Running head: OILWELL CABLE COMPANY, INC
Oilwell Cable Company, Inc
A Case Study
Prathibha Vemulapalli
Cleary University
OILWELL CABLE COMPANY, INC
1. The after effects of Norm, deciding to go ahead with the idea of microprocessors without
running it by the team are both advantageous and mostly conflicting.
To discuss the
disadvantages first, he might run into issues with production especially with a history of
considerable trouble caused by some small decision taken in the past without production
teams involvement. The employees on the other hand might think it as an attempt of work
force reduction by the management team. With the fact that they include all the employees in
the team management system, all it takes is one employees trust to interrupt the flow of their
high productivity since Oil Well Cable Company depends on small group of highly
productive loyal customers. On the other hand, Norm will be saving time money temporarily
by not passing by the team.
2. The advantages if Norm decides to run the decision of microprocessors by production team
are the obvious time and money (again, temporarily). There is one more advantage of not
passing it by the production team, avoiding a misconception that this is a managements
move to reduce work force which really is not. But in contrast, if he decides not to involve
the production team in the decision making, it results in giving signals of breaking employee
trust since Oil Well Cable Company has reformed their way of reducing work force by
including all the teams. Also the biggest disadvantage is that any decision taken by not asking
production teams input could potentially result in a lot of time and money investment to
correct any improper decisions.
3. Functional project form of the organization since this project is related to operations.
4. The organization in discussion does not deal with many projects at a time. So instituting a
project management office will be a lot of cost and time involving process. Since the
company already decided to invest $1000 per person per year, it would be beneficial for them
to train employees to follow project management techniques and procedures that best suit the
OILWELL CABLE COMPANY, INC
company. Also the development of internal documentation of the project management
procedures and training personnel will be best for future employees that join the company.
5. The total sales for the company would sum up to $25000000. The below is the calculation of
the production costs with respect to the given details
Total Annual Sales = $25000000
Assumed cost with 10% margin = 25000000 (0.1*25000000) = $22,500,000
Direct Labor = 5% (according to the case) = 0.05*22500000 = $1,125,000
Indirect Labor = 5% (according to the case) = 0.05*22500000 = $1,125,000
Material = 60% (according to the case) = 0.6*22500000 = $13,500,000
Fixed Overhead = 15% (according to the case) = 0.15*22500000 = $3,375,000
Variable Overhead = 15% (according to the case) = 0.15*22500000 = $3,375,000
Since the case asserts that installation of Microprocessors reduce 1 to 0.5% of the scrap. Lets
assume that as a worst case 0.5% of material cost. Also in additions 1% of the production
time can be reduced according to the case, so that in return cuts down the variable costs by
1%. Further calculations are below
1% of variable costs = 0.01*3375000 = $33,750
0.5% of Material costs = 0.05*135000000 = $67,500
Total Reduction (savings) in the costs = $101,250
Initial Outlay = Microprocessor costs (25000) + Installation costs (5000) = 30000
NPV = (Total Savings/(1+ expected rate of return)) Initial Outlay
= (101250/(1+10%)) 30000
= $62,045.45
6. The case tells that the productivity increased rapidly from 1995 to 1996 according to Norms
recollection but exhibit 2 contradicts it. There is not much information presented in the case
in regards to what happened between 1995 and 1999 except for one change, Norm replaced a
previous operations manager Bill. The inference I carried is, with his years of industry
experience in manufacturing and as a mechanical degree holder, Norm managed to increase
the productivity successfully in the first two years and after that worldwide economic
downfall in the form of recession impacted the companys productivity in late 1990s
especially 1998 and 1999.
7. I would recommend Norm to go ahead with his decision since it is proved to be profitable
however, with the production (operations) teams involvement in it.
OILWELL CABLE COMPANY, INC
References
Meredith, J., & Mantel, S. (1995). Project management: A managerial approach (8th ed.). New
York: Wiley.
