FABTEK
Background
Fabtek, one of the first companies to provide titanium products for industrial use, has a fabrication division which is the second largest industrial fabricator of titanium in the industry. The company is currently facing shop backlog and delivery times have increased from 8-10 weeks to 16-60 weeks. Some employees of the company were of the opinion that customers continued to place orders with Fabtek in spite of the delays and backlog, because of the quality.
The company is now faced with four orders of which they have to choose one to make a bid. Choosing more than one for bidding is not a feasible option since the added volume from any one of these orders will affect metal purchases and Fabtek’s limited facility size will make overtime or a third shift impractical and also because there will be no room to store work in process.
The criterion that operations would consider while making a bid include a technically challenging job in which the company’s engineering expertise is utilized and a job that is long run and repetitive. It would also be preferable to have progress payments that can be negotiated, for labour and materials. Marketing would look at criterion that includes a job that involves simple design, reliable cost estimates, and one that Fabtek is familiar with and which falls in an area that has market potential and allows for adequate delivery time. Negotiable progress payments on labour and materials, is again, a criterion.
The Options
The first order request is from Refco, Fabtek’s single largest customer, contributing 15 to 20% to Fabtek’s revenues. Fabtek is the only outside titanium fabricator in the world that Refco has used or uses, but Refco has been unhappy with the long delivery sc ...