Custom Fabricators, Incorporated Case Study Since its release in 1994, the North American Free Trade Agreement

(NAFTA) has impacted the manufacturing sector in the United States. Manufacturing organizations such as Custom Fabricators, Inc (CFI) have been forced to find ways to cut costs to remain competitive. In the United States, NAFTA has contributed to the reduction of employment in high- wage traded-goods industries, growing wage inequality, and a steady decline in demand for workers without a college education. The majority of the net jobs displaced were in the manufacturing sector. Growing trade deficits with Canada displaced 270,248 manufacturing jobs while growing deficits with Mexico displaced 388,682 manufacturing jobs, for a total of 658,930 manufacturing jobs displaced (64.9% of the total) (Scott, Salas, & Campbell, 2006, p. 1). Figure 2 displays job losses per state. Custom Fabricators, Inc. CFI is a non-union shop with loyal employees, and low employee turnover. CFI started by providing sheet-metal elevator panels for Orleans Elevator in the 1980s. Since that time CFI's role with Orleans has grown due to Orleans policy with regard to outsourcing. Not only does CFI produce panels, but CFI also provides the entire panel assembly, which includes the electronics, the elevator motor assembly, and several custom brackets and other machined parts for Orleans. CFI and Orleans have developed a close partnership. Orleans provides CFI with elevator forecast data, which CFI uses to assemble components to support the forecast. CFI ships the components directly to the work site. Orleans parent company, United Technologies Corporation (UTC) has recently decided to implement the FreeMarkets Internet Purchasing system. This system works as an onlineauction. Orleans enters data with regard to purchased parts and assemblies, and other companies bid on the jobs. Orleans invited Ben Lawson, CEO of CFI to a recent auction. "For Ben Lawson what was most interesting was to observe the auction for some parts that he used at his plant" (Chase, Jacobs, & Aquilano, 2004, p. 45). A Mexican facility had bid on some of these components and Lawson was concerned with how he would deal with a Mexican supplier. Distance and language barriers were of special concern to him (Chase et al, 2004). Operations Management at CFI "Operations management (OM) has been a key element in the improvement in productivity in businesses around the world. Creating a competitive advantage through operations requires an understanding of how the operations function contributes to productivity growth" (Chase et al, 2004, p. vi). The OM role at CFI is there to provide "a systematic way of looking at organizational processes" (Chase et al, 2004, p. 6). OM provides a business plan which includes methods to improve quality, lower costs, and improve the effectiveness and efficiency of operations. The OM strategy is constantly updated to change with current business and economic trends, the changing marketplace, and technological advancements. How does Ben Lawson's Custom Fabricators, Inc. provide value for Orleans? CFI provides value to Orleans because of the close partnership of both companies. CFI is able to provide several components and whole-assemblies to Orleans by use of a schedule forecast. CFI also ships the components and assemblies directly to the worksite. This working relationship allows Orleans to spend more time engineering elevators and less time

monitoring one of its key suppliers (Chase et al, 2004). In the past, what has been Ben Lawson's competitive advantage in keeping the Orleans business? Prior to Orleans transition to a just-in-time and lean manufacturing system, CFI was able to maintain its competitive advantage because of its location near the Orleans facility. CFI also invested in new machines to improve the processes used to manufacture components for Orleans. Another advantage, now and in the past, is employee loyalty. CFI pays its employees well, which has reduced turnover. This allowed CFI to consistently deliver quality products to Orleans (Chase et al, 2004). Have Orleans' priorities changed? Orleans priorities have shifted to outsourcing more work. Orleans is interested in receiving whole sub-assemblies rather than components. Orleans currently manufactures some of the large sheet metal parts and light fixtures for the elevators. Orleans is leaning more towards an engineering firm and away from manufacturing (Chase et al, 2004). Should Ben change his business model? CFI should change its business model to maintain its competitive advantage with Orleans. Because of Orleans interest in outsourcing and NAFTA, CFI's relationship with Orleans could change. CFI should consider outsourcing to other suppliers and countries to reduce costs and investigate potential technologies to help improve the efficiency of its manufacturing processes. CFI should also look for other companies to partner with. How should Ben position his company in the value chain? CFI should remain a Tier One supplier with Orleans. This puts CFI in the position to continue its close partnership with Orleans. CFI already acts as a warehouse and distributor for Orleans which further strengthens its position in the value chain. Figure 3 provides a visual image of a typical manufacturing value chain. Figure 3 Schematic of Typical Original Equipment Manufacturer Value Chain Note: Retrieved from Chase, Jacobs, & Aquilano, 2004, p. 7. What should Ben do to ensure his company's future success? CFI should continue to change Operations Management strategies to improve the efficiency and effectiveness of current processes. The current business model should be examined and changed to improve CFI's position within a global market. CFI should also continue to work with Orleans and look for other companies to partner with. Executives at CFI should also investigate the need for more capital investments. New technologies may reduce fabrication time, reduce costs, improve quality, and provide more quality to Orleans and other customers. Lastly CFI should consider outsourcing assemblies to other suppliers, including foreign suppliers. Although, this may have a negative effect on the current employee base, it may improve overall costs and competitiveness. Summary The affects of NAFTA and global outsourcing to manufacturing companies within the United States have caused companies such as CFI to make changes to business strategies to remain competitive. These changes may require difficult decisions with regard to employee cuts

and relocation of facilities but are necessary to remain in business. OM at CFI and other companies, must constantly examine potential threats and opportunities, and make improvements as required. These changes will ensure the company's position in the global marketplace. References Chase, R. B., Jacobs, R., & Aquilano, N. (2004). Operations management for competitive advantage (10th ed.). New York: McGraw-Hill. Retrieved February 23, 2007 from University of Phoenix, Resource, ISCOM/471 Operations Management Web site: https://ecampus.phoenix.edu/secure/resource/resource.asp Scott, R. PhD, Salas, C., Campbell, B. (2006, September 28). Revisiting NAFTA: Still not working for North America's workers. Retrieved March 23, 2007 from www.epi.org

Custom Fabricators, Inc. Case Study With the constant change in demand, businesses must consistently review various strategies, customer needs and core competencies to determine all are in align with the company purpose and mission. Manufacturing companies are endeavoring to be order winners in the various markets today. They must differentiate between the competition and core competencies in a very challenging economy. Custom Fabricators, Inc has been the primary manufacturing company for Orleans Elevator since the late 1980s. This partnership with Orleans began with manufacturing the control panels for elevators. Now with the concept of outsourcing, the manufacturing company provides more than just parts, they provide whole subassemblies, entire control panels and elevator motor housings. The CEO, Ben Lawson, advises he was in the right place at the right time when Orleans got into just-in-time and lean manufacturing (Chase, Jacobs and Aquilano, 2006, p. 45). Just-in-time manufacturing is the methodology which dictates that resources, labor, parts and equipment are produced as needed and in the quantities required. This insures that Orleans gets their exact items at the correct location when needed. With this system, there is no need to stock inventory, which would assess costs to the company. This philosophy provides for the elimination of waste, and increases productivity, performance and quality while reducing costs (Heizer and Render, 2007, p. 201). The partnership between both companies has been very companionable. Orleans Elevator, a subsidiary of United Technologies, provides Custom Fabricators with a monthly schedule and all products are made to order and delivered either to the nearby Orleans plant site or directly to the construction location. Custom Fabricators creates value for Orleans by delivering quality and great service with the speed, reliability and flexibility of the manufactured items they produce. Custom Fabricators, Inc does most, if not all, of its manufacturing business with Orleans. The manufacturing company is fortunate that Orleans purchases all needed raw material so

costs to Custom Fabricators is limited to land lease, the plant, equipment and employee costs. This allows for revenue margins to maintain at approximately 30 percent. This prosperity is transferred to the Custom Fabricators employees who have shown their loyalty through increased productivity as business increases. Employee satisfaction has enhanced the companys reputation of quality and timely products. How does ben lawsons custom fabricators create value for orleans? They have setup an efficient process for fabricatingexactly what the plant needs with very little lead time. Orleans need not verify the quality of the motor housingand Ben does it perfectly for Orleans. They make the subassemblies instead of providing theindividual parts. What has been ben lawsons competitive advantage in keeping the orleans business? The location of Ben Lawsons plant which is close to theOrleans elevators. They have built a very good relation with Orleans over the years, providing them quality products. Ben has a very loyal group of employees that ensuresthat he remains competitive. Have orleans priorities changed? They are trying to outsource the manufacturing process.Initially they were obtaining the fabricated parts andassembly the entire unit. Now they are trying to procuresubassemblies. They are trying to reduce the costs

Should Ben change his business model? Yes, he should change in order to become morecompetitive.-He should try backward integration. Procure the rawmaterials himself and supply the fabricated products toOrleans.-Orleans seems to be moving towards outsourcing theentire manufacturing process. He can take up themanufacturing How should the ben positiion his company in the value chain? They can position themselves as a manufacturing unit. What should Ben do to ensure his companys future success? He should adopt strategies that will make him competitivewith the times.Like changing to a manufacturing unit.He can also reduce his costs either by reducing theemployee costs or by procuring the raw materials himself so as to supply his goods at a much lower price than whatadvantage the Mexican suppliers can give them