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  • Ak. Man Lanjutan (Bridgestone)

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    Ahmad Ali Akbar Aslamy
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    Bridgestone Industries is a major automotive component supplier that was facing rising costs and competition. In the 1980s, one of its plants closed due to high oil prices and an ineffective outsourcing strategy. To improve performance, Bridgestone hired a consultant who classified products into three categories based on their cost position versus competitors. Products in the highest cost category were outsourced, like mufflers and oil pans. This reduced headcount but also profit margins. An analysis of overhead rates and projected budgets recommended keeping manifold production in-house despite competition, to avoid decreasing profits from 28% to 21% of sales.

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    Bridgestone Industries is a major automotive component supplier that was facing rising costs and competition. In the 1980s, one of its plants closed due to high oil prices and an ineffective outsourcing strategy. To improve performance, Bridgestone hired a consultant who classified products into three categories based on their cost position versus competitors. Products in the highest cost category were outsourced, like mufflers and oil pans. This reduced headcount but also profit margins. An analysis of overhead rates and projected budgets recommended keeping manifold production in-house despite competition, to avoid decreasing profits from 28% to 21% of sales.

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    © All Rights Reserved
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    9 views9 pages

    Ak. Man Lanjutan (Bridgestone)

    Uploaded by

    Ahmad Ali Akbar Aslamy
    Bridgestone Industries is a major automotive component supplier that was facing rising costs and competition. In the 1980s, one of its plants closed due to high oil prices and an ineffective outsourcing strategy. To improve performance, Bridgestone hired a consultant who classified products into three categories based on their cost position versus competitors. Products in the highest cost category were outsourced, like mufflers and oil pans. This reduced headcount but also profit margins. An analysis of overhead rates and projected budgets recommended keeping manifold production in-house despite competition, to avoid decreasing profits from 28% to 21% of sales.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 9

    Akuntansi Manajemen Lanjutan

    Business Case: Bridgestone (Robert S. Kaplan


    and Robin Cooper (1999)
    Bridgeton Industries: Automotive Component &
    Fabrication Plant
    Background:

    Bridgeton Industries is a major supplier of components for the domestic


    automotive industries.

    Bridgeton Industries sells components such as fuel tanks, manifold, front and
    rear door, and oil pans
    Bridgeton Industries: Automotive Component & Fabrication Plant

    Case :

    - In 1985/86 closure/shut down of the factory owned by Bridgetown Industries


    Automotive Component Fabrication Plant (ACF Diesel Engine Plant) due to rising oil
    price and outsourcing strategy that turn out to be ineffective for the company’s
    effectives
    - Competition from outside and inside of the company
    - Management think The plant isn’t competitive

    How :

    how to improve performance management cost by Bridgeton is to use the services of a


    consultant and create a new cost strategy.
    Strategic Analysis
    Consulting firm classified their products into 3 classes:

    - Class I: cost equal or lower than competitor’s manufacturing cost


    - Class II: cost 5-15% higher than competitors manufacturing cost
    - Class III: above cost 15% higher than competitors manufacturing cost

    Four criteria were used to classify their products:

    a. Quality
    b. Customer Service
    c. Technical Capabilities
    d. Competitive cost position
    Product Outsourcing
    - Outsourced products from 1988/9: muffler-exhaust system and oil pans.
    - Due to outsourced products, company cutback on 90 employees
    Overhead Rates
    Comparison
    Overhead Rates Comparison
    Gross Profit Margin (%)
    Projected Model
    (outsourcing
    manifolds)
    Based on projected budget,
    we recommend not to
    outsource manifold.
    Bridgeton Industries: Automotive Component & Fabrication Plant
    Recommendations :
    1. We would not outsource manifolds, based on projected budgets. We see the decreasing of profit as percentage of sales from 28 % to 21 %

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