Case 1: CUSTOM FABRICATORS, INC.

How does Ben Lawson’s Custom Fabricators, Inc., create value for Orleans?In the past, what has been Ben Lawson's competitive advantage in keeping the Orleans business?

The strong customer relationship of Custom Fabricators, Inc. (CFI) with Orleans Elevator (OE) has strengthened over the years, giving CFI competitive advantage in terms of cost leadership, differentiation and response as summarized below:

Cost Leadership OE provides CFI with raw materials from its Bedford plant Bedford plant is located in close proximity with CFI keeping transportation cost minimal A tax break was granted to CFI in acquiring its building making production inexpensive CFI has maintained a group of loyal and satisfied employees, thus, a minimal labor turn-over if

any With OE’s production schedule given to CFI, the need to maintain inventory is reduced

Response CFI has set up a very efficient process for fabricating exactly what OE plant needs for bracket

and panel with very little lead time Custom fabricated motor housing and control panel are shipped directly to OE’s site where

the elevator is being assembled Location of supplier is near and any problems with raw materials is addressed immediately

Product Differentiation CFI knows exactly what the plant needs based on OE schedule Modification of specific need of a particular elevator order is easily done

These same strategies mentioned above is what created value for OE as well. CFI assured OE of quality customized products, frequent and reliable delivery of inputs needed by OE’s elevator assemblies and reduced inventory space, which ultimately translate to lower costs for OE.

Have Orleans' priorities changed?Should Ben change his business model?How should Ben position his company in the value chain?What should Ben do to ensure his company's future success?

However, these advantages are threatened to be irrelevant with OE’s shift of priorities. OE is now trying to further reduce its costs associated with elevators, particularly the cost of raw materials, by adopting an online auction method through FreeMarkets. In this auction, the winning bid was 27% lower than OE’s current contract with existing suppliers.

With this threat at hand and given OE’s shift in priorities, there is a need for CFI to also change its business model in order to maintain its competitive advantage and to ensure future success of the business. To achieve this, the group reviewed CFI’s critical success factors and core competencies in operations and used the same as basis in recommending strategies to Ben Lawson:

Critical Success Factors Core Competencies

Product Diversify products to cater to a variety of customers

Quality Continuous improvement in the product design and operations with the use of modern technology. Set a proper company standard whoever is the client, it should be the company’s signature.

Logistics Open other shops in strategic areas possibly near other customers; Ensure inbound and outbound logistics are reliable to maintain competitive advantage in terms of high response time

Human Resource Maintain employees with the excellent craftsmanship and train newly hired employees to maintain the quality of work that they are known for; ensure their loyalty to maintain low labor turn-over rate,

RECOMMENDATION:

Shift to contract manufacturing. This means instead of producing outputs only when OE needs it, CFI would now have a fixed production per month that they would need to deliver. This would answer the possible transportation problems by outsourcing raw materials from Mexico. Nevertheless, CFI should guarantee the quality of its products and respond effectively with OE’s various needs in terms of customized product designs and modifications to maintain competitive advantage over other suppliers who can offer the same service.

Diversify products and expand market. CFI should diversify its product line by introducing other fabrications for other products used in construction machineries, digital instruments and industrial automation in varying industries. By partnering with potential suppliers, capitalizing on their modern technology and talented employees, CFI will be able to diversify their final product making them more marketable to other customers.

Innovate. CFI could try to develop new designs and products to cater to new markets.

Strongly improve and promote their strengths. CFI should invest in improving their best products and should give more focus in promoting or advertising the products. This would help CFI be known as the best or one of the best in their industry.

Seek more customers. Having a good relationship with OE does not have to limit CFI in expanding its business and look for other customers. The key here is to seek for customers where CFI can duplicate the strategies it implemented with OE. They should establish a good marketing and advertising department to introduce their products to potential clients. Inbound and outbound logistics should be given importance to ensure high response time with both suppliers and customers.

Invest in technology development. Given CFI’s success in incorporating modern technology in its design and operations, changes in technology can impact competitive advantage by incrementally changing the activities themselves or by making possible new configuration in the value chain. Investing in information technology could also help CFI enhance communication needs with possible Mexican suppliers of OE.

Submitted by:

Group 4

Arcedo, Lloyd

Ladja, Johnraja-Zaid M.

Mendoza, Sheila Mozenda C.

Pangilinan, Jayson E.