TI-TECH (A)Group 6

QUESTION 1

ORDER SELECTION

CRITERIA FOR SELECTION BY DEPARTMENTS

• Job is challenging and fits Ti-Tech’s capabilities• Job is long run and competitive and job scope is clear

and company has prior experience with same• Overall contribution before sales, general and

administrative expenses is 20% of product priceOperation

s

• Job must be similar to what Ti-Tech had done before• The design is simple and the cost estimate reliable• The job has good payment terms• The market has future scope and adequate delivery

time• Price is not the primary factor in customer’s decision

Marketing

PROCESS OF JOB SELECTION

(Marketing Dept)Get Ti-Tech on the bid-list of potential customers-Get The Request for proposal (RFQ)

(Operations Dept)Used estimators to estimate the duration for completion and delivery date

(Marketing Dept)Modification of the quote to reflect market conditions

IMPLICATIONS BY THE METHOD FOLLOWED

No job diversification

Lead time increases by intra departmental

verification and estimation process

Quality over price doesn’t satisfy all

customers

Progress payments wanted to focus more

on labor costs to meet labor requirements

QUESTION 2

ORDER SELECTION – RECOMMENDATIONS

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

QUESTION 3

ACCOUNT MANAGEMENT

Account Management Features at Ti-Tech

Sales managers handled both fabrication sales and metal sales

Staff with close relationships with customers handled accounts personally

Most of the management people handled 2-3 functions including sale

Sales along with marketing made sure that Ti-Tech is on the bid lists

CORRECTIVE ACTIONS Customer Hendricks represented for 15-20% sales each year Two other companies accounted for 10-15% sales

As per organizational chart no Key Account Manager was allocated for these accounts. Marketing Dept. was handling these accounts.

Hence the organization structure should change to incorporate key account managers

Project budget estimation for key accounts should be done with higher markup on labor As these are time consuming projects, the uncertainty in the labor

costs have direct impact on the bottom-line

Order processing in Marketing and Operation dept. not in sync Operations wanted technically challenging work and marketing wanted

job similar to what ti-tech had built before. Tie both the department’s goal to lifetime value of customer. By

accepting the order how the customer can be retained and increase subsequent business for the company

PRICING DECISIONS

QUESTION 4

PRICING TILL NOW

Cost + basis Two estimators – calculate the cost of

manufacturing

COG – 80-85%

Contribution before S,G&A – 20%

SUGGESTIONS FOR IMPROVEMENT

Shift to Value Based Pricing

More aggressive for first-time customers / new market opportunities

Robust system for Competitor Analysis

Target Pricing for Standard (Proprietary) Line of Products

OVERALL STRATEGY

QUESTION 5

OVERALL STRATEGY

• Alleviate pressure due to erratic pricing and market conditions• Ti-tech will be future proof and can’t be held to ransom

Explore newer industries and diversify portfolio(Max 20% and 30% from a player and a market respectively)

• Most key accounts were based on relationships with certain employees• Required specifically for custom made jobs

Focus on maintaining close relationships with clients

• Reduce expenditure in certain heads viz. manufacturing overheads et al

Attain COGS average of 80% with upper limit of 85% without jeopardizing quality

• Pick and choose bids which are likely to be fruitful

Improve the Bid Success Rate from 15%

• Synergies in manufacturing processes and cost allocations• Ease of training and maintaining workforce• Creating a sales force that can augment current business

More Involved in proprietary contracts rather than custom made contracts

STRATEGY BEHIND JOB SELECTION

• Technically Challenging job

• In sync with Ti-tech’s high image quality

• Repetitive job and long run job

• Experience with similar products

• Progressive payment• Overall contribution

before sales, general & admin expenditure near 20%

• Specifications and job scope clear

Operations

• Job similar to what Ti-tech had been doing

• Design Simple and cost estimate reliable

• Progressive payments etc.

• Market area has potential for further development

• Leeway on delivery time

Marketing

Marketing and Operations are not kept in sync as a result inefficient order processing ensues

RECOMMENDATIONS

Pick up jobs which leverage Ti-tech’s technical expertise

Have more synergies between the operating and the marketing teams for efficient working

Don’t put too much pressure on the operations team to trim down the costs

Don’t put too much emphasis on the bid success rate

Continue with quality orientation rather than volume orientation