Custom Fabricators, Inc - Week 2

Custom Fabricators, Incorporated

Since its release in 1994, the North American Free Trade Agreement (NAFTA) has impacted the manufacturing sector in the United States. Manufacturing organizations such as Custom Fabricators, Inc (CFI) have been forced to find ways to cut costs to remain competitive. In the United States, NAFTA has contributed to the reduction of employment in high- wage traded-goods industries, growing wage inequality, and a steady decline in demand for workers without a college education. The majority of the net jobs displaced were in the manufacturing sector. Growing trade deficits with Canada displaced 270,248 manufacturing jobs while growing deficits with Mexico displaced 388,682 manufacturing jobs, for a total of 658,930 manufacturing jobs displaced (64.9% of the total) (Scott, Salas, & Campbell, 2006, p. 1). Figure 2 displays job losses per state.

Figure 2

NAFTA Impacts on Jobs per State

Note: Retrieved from Scott, Salas, & Campbell, 2006, p. 1.

This paper will summarize the Custom Fabricators, Inc. case study by Chase, Jacobs, & Aquilano, p. 44, answer the discussion questions shown in Figure 2, and define the role of Operations Management at Custom Fabricators, Inc.

Figure 2

Case Study Discussion Questions

Note: Retrieved from Chase, Jacobs, & Aquilano, 2004, p. 45.

Custom Fabricators, Inc.

CFI is a non-union shop with loyal employees, and low employee turnover. CFI started by providing sheet-metal elevator panels for Orleans Elevator in the 1980s. Since that time CFI's role with Orleans has grown due to Orleans policy with regard to outsourcing. Not only does CFI produce panels, but CFI also provides the entire panel assembly, which includes the electronics, the elevator motor assembly, and several custom brackets and other machined parts for Orleans. CFI and Orleans have developed a close partnership. Orleans provides CFI with elevator forecast data, which CFI uses to assemble components to support the forecast. CFI ships the components directly to the work site.

Orleans parent company, United Technologies Corporation (UTC) has recently decided to implement the FreeMarkets Internet Purchasing system. This system works as an online-auction. Orleans enters data with regard to purchased parts and assemblies, and other companies bid on the jobs. Orleans invited Ben Lawson, CEO of CFI to a recent auction. "For Ben Lawson what was most interesting was to observe the auction for some parts that he used at his plant" (Chase, Jacobs, & Aquilano, 2004, p. 45). A Mexican facility had bid on some of these components and Lawson was concerned with how he would deal with a Mexican supplier. Distance and language barriers were of special concern to him (Chase et al, 2004).

Operations Management at CFI

"Operations management (OM) has been a key element in the improvement in productivity in businesses around the world. Creating a competitive advantage through operations requires an understanding of how the operations function contributes to productivity growth" (Chase et al, 2004, p. vi). The OM role at CFI is there to provide "a systematic way of looking at organizational processes" (Chase et al, 2004, p. 6). OM provides a business plan which includes methods to improve quality, lower costs, and improve the effectiveness and efficiency of operations. The OM strategy is constantly updated to change with current business and economic trends, the changing marketplace, and technological advancements.

How does Ben Lawson's Custom Fabricators, Inc. provide value for Orleans?

CFI provides value to Orleans because of the close partnership of both companies. CFI is able to provide several components and whole-assemblies to Orleans by use of a schedule forecast. CFI also ships the components and assemblies directly to the worksite. This working relationship allows Orleans to spend more time engineering elevators and less time monitoring one of its key suppliers (Chase et al, 2004).

In the past, what has been Ben Lawson's competitive advantage in keeping the Orleans business?

Prior to Orleans transition to a just-in-time and lean manufacturing system, CFI was able to maintain its competitive advantage because of its location near the Orleans facility. CFI also invested in new machines to improve the processes used to manufacture components for Orleans. Another advantage, now and in the past, is employee loyalty. CFI pays its employees well, which has reduced turnover. This allowed CFI to consistently deliver quality products to Orleans (Chase et al, 2004).

Have Orleans' priorities changed?

Orleans priorities have shifted to outsourcing more work. Orleans is interested in receiving whole sub-assemblies