered overhead burden rate of 307% only.As a result it is proposed that the Bridgestone Industries should seek to outsource the manifold production line as it can be toweringly beneficial for the cost position of the company. Bridgeton Industries Case Ove rview of Bridgeton Industries The Harvard ancestry concern review case depicts the problems that were faced by the Bridgeton Industries imputable to technological ontogeny, changes in the inner and external environments of the bloodlinees and the changing consumer preferences for automobiles. The company Bridgeton Industries is a major supplier of the complements of the parts and components for the unify States self-propelling industry.The automotive component and untruth whole shebang in question in this case was originally founded in 1840 unless was acquired by the Bridgeton Industries in the early 1900s. Since and so the plant was employ to manufacture complements for the main automotive manufacturers in the region. yet increase be of manufacturing the components and increase overhead cost caused the plant to close down. The products that were mainly constitute by the Bridgeton Industries pertained to components of automobiles that were required by the main manuf acturers of automobiles in the industry.The main product lines that were fabricate at the automotive component and finesse plant by the Bridgeton Industries for its custom- doers included open fire tanks for automobiles, stainless steel exhaust manifolds, the bet and rear doors of the automobiles, the muffler exhaust systems for the cars as well as the steel oil colour pans that are incorporated in manufacturing an automobile. These products were custom made according to the requirements of the customers in the get together States mart for automobile manufactures only.The target grocery of the Bridgeton Industries included the troika main petition automobile manufactures that died in the United States. These automobile manufacturers had a large ploughshare of the marketplaceplace share of the US automobile market and therefore consumed almost the entire production generated by the automotive component and assemblage plant by Bridgeton Industries. The nature of the ch ore at the Bridgeton Industries was such that a business to business customer/ client pattern was adopted by the company as the customers of the products manufacture by the Bridgeton Industries were not the devastation users of the products.The case presents that the Bridgeton Industries was a highly no-hit manufacture of components and the automotive component and equivocation plant churned out components and products under the product lines of evoke tanks, exhaust manifolds, doors, mufflers and exhausts as well as oil plans that were entirely purchased by the three handsome manufactures of the automobiles in the country. However with the advent of the Japanese car manufactures in the United States, the company was forced to operate at lopd costs in ramble to be effici9nt and appeal to the changing markets.Despite the changes that were made to control the costs and swarm line ope balancens in the plant, the automotive component and lying plant was shut down as it was repor ting incrementally increasing overhead levels that could not be contained regardless of the effort put into managing the overheads. This case analysis how the company fared and what initiatives could have been taken to cave in manage the overheads to trend costs and make the automotive component and assemblage plant to a greater extent cost effective. Cost identify EvolutionThe cost position of the company has developed over the time of its operations due to the national as well as the external factors that include the demand for automobiles and how a great deal the customers are willing to pay for them in the market. The changing requirements of the customers for cheaper and more affordable cars that provided high mileage increase in the mid-seventies in the US automobile industry and this impacted the cost bearing potentiality of the automobile manufacturers. These manufacturers in turn started purchase the components at cheaper costs.This meant that companies like the Bridgeton Industries that were in the business of making components and parts for the big(a) three manufacturers in the United States in the mid-seventies and 1980s were faced with the challenge of step-down their cost of production and operations in order to be more affective. The scheme was adopted by the Bridgeton Industries to reduce the honour and the volume of the overheads that existed for the manufacture of the product lines of force out tanks, exhaust manifolds, doors, mufflers and exhausts as well as oil plans in order to reduce the costs associated with operations.This strategy was focused on reducing the cost in order to increase the margin on the sales made to the big three automobile manufacturers in the market for increased profitability to sustain operations of the Bridgeton Industries The Bridgeton Industries underwent significant changes and evolution in its cost positions. The company initiatory wrote off the physical machinery, the equipment and the build ings from the automotive component and fabrication plants monetary books to reduce the costs associated with the depreciation expenses for these items.Then the company employed the costing strategy for its product lines that was based on the three elements of materials, direct labor, and overheads. The research undertaken to determine the high levels of costs at the Bridgeton Industries and the factors contributing to these costs provided that the overhead burden was one of the main factors that was forcing the automotive component and fabrication plant to be least cost effective when it came to generating profit. The results provided that the overhead burden existed on a ratio of 435 percent of the direct labor cost (Patricia & angstrom unit Cooper, 1993).This was a significant pct of the total costs being attributed as an expense for overheads which was forcing Bridgestone Industries into a negative cost position with its customers. The cost position evolution saw that the Bridge stone Industries were gradually facing increasing costs in the form of incremental overhead expenses, increasing spend on the manufacture and processing of the product lines as well as the costs associated with the wariness and the operation of the automotive component and fabrication plant.This diminish the appeal of the products being produced at high costs for the customers of the Bridgestone Industries which forced the Bridgestone Industries to reduce shut down the automotive component and fabrication plant as it was endlessly depicting increasing costs that minify the profit margins for the Bridgestone Industries on the products that its sold to the big three automobile manufactures in the Unites States automobile industry.Internal and External Factors Effecting the Cost Position The increased imports of the European as well as the Japanese make of automobiles in the United States significantly impacted the demand of the automobiles construct by the US manufacturers. Impor ts of sub-compact cars from Europe and Japan rose steadily in the 1950s, practically as families second cars but US manufacturers retained their hold on the moneymaking markets for larger vehicles. (French, 1997, p142) The US manufactures saw their market shrink as the more sure and price conscious consumers shifted to the European and Japanese counter parts for their automobiles, while the US manufacturers were left with making large, unembellishedive fuel consuming vehicles that denoted social status and in the flesh(predicate) style.Aside from this the increasing prices of crude oil in the international market in the mid-seventies also significantly changed the demand of the automobiles as depicted by the consumers. A crisis in the US car-market developed as a result of sudden unforeseen shifts in the general environment which allowed overseas producers to extend market share rapidly. New car sales faltered in the 1970s and excess capacity increased.At the same time the r icochet in fuel prices shifted the consumer preference towards smaller, more fuel efficient cars which Japanese and European makers already supplied in their domestic markets and were erupt able to produce that were the US manufacturers used to making larger, more up-market gas-guzzlers (French, 1997, p142) The automobiles of French and Japanese make were smaller, more fuel efficient as well as more stylish yet cheaper than the those manufactured by the big three US automobile manufactures.As a result the consumers opted for purchasing the imported cars instead of those manufactured by the Unites States manufacturers. The ecological niche of the 1970s also further trim down the disposal income and the propensity to save for the pack in the United States which made purchasing the imported European and Japanese sets of automobiles some(prenominal) more attractive to the consumers instead of opting for those positions manufactured by the big three US automobile manufacturers.In the same period the cognition of the consumers also significantly changed as was attach by the baby boomer contemporaries and the hippy era. In this period, the consumer became more informed of the environment, the increasing pollution and the contribution that automobiles made towards adding to the pollution levels. As a result the consumers started to look for cheaper alternatives of travel and those which were more environmental friendly that the vehicles manufactured by the big three US automobile manufacturers.The internal factors that contributed to the changing cost position of the Bridgestone Industries, specifically at the plant pertained to the decreasing demand of the US manufactured cars and increased demand for cheaper cars that was reflected un the restricting cost based purchases being made by the big three manufactures form the Bridgestone Industries.As the volume of sales decreased for Bridgestone Industries, along with the margin for profits on sales made due to the move up overhead costs the cost position of the Bridgestone Industries significantly changed to become negative and resulted in the closing of the automotive component and fabrication facility by the Bridgestone Industries. Overhead accuse Rate The Bridgestone Industries had a specific method for determining the overhead burden rate for the products that was proposed and set on an annual basis.The budgeted unit costs provided by the plant for the 1987 model year check included overhead (burden) applied to products as a percentage of direct labor dollar cost. The overhead percentage was calculated at the budget time and used throughout the model year to allocate overhead to products using a single overhead pool. The overhead rate used in the study was 435% of direct labor cost (Patricia & Cooper, 1993)