According to Robbins et. al (2012), value chain management refers to a strategic business management process whereby a firm strives to improve the value for its customers cost-effectively in order to gain and sustain competitive advantage in its markets(Robbins et. al, 2012).This report provides an analytical account of the Key themes and issues within the case study, Southern Discomfort. The case study deals with the concerns of managing an organization that is facing the crisis.
The organization, Wisconsin Specialty Products Division of Lamprey Inc is a third-generation, unionized US manufacturing plant. The plant is facing an economic crisis; the cost of running the company was too high. The president of the company, Jim Malesckowski under the instruction of the of the Chief Executive Officer Jack Ripon needed to analyze the possibility of the company relocating its operation from the US to Mexico where the cost of labor was much cheaper. The management needed to analyze the cost of operations and assess how practical relocation would be.
The management had to put into considerations not only the operational cost but also the social impact and especially to the 520 employees. The report makes a comparison of the possible consequences that the company may face in the decision made.
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According to Robbins et. al (2012), the six requirements for value chain management include, organizational culture and attitude, co-ordination and collaboration, the employees, technological investments, leadership, organizational processes. The management has to put all these into consideration as they make the decision of the company’s future.
Issues and Problems
Wisconsin Specialty Products Division of Lamprey Inc is facing the following problems. First, operating costs are too high. The cost of paying workers in the US was US $16 – per-hour averagely. That significantly increases the production cost, which beats the logic for Value Chain systems, which bank on reduction of production cost for their profits.
Second, the union is extremely stubborn and not cooperative with the management request. They could not accept lower wages from the company. This is practical though because it is extremely hard for the workers to accept lower wages considering their cost of living. However, the union has no excuse to refuse the cell manufacturing approach, which would cross-train employees to perform up to three different jobs.
Third, the Company needs better return on investment. A higher production cost translates to higher lower returns on investment. Google, for example, is able to pay its workers extremely high wages because almost every web user uses their service. In turn, it has a greater market, which would be equal to large units of production, which lessens the cost of production. The Wisconsin Specialty Products Division of Lamprey Inc manufacturing plant, on the other hand, make exceptional apparel for persons suffering injuries and other medical conditions. Their production is in smaller units and, they can only make better returns if they have minimal production costs.
Lastly, the company may be having a threat from other companies. According to Jim; the competitors had already edged past Lamprey in terms of price and were dangerously close to overtaking it in terms of quality. This threat would mean less business or even closure for the Wisconsin Specialty Products Division
The management needs to consider several issues in their decisions.
First, the Business needs to consider the current environment of the company, in comparison to its potential environment in Mexico. The internal environment, which is the organizational culture, comprises of shared meanings. They include stories, rituals, symbols and language will undoubtedly shift, and a balance has to be reached.
There is the external environment. It includes the specific factors that directly influence achievement of the organization’s goals. The management should compare suppliers, customers, competitors, government agencies and public pressure groups in Mexico versus USA. There are also the General broad factors that the organization cannot control. These include Mexico labor union, government officials, the Mexican labor skills, culture, and other business competitors.
Secondly, the Cost issues face the business. Sometimes the operation costs are too high in a low labor cost country, and the cost saved by cheap labor must cater effectively for the other costs. Many organizations have to move their production to developing countries with low cost labors as a way to expand their business. The benefit of the company relocating to Mexico will be the lower productivity costs.
Third, there are Ethical considerations
Every organization is ethically responsible to their employees and the organization. The issues to consider when an organization needs to make an ethical consideration depend on its intensity. The issue intensity depends on Probability of harm, Greatness of harm- how many people, Concentration of harm, Proximity, Consensus of wrong, Probability of harm, Immediacy of consequences (Robbins et.al, 2012).
The Oconomo plant operated since 1921 with 520 workers’ working life and employment opportunities. The whole economy of the town of 9000 people
According to Robbins et. al (2012), the Obstacles for successful value chain management are Organization barriers Cultural attitudes, Required capabilities and people. The organization needs to look into the barriers of Cultural attitudes and People carefully as they move into a new region.
The People and their Cultural attitudes will change. The employees of Wisconsin Specialty Products Division of Lamprey Inc limited have been in the plant operation since 1921. This is in terms of location. They most probably feel as part of the company. This implies that their level of commitment and the willingness to work would be acceptable high. They have cultural attitudes functional in the environment. Mexico is a new region to conquer. The probability that people will be equally willing and committed to the company is uncertain. Their cultural attitudes may also affect the organization smooth running
In conclusion, if the External environment and the internal environments are accommodative and profitable for the company it is advisable that the company relocates to Mexico.
After the calculation and comparison of the cost of production, the most probable result us that it is cheaper to run the factory in Mexico.
After the thorough analysis of the stakes, the recommendations are as follows:
The Wisconsin Specialty Products Division of Lamprey Inc company should consider moving to Mexico. It should not consider the costing and the profit issues only, but instead have in mind the social responsibility and business ethics issues
However, for a business to consider its social responsibility it has to enable the make return to sustain both production and the business development. After the business relocates to Mexico, it is possible for it to save up to $15 million each year. Re-invest the immense savings from low-cost labors back into the plant will be a good idea. The organization may also consider Upgrading labor skills, training, and retraining workers. In their advent to Mexico, one of the issues they face is the cost of labor training and may probably need to have a substandard training.
In their advent to Mexico, the company may also combine jobs with cell manufacturing approach to increase productivity. In the U.S.A., they probably faced opposition because the organization had already established a culture and were resistant to change. In the new environment, however, they may have a choice.
The organization may also use the extra saving for Upgrade of facilities and equipment in the organization. They may also improve the quality of products, which will even help them counter competition. The organization has to consider long-term benefits and not short-term profits. They should consider the future of the company. The company should insure that there is security for investment in Mexico just as it had been in the U.S.A. since its establishment in 1921.
The company could also share the cost savings to benefit also Mexican workers by providing them with higher wages after productivity improves.
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