Contents

• This essay is based on the following case study –
• Race-Tuned Extractors designs and manufactures custom-made high performance automotive extractors and exhaust systems for the Australian motor racing industry and the automotive aftermarket in Sydney. The business was established by two part-time motor-racing drivers in 1994. Pierre Martel was an automotive mechanic by trade and John Gambini was a mechanical engineer. The business operated originally in Homebush, but relocated to Blacktown prior to the 2000 Olympic Games. Whilst the move created some marketing issues, the new premises were almost twice as big as the old factory in Homebush, giving the firm much needed room to grow.
• The company was originally conceived to supply specialty exhaust and extraction systems to the motor racing industry, but as Race-Tuned Extractors’ reputation grew, more and more demand came from private motorists who wanted to improve the performance of their street cars. Whilst originally specialising in custom V8 exhaust systems for Holdens and Fords for the V8 Supercars circuit, Race- Tuned Extractors quickly developed the expertise to design and manufacture systems for several of the more popular makes and models of car common to Australia. This ability to meet a diverse range of market demands has helped to create a solid company that is well respected both as a supplier to the motor racing industry, as well as a supplier to the performance street car sections of the market.
• Traditionally, the company had focussed entirely on custom-built systems; each being specifically tailored to the engine in question. As the company’s reputation grew, more and more requests were received for high performance systems that could be bought off the shelf. Seeing an opportunity for expansion, Pierre and John decided to manufacture a few systems to stock to meet this small but growing demand. Initially, this production was limited to the two main systems (Holden and Ford), and only occurred when the work schedule permitted. This move into ‘off-the-shelf’ products led Race-Tuned Extractors into the production of a more standardised line of performance extractors and exhaust systems. These exhaust systems were not specifically Tuned to the engine in question, and whilst they were still high performance systems, their performance was slightly inferior to that of the custom-made extractors.
• The off-the-shelf systems appealed to the more price conscious buyers. These customers appreciated the brand value offered by Race-Tuned Extractors but expected good value for money. Pierre and John felt however that the off-the-shelf products should reflect the same quality of engineering as the custom systems that sold with a much healthier profit margin. The custom-designed and made systems continued to dominate the company’s sales, accounting for 60 percent of the production volume and 75 percent of the revenue.
• Currently, the company operates a single manufacturing facility in Blacktown, where both custommade and off-the-shelf systems are manufactured. The high-tech engineering equipment is mainly general purpose in nature in order to provide the flexibility needed for producing custom systems. The factory layout groups tube cutters together in one section of the facility, tube benders in another, a separate welding section and so on. The facility also has three dyno-equipped service bays that facilitate the tuning and fitting of custom systems. The majority of staff are highly skilled tradespeople who take pride in the quality of design and the quality of manufacture of their products. Both the custom and the off-the-shelf systems compete for processing time on the same equipment by the same tradespeople.
• A few months ago the firm was approached by Oz Race Mart; a national car parts distributor specialising in the supply of high performance automotive components to both motor racing enthusiasts and the general public. Oz Race Mart was seeking supply of a limited range of high
• performance exhaust systems for the 5.0L Ford "Boss 302" SVO and the 5.0L Chevrolet small block racing engines. Race-Tuned Extractors entered into an agreement with Oz Race Mart that required an initial stocking of the supply chain, and regular replenishment of stocks in line with sales. Oz Race Mart estimated demand to be regular but of low volume. The initial stock requirement of 500 units of each system was met by scheduling overtime production across several weekends. Oz Race Mart’s sales forecasts suggested that the day-to-day demands for stock replenishment could be met during normal production time augmented with irregular overtime.
• During the past few months however, sales of performance systems through Oz Race Mart steadily increased, leading to more regular scheduling of this line of products. However, when scheduling trade-offs had to be made, the custom-made systems were always given priority because of the higher profit margins these products attracted or because of the urgency of the job. Thus scheduled lots of components for the Oz Race Mart systems were often left sitting around the factory in various stages of completion.
• As the partners review the progress of Race-Tuned Extractors, both Pierre and John are pleased to note that the company has grown. Sales of custom-made systems remain strong, and sales of made to stock systems are steadily increasing. However, finance and accounting have indicated that profits are not what they should be. Costs associated with the off-the-shelf and Oz Race Mart systems are rising. Money is being tied up in inventory; both of raw materials, work in process and finished product. Expensive nearby warehouse space has been rented to accommodate the growing inventory volume. Sam is also concerned with increased lead times for both custom and Oz Race Mart orders, which are causing longer promised delivery times. Stock-outs have also occurred with their own off the shelf retail products. Capacity is being pushed, and with the current layout, no space is left in the plant for expansion. John is worried that it is getting increasingly harder to meet the demand created by their new contract with Oz Race Mart and decides that the time has come to take a careful look at the overall impact this new demand for exhaust systems is having on operations.

Description

This essay is based on the following requirement –
Write an essay discussing the operational issues facing Race-Tuned Extractors. The essay should identify and discuss the operational aspects that are affecting the organisation, paying attention where appropriate to any strategic implications. The essay should discuss the following issues with responses integrated within the essay.
• Current production processes used by Race-Tuned Extractors
• The effect of the new contract with Oz Race Mart on Race-Tuned Extractor’s operations
• The daily operational decisions required under current operating conditions for the company’s
operations to run effectively
• The effect that the move to producing off-the-shelf systems may have had on the company’s
financial structure.