Megacorps CMC is a manufacturing company in a crane production. The cranes are normally used in different firms and process lines operations. The firm produces both small and large sized cranes the can hold huge heaps across a rectangular boundary. These products are customizable and often most clients come up with their specifications for the cranes. The company has been in the industry for more than 50 years and it has successfully controlled large markets especially in Europe where they have a market share of more than 50%. Megacorps' management is determined to improve its current performance. The is paper addresses various issues that the entity is facing and the applicable solutions to the challenges using the minimum cost and can achieve maximum profits. Also, it is essential to assess the competitive situation and the existing production systems.
The Competitive Advantages CMC
Companies use different strategies to outperform their rivals in the market. Competitive advantages allow an entity to make more sales and increase its profit margins as compared to other competing companies in the industry. There are various theories that describe the competitive advantages of a company. SWOT analysis and the Porters' Theory of competitive advantage are the most common theories that can describe the competitiveness of an entity and therefore, the theories are applicable in determining the competitiveness of CMC in the crane industry.
SWOT Analysis of CMC Company
The SWOT analysis is a framework that determines the internal and external factors that can enhance the competitiveness of an organization. The tool is useful in analyzing the main factors that allow a company to achieve its pre-determined goals, the main challenges it may be facing in accomplishing the objectives, the current situation and the future plans of the company (Speth, & Probert, 2015). This model will analyze the strengths, weaknesses, opportunities, and threats of CMC.
- Customers can easily identify the brand of the market due to its long existence in the market.
- The company uses technology to improve the quality of production.
- Customization of products enables clients to acquire products within their specification. This improves customer satisfaction.
- The entity controls a large market, especially in Europe.
- Customization of products enables CMC to remain the sole producer of the spare parts.
- The operating cost is high
- The lead time is lengthy
- Ability to increase the market size
- Production of high-quality products
- Improving the efficiency of the production process through the use of advanced technology
- Customer Low purchasing power due to the global economic crisis
Porter's Theory of Competitive Advantage
This model evaluates the strengths and weaknesses using the five competitive forces. The forces help to measure the level of competition and the profitability of the entity in the industry and they include; the level of competition, threats to join the market, the buyer's power, the suppliers' power and the availability of substitutes (Michaux, Cadiat, & Probert, 2015).
The Suppliers' Power
This force shows the extent to which the suppliers can influence the strategies of an organization. Various factors such as the number of suppliers in the market, the ability to switch from one company to another determine the power of the supplier (Michaux, Cadiat, & Probert, 2015). CMC can access materials from suppliers in Europe. Moreover, the company bargaining power is high because it purchases large amounts of goods and as a result, the supplier has a low influence on the decisions o the company.
The Power of Clients
This force determines the influence of the buyer in the decision-making process of the company. Factors such as the number of customers, their ability to switch from one product to another and the clientele base can determine the influence on the company strategies (Michaux, Cadiat, & Probert, 2015). CMC has a large number of clients who require high-quality cranes and parts. The clients have a high influence on the CMC strategic decisions.
Threats to Enter the Markets
The company's competitiveness can be influenced by the ability of new firms to join the market. When the process of acquiring the legal formalities to join the market and the amount of capital required can determine the strategic decisions of a company into the market (Michaux, Cadiat, & Probert, 2015). Entry into the crane manufacturing industry is not easy. This is because of the huge amount of capital required. Additionally, the companies brand can be recognized with ease and therefore entry of new products into the market cannot affect the demand for the companies 'products.
The Availability of Substitutes
The availability of close substitutes from competitors can be a threat to a company's products. In crane manufacturing industry there are no substitutes for cranes. Therefore, the threat entry is low (Case Study, 2018).
The Level of Completion in the Market
In any market, it is necessary to consider the number of competitors in the market. The competitors help to determine the strategies that a firm can use to maintain the competitive advantages in the industry. The number of companies operating in the crane industries is few due to the heavy capital requirements and as a result, the competitor power is fair.
The Current Position and the Challenges Available at CMC
The company has two categories of clients. There are buyers for small cranes and those that buy the large ones for shipyards, power stations, and merchandise yards. The departments dealing with product promotion has the mandate to take care of the requests and special orders from the customers. The company plies the a-b-c system to manage the stock. The system allows for outsourcing of the low valued products while the high valued products can be produced within the entity. The design department takes the responsibility of managing the production system and determines the lead time. Additionally, CMC may outsource some parts when the demand is high. The demand for the cranes is uncertain and therefore, the CMC uses the customization strategy. CMC has developed new technology crane in an effort to improve the effectiveness and efficiency of the cranes (Case Study, 2018).
According to stack (2016), efficiency the degree to which a system consumes the resources, while effectiveness is performing an activity in a manner that results to the client's satisfaction. At CMC, the labor expenditure is high because of a large number of manual activities in the firm and the slowness in the production system which was installed more than 20 years ago. Additionally, there are more work movements that require discontinuous production results in time wastage. Besides, due to long lead time, customer satisfaction may not be achievable and when the company is maintaining production of high-quality products (Case Study, 2018).
The production system is poorly designed. The structure has obsolete machinery and the flow of materials is not swift. Additionally, the old machines cannot work with the pace of the new model machines leading to a backlog. Moreover, the management system is not revised and it has more than 120000 items in the on the master file and most of them are not in use, and it does not have proper coding to allow for retrieval of information for unused products which can be reused for other purposes. .Also, the marketing department does not have an elaborate system to record the feedback. The ship loading unit is inconvenient because most components go missing on arrival of the ship and this causes problems during the assembly. The other issue that raises the eyebrows is on the productivity of the staff at the design department. They are over 20% of the total employees and the worst part of this situation is that they use obsolete software (Case Study, 2018).
Solutions to the Problems
At the moment the main responsibility of the marketing department is to identify the potential customers and ensure that they are supplied with the cranes and the spare parts. Normally, the customer relationship plays a significant role in the enhancing development of quality products and improving the image of the company. Therefore, CMC has the responsibility to collect information from the customers and analyze it get information on how to improve the supply chain, the design of the product and penetrating more into the market. When companies design products based on the first hand information collected from the clients, it enhances production of high products that generate customer satisfaction.
The main responsibility of this unit is to identify the materials that are need and the suppliers available to deliver materials to the firm. Efficiency in the supply chain would increase the production process and as result the cranes would be produced at low cost but of high quality. The firm ca reduce the expenses linked to the holding stock for a long time by streamlining the delivery of the inventory and it should avoid holding unnecessary stock in the store which possible because most of the products are customized and they cannot be re-used interchange-ably.
The core business of this department is to produce the cranes and spare parts that meet the demand of the customers. Design and production process take place in this unit. Large manufacturing plants normally use the automated machines n the production process. However at CMC there are more than 50 machine used in the production process but they are run manually. As a result, the company experiences long lead time and the chances of producing defective items are high. To overcome this challenge the organization must adapt to modern automated machines that enhance efficiency and high quality production.
The MRP system is one of the most widely used tools in the manufacturing sector
Material requirements planning (MRP) technique asserts that an efficient and effective must process be able to record the inventory off materials and other items used in the production system, it must identify the deficit of the materials and plan on the purchase of these products (Reid, & Sanders, 2015). The production management advocates that the m managers in an organization must ensure that they identify the blockages that have the negative consequences into the production system and thwart the bottlenecks from affecting the inventory and the expenses of the firm (Li, 2014). From the above description, CMC can adopt the MRP system and production management suggestions to enhance the cost reduction, increase the productivity, reduce the lead time and improve the quality of production.
Assessment of Existing Systems and Procedures
The production mechanism at CMC is unpredictable because the volumes of production depends on the demand of the products. In this matter, when the clients demand for the new models of cnes, the company is forced to buy additional materials for production that will meet the customer specification. Since the production on the cranes largely depends on the demand of the buyer, the company hardly produces finished goods . in this type of business operation it is not possible to make plans for the production system. For example, the company cannot delete some of the data from the master file, a majority of the cranes are have a specific model that can only meet a given buyer's needs and the reuse of the components is my not likely occur. In this case, the stock management models such as the economic order quantity are not applicable.
Speth, C., & Probert, C. (2015). The SWOT analysis: Develop strengths to decrease the weaknesses of your busin...
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