Ti-Tech

How does the company do order selection? What are the implications of the methods followed by the company?
Implications
Order Selection
Labor costs fluctuate, hence there are cost overruns

Marketing & sales made sure that the company was on bid lists Operations prepared the quote once a bid was received Marketing then modified quotes to reflect market conditions & corporate goals

Overtime by labor resulted in lower productivity and quality

Poor capacity resulting in poor reputation due to inability to meet large orders in the prescribed time Main reason why customers purchased from Tri Tech was quality which is being severely affected now

Criterias Similar job as done before Simple design Good payment terms Potential for further development Adequate delivery time Price not the primary factor in the customers decision

There is shortage of trained labor. This has caused stress and great strain amongst the existing labor which may spillover into a crisis some day
Due to overburden, there is immense backlog

There is poor coordination between Marketing and Operations

What would be your recommendations for a process for order selection in terms of criteria and from a strategic perspective?

New orders to be taken with the consideration that delivery schedules are not hampered Profit expected per projected shop floor hours required should be maintained optimally

They should be on the lookout for new opportunities that are available .They should keep adapting and building new capabilities. They should enter Market area which has potential for further development
Avoid excessive dependence on a single customer

The contracts with customers should not be fixed. During contracts with long duration ,the payment terms should be negotiable so that any change in labor or material costs can be accommodated. The company should concentrate on profitable growth

Outline the account management process at Ti-Tech? Critique the same and recommend corrective action.
Corrective Actions Separation of the responsibility of handling functions and accounts to reduce biasness and improve efficiency Demand from the different accounts to be communicated to Operations in a streamlined manner to evaluate and distribute resources Equal focus on building new accounts/manager along with handling the existing accounts Account managers to be in sync with the Operations to ensure that capacity and cost are correctly accounted while bidding

Account Management Process

Limited to a certain high revenue customers Close business and personal ties existed Top management individuals handled accounts with which they were most close Respective individual personally handled every bit of the business of the key accounts along with handling their principal role

Need for Account Management Pareto principle applicable i.e. a vital few customers making up a large amount of revenue Preference and existence of repeat customers Customization presence in the fabrication product line

Aspects: No clear role identity Conflicts of interest Too much focus on key accounts Lesser chances of risk diversification

How are pricing decisions made at Ti-Tech? What can Ti-Tech do to improve the pricing methodology?

Current Pricing decision priorities

Companys objective Operations standpoint Marketing standpoint
Companys objective to have COGS average 80%, with 85% the upper limit Overall contribution before SG&A expenses is near 20% of the products price Clients for whom price is not the primary factor in decision making

Scope for improving pricing methodology

Take into account cost of holding inventory and factor it into the price for projects which build-up huge inventories Progress payments reduce the working capital requirements and benefits can be passed on in the form of lower prices Target pricing methods keeping in mind the required rate of return on long term projects Differential pricing based on urgency of client need because of the ability to command premiums (Value based pricing) Determine space and man-hour capacity using existing constraints and determine the cost per unit capacity. Estimate costing by taking into account space and man-hours consumed along with a 20% buffer for SG&A and profits to arrive at the final price to customer.

Analyze Ti-Techs overall strategy and suggest corrective action, if any

Focus was considered as the key differentiator against its competitors and help them command a premium price Outstanding welding was USP and most welders had to be ASME boiler code qualified Lesser push to venture into new market and build newer accounts 20% of business could come by a single customer Non union operation Shop Current bidding process does not differentiate between material and labour

Focus on Quality Offering premium quality/services

More focus on nurturing existing accounts and markets

Lesser people focus

Corrective Action Keep Clear Missions: Stick with Quality as a differentiator or engage in Price wars Focus on risk diversification by venturing new markets and building new accounts Short term Mission/Goal formation e.g. Improving Delivery time, Increasing Key Accounts/ Standardizing Bidding process etc. Position as a pro-workers company by improving bidding process and unionizing labor force which would help it to gather competent labor