Case Analysis: Fabtek (A)
Fabtek’s Overall Situation
Fabtek is a titanium fabrication company serving mainly US market and based in Philadelphia. The main activity of the company is fabrication of titanium, whereas it also sells titanium metal and specialty hardware. The company carries out high quality welding, which represents its competitive advantage.
Fabtek has 5 major competitors in the United States. The company has a reputation for higher price and higher quality.
Despite a steady growth of the company’s sales and equity throughout 1985 – 1988, in 1989 sales dropped and in 1990 the Fabtek experienced its first net loss.
In June 1991, the company experienced a critical level of backlog for the first time in its history. One reason for this problem was difficulty of hiring and training qualified welders due to the fact that the company could not offer higher than average pay because all of its competitors were located in less expensive areas. Another reason was the lack of reliable information on the shop’s actual capacity at any given moment.
Now Fabtek is facing a situation where it has received 4 different orders from Refco, Pierce-Pike, Worldwide Paper and Kathco. Given the limited capacity and the critical level of backlogs the company has to decide which one(s) of these four orders it should bid on. As the issue is a cross-functional one, i.e. it involves consideration of capacity issues (Operations Department) and strategic issues (Marketing Department), the decision will be made jointly by the Operations VP, Rob Lightfoot and the Marketing VP, Amy Vitali.
The four orders are described briefly below:
• Refco – Refco, Fabtek’s largest single customer, which typically represents 15-20% of the company’s sales every year, is one of the world’s leading engineering contractors. It specialized-concentrating on petroleum refineries and petrochemical plants. Refco had requested Fabtek for production of an above-size...