Albatross Anchor Proposal

Topics: Costs, Manufacturing, Variable cost Pages: 6 (1658 words) Published: January 3, 2012
Processes and technologies have many variables; planning, analysis, designing and innovations. Albatross Anchor needs to become more effective with the opportunities and challenges in its operating environment. Albatross’ operating system must be capable of producing quality products (anchors) that are n demand within a time frame that is acceptable to the industry. Question One

Based on the information presented in the scenario/case study discuss Albatross Anchor’s competitiveness in relation to (please address all items in the below list and provide support for your conclusions): 1. Cost

a) Cost or Production:
The first issue that needs to be addressed is; how much of the fabricating of the anchors could be outsourced? Albatross, a vertically integrated company has an antiquated and technology-deprived plant as well as non-compliant on safety and environmental issues. The factors that can make outsourcing desirable to Albatross Anchors are quality and speed. Quality, which is “standardization of parts, supplier certification, and supplier involvement in design can improve the quality of supplied parts.” ( Speed of the supplier can produce the components quicker, with adaptability, flexibility and reliability then this is a time benefit for outsourcing. Albatross Anchors is lacking the production capabilities to output products in relation to the industry and customers demands. Outsourcing would be a benefit to the production of the customized and specific anchors and a valuable asset to put into action and still be able to keep the competitive edge. Albatross’ ability to produce the anchors on a larger scale with fewer, less expensive costs needs to be implemented. Technology, specialized trained employees and bulk purchasing are factors that contribute to the economic scale. An investment in specific technological production techniques would give Albatross more of a competitive advantage over other “anchor” companies. Increasing production efficiency would allow Albatross to reduce the company’s expenses. Reduced expenses means more cash to spend on operational expansion. Experienced and a specialized skilled labor force would improve Albatross Anchor because the more skilled workforce the more capable workers would be to complete complex tasks. Albatross could hire more skilled labor force to reduce the workforce for their competitors. The advantage of a more highly skilled workforce is to improve the economies of scales because they could produce more anchors in less time.

b) Economies of Scale:
The ability to grow and expand would lead Albatross to purchase materials in bulk. Bulk purchasing would allow Albatross Anchor to benefit from a reduced average cost per unit. “Economies of scale refers to the decreased per unit cost as output increases. More clearly, the initial investment of capital is diffused (spread) over an increasing number of units of output, and therefore, the marginal cost of producing a good or service decreases as production increases.)” (

c) Cost of Raw Materials Sitting Idle in the Warehouse: d) Cost of Finished Goods Sitting Idle in the Warehouse: To stay competitive, Albatross needs to implement the “Just-in-time” inventory control system. This system identifies that a “finished product should be produced just in time for delivery and the raw materials should be delivered just in time for production.” ( The “Just-in-time” system is used so materials and goods never sit idle for extended periods of time. If products or materials sit for long periods of time in warehouses, Albatross is wasting money and valuable space. Inventory management is another key factor for the success of Albatross Anchors. If Albatross wants to maintain an effective inventory of their materials, regular maintenance needs to be a priority. Inventory maintenance on a regular basis needs to 1)...

References: Evans, J. (2005). Total Quality Management, Organization, and Strategy, (4th Ed.). Thomson,
Wilson, Dennis R (2004, March 22). Outsourcing Production and Jobs: Cost and benefits.. Retrieved May 10, 2011, from
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