The Policy and Organisation for dealing with Small Orders in an Industrial Company

Abstract

The research described in this thesis was undertaken at Dunlop Limited, General Rubber Goods Division, Skelmersdale and concerned automotive braking components supplied to Automotive Products Limited. The majority of the sales revenue was generated by a small number of injection moulded components; the remainder was generated by those components which constitute the majority of the product range and were generally manufactured by compression moulding in small quantities. The large number of small order products represented an area of uncertainty for the Dunlop management; ae major objective of the project was to reduce this uncertainty. The problem was considered under three headings: the marketing, manufacture and costing of smell) orders. An investigation was undertaken to identify the significant differences between the high volume and low volume order markets. A survey Was made of industrial buyer behaviour literature end hypotheses generated predicting the behaviour of the Automotive Products purchasing organisation. The hypotheses were tested and an assessment made of Dunlop es 2 supplier. Alternative approaches to product pricing were evaluated end a pricing policy which related product price to the amount of customer tooling investment was developed. Small order manufacturing efficiency was examined and improvements suggested. A new approach to labour costing was developed and implemented. Subsequent investigations revealed that the existing standard costing system was not appropriate to the costing of small orders; an exercise was undertaken to forecast future demand for small order and derive standard cost budgets in order to assess the viability of small order manufacture. An interactive cost model of small order manufacture was also developed which enabled expected actual performance to be predicted. As a result of the investigations the company was recommended to continue small order manufacture on condition that some improvements were made. An attempt was then made to draw some general inferences from the study.