In December 1998, Glen Fell, President of Fell-Fab Products (FFP) of Hamilton, Ontario, was preparing his response to North American Airline (NAA), one of FFP’s important aircraft interior customers. Two months earlier, NAA had asked FFP whether it was interested in taking over complete management of NAA’s interiors. Although the proposal was financially promising, it represented a significant departure from FFP’s traditional business of interiors manufacturing. Now, after considerable study and discussions with NAA, Glen had to decide whether to FFP should accept the offer and, if so, how to implement it.
FFP was a family owned firm founded in 1952. Headquartered in Hamilton, Ontario, with plants in both Hamilton and Atlanta, its core business is the manufacturing of engineered textile products into specified patterns. Interior coverings account for 75% of its business, and a mix of other products ranging from military tents and vests to parts of microwave receiver dishes account for the remaining 25%. FFP seeks to diversify and expand its current business. The company considers tight materials management, communication with customers, and its ability to react quickly through manufacturing flexibility and technology to be among its core competencies. It also accredits its strengths in manufacturing to its experience, consistent product quality, and design capability. FFP has produced of interior coverings for NAA since 1965. Sales to NAA have increased throughout the years, and it currently supplies 35% of NAA’s cabin interior purchases. FFP’s annual revenues are approximately $27million. Despite success in managing its current internal production processes, the company experienced a 100% failure rate with its acquisitions, all of which were in the manufacturing industry. These failures were attributed to lack of experience in the companies’ differing production processes and FFP’s lack of knowledge on increasing the products’ sales; a serious factor worth considering as FFP proceeds with their decision of whether to accept NAA proposal.
FFP serves a wide range of customers: 60% of sales are to the airlines, 15% to bus and railway lines, and the remaining 25% is divided among aerospace organizations, government, material handling, packaging, and industrial sectors.
Companies which manufacture aircraft interiors for the North American market tend to be small. Competitors include a subsidiary of a textile mill, a producer of the entire airline seat, and a company which combines interiors replacement with cleaning. It is estimated that FFP captures about 20% of the Canadian market share. Most buyers are hesitant to single source with the members of this industry.
Key stakeholders include NAA management; the employees who perform the tasks to be assumed by FFP, and NAA members who would be required to transfer knowledge of the current system. Key stakeholders at FFP include management; employees who work with the production scheduling and contribute to the finished goods; and any new staff employed by FFP for the aircraft interiors business at NAA. These are the stakeholders that would be affected by the current decision that has to be made.
Manufacturing versus Services
Traditionally a manufacturing organization, FFP has worked over the years to align its manufacturing processes with the needs of its customers. It has realized growth in manufacturing, and has also taken steps to diversify its product line (25% of production is non-interiors). At this point, its experience in service has been limited to sales of its products and supporting the design processes of certain customers.
The NAA Offer and Discussion of FFP Alternatives
Fell-Fab Products (FFP) has been approached by Northern American Airlines (NAA) with an opportunity to assume complete management of the airline’s aircraft interiors business....
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