Parker Earth Moving Company Consulting:

Parker Earth Moving Company Consulting: Customer Needs and Operational PerformanceRead the scenario to complete the assignment outlined in the course syllabus. BACKGROUND INFORMATIONParker Earth Moving Company (PEMC) was founded by Zeb Taylor. The company is a producer of high-quality small earthmoving equipment used in the home and in the small-business landscaping industry. The company serves the international market, and one facility for manufacturing and distribution of its products is located in Reno, Nevada. PEMC has limited space for production and storage of inventory. Qualified personnel for production of premium small earthmoving equipment are in short supply, and training requires 11 weeks. The company has introduced a new personal and small-business navigational device called the Ultramover, which will sell for $129.95. Based on the market research conducted by the Marketing and Sales Department, first-quarter sales are forecasted to be 10,000 units (per month). CURRENT REVENUE AND COST STRUCTURE FOR THE ULTRAMOVER The company can produce 10,000 units per month by working two shifts per day, 5 days per week. Adequate storage space for 10 days exists for raw materials, work-in-process, and finished goods to support the forecasted 10,000 units sold per month. Lead time for ordering and receiving required raw materials and component parts (Work-In-Progress) is 50 days, which includes 5 days for transit. All raw materials and Work-In-Progress (WIP) come from small, specialized single source suppliers. Production time requires 5 days, and transit time averages 3 days. Production for the first quarter is scheduled to begin in 60 days. All orders for raw materials and work-in-process for the entire quarter have been placed. THE MARKETING AND SALES TotalPer Unit48.00Distribution and Storage22.00Sales and Administrative38.00Price per Unit$ 129.95All other cost categories equal $5 per unit, leaving a pretax profit of 13.04%.WORKING THE CHALLENGEThe president and CEO of PEMC is aware that the company needs expert assistance to get through this production challenge. Assume that your team is a team of industry experts for a reputable consulting firm that has been brought in to help solve the problem. Analysis of the situation reveals that you can add a third shift and work all shifts 6 days per week to get production up to 20,000 units per month. You must also rent an off-site facility to achieve this level of production. Initiation of this effort will increase total production costs by 62%. Through your contacts in the manufacturing industry, you have located two small manufacturing companies that can meet the 10,000 unit per month shortfall for the quarter. Subcontractor A requires 45 days to ramp up for production with a total production cost of $82 per unit. All other cost categories remain the same. Subcontractor B requires a 35-day lead-time with a total production cost of $88 per unit. All other cost categories remain the same. Quality standards can be met by each of the subcontractors.You are charged with meeting 30,000 units per month (or 90,000 units for the quarter) as your actual demand, even though the marketing department may have mistaken the demand target to only be 10,000 units per month (or 30,000 units for the quarter).As consultants and industry experts, your assignment is to prepare a written recommendation to the president and CEO on how to meet the production and sales requirement of 30,000 units per month for the first quarter while preserving the good reputation of the company and minimizing losses due to the faulty sales forecast.

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