 |
 |
 |
 |
|
 |
 |
the company had seen the average price of its submersible orders drop over the last 5
years, while prices for valves and general engineering had risen, though general
engineering remained more competitive than the valve sector on price. The trends in the
three areas are in Table 10 in Appendix A.
With the growth in foreign business, Burke had become increasingly vulnerable to foreign
exchange movements. Most Third World contracts were quoted in dollars and this had
meant that the company had had to cope with the increasingly volatile exchange rate.
Burke had encountered additional problems with such orders during the last 5 years, as 3
contracts had been cancelled at a late stage, involving substantial write-offs.
Work had to be quoted in the relevant currency for European customers, with the added
complication of providing CIF (carriage insurance and freight) prices to the overseas port
of destination. The failure of Burke to accurately cost freight and other elements in such
pricing had been another worry in many of these contracts. However, such European
customers had not caused significant payment problems: a major issue with submersible
contracts with certain non European clients. A further problem that the firm had
encountered during the past five years had been the continually changing prices of raw
materials.
The company had tended to buy large quantities of raw materials, especially metals, at the
top of the market, with the result that the costs of the finished product had been
considerably higher than would have been the case if a more effective buying policy was in
place. Recently, the company had moved to a policy of spot purchases because of cash
constraints. With fluctuating metal prices this had also reduced margins on many of the
long term contracts in which substantial quantities of metal were involved. particularly in
submersible production.
Personnel and Production Resources
You have completed separate analyses for the various areas of the company. This has
taken the form of commenting on each area of company activity itemising the staff skills in
each sector, their cost to the company (including wages and all other costs per annum),
and the floor space that they occupied. These details are in Table 11 in Appendix A. You
have also prepared a separate chart identifying the management staff reporting to each of
the various directors and their level of expertise. This is included as Table 12 in Appendix
A.
Design. At Burke Engineering, the production process involved Marketing and Sales
providing the Technical Director and his staff with a series of technical specifications from
the customer for particular applications. Then, the Technical Director asked his design
team to translate these requirements into specific designs. Costing would be handled by
the Production and Finance Departments, and then passed back to the Sales (and
Marketing department for final verification and contact with the customer. All designs were
produced manually and had to undergo a rigorous period of checking by management
before they could be approved.
The average time for creating a drawing could vary from a basic 7 days for the most
simple operation to around 20 for the most complex, which would involve a number of
staff. Burke's main competitors in its areas of operation had now installed computer aided
design systems. You realise that the company has become increasingly un-competitive in
this area. The Technical Drawing Office was in the factory complex, whereas the Product
 |