General

ACE AUTOMOTIVE CASE – Another View

Chukwunalu Analogbei Written by Chuks · 1 min read >

Abstract

A plant manager must decide which contracts to take for his casting-press operation and the price to bid on a new GM water pump. In the process, jobs must be scheduled in regular time, overtime, and outsourcing, and the plant manager must consider uncertainty in volumes, costs, available uptime hours, and the uncertainty about winning the contract bid, which depends on price. Two student spreadsheet files are available for use with this case.

ACE AUTOMOTIVE

Bruce McCullough, president of Ace Automotive and plant manager of Ace’s St. Peters, Missouri, plant, stood on the stairway leading to the mezzanine offices in early March 1991 and gazed at the plant’s machine shop. The machine shop expansion was on schedule and nearly complete, and now McCullough had to deal with capacity restrictions in the foundry. He hoped to expand the foundry someday, but he now had to focus on a more immediate task. By the end of the day, he had to put the finishing touches on an important sales quotation.

Company Background

Ace Automotive was one of four divisions of Spartan Industries, Inc. Like its sister divisions, Ace was a supplier to the automotive industry. Its product lines included water pumps, fuel pumps, oil filter adapters, and exotic brackets for automotive applications. Other Spartan divisions were: Spartan Tool and Die, a supplier of specialty precision stampings; Guardian Rubber, a supplier of structural rubber products; and Viking Electronics, a supplier of automotive switches and electrical components.

Spartan Industries acquired Ace in 1987 from McCullough, who agreed to stay on as Ace’s president and St. Peters’ plant manager. Spartan management had been interested in diversifying into casting and machining but was also impressed with Ace’s cost competitiveness, reputation for quality, and customer base. In addition, Ace was Viking Electronics’ preferred supplier for machined castings for use in alternator assemblies.

Important Definitions

A machine shop is a place for machining (i.e. shaping of metals (part details) with machine tools)

A foundry is a place for casting metal (i.e. pouring metal (parts and part housings) into a shape and removing once solid)

A sales quotation shows the cost of goods to a buyer

An original equipment manufacturer (OEM) is a company that makes a part or subsystem that is used in another company’s product.[1] For example, if Acme Manufacturing Co. makes power cords that are used on IBM computers, Acme is the OEM.

An assembly area is a place used for collecting and combining parts into complete units

A die-casting machine is used for forcing molten metal into a mold cavity under high pressure.

Press tonnage is the force exerted by the press against the molten metal in the die.

  1. STAKEHOLDERS PGC
    1. Bruce McCullough
      1. DECISION 1: Decide which contract combination to pursue 1992 and which presses to use that will optimize profit:
        • Continue the Chrysler contract, bid on the HV6 using the 800/1,000-ton presses, and forego Laclede
        • Keep both Chrysler and Laclede contracts and cast the HV6 on the 800/1,000-ton presses while using overtime or outsourcing
        • Run both Chrysler and HV6 on the 400/500-ton presses, with Laclede
      1. DECISION 2: Decide on the price for the HV6 water pump

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