Background of the case
Circuit Board Corporation (CBC) designs and manufactures printed circuit boards (PCB’s). Dieter Adams had started CBC in 1961 during the early days of the computer industry. His first contract was to design and manufacture PCB’s for the early minicomputer companies. Maggie Adams, his wife, was a part-time employee at the time.
The market was divided into three distinct product segments by functionality. In 2001 the three product segments were: * Low-End Segment: for simple applications requiring one- to four-layer boards * Mid-Range Segment: for more complex applications requiring 12- to 24-layer boards * High-End Segment: for the most complex applications, requiring 30- …show more content…
2. Ben Cashman shed the unprofitable low-end business to refocus on the mid-range, more technologically complex segment of the market.
3. Ben Cashman estimated that each head-count reduction of 10 persons saved the company about 300.000 dollar a year in operating expense. He felt that the integrity of the operation at a 20 million dollar rate could still be maintained with only 100 people. That meant a downsizing from 240 full-time employees and a two-and-a-half-shift operation to 100 employees on one shift.
1. Reduction in monthly bookings: CBC went from about 2.5 million dollar in bookings a month in 2000 down to about 1.8 million a month in 2001.
2. Ben Cashman felt that the General & Administrative Expenses, which are the day-to-day operations of a business, was too high. The G&A were about 10 % of sales.
3. Weakness in 2001 sales had drained the company’s cash.
4. Implications of inventory levels: The company had more than 3 million in inventory by the close of 2001. Ben estimated that about half of that was truly productive in the sense that it comprised unfinished goods that could be directly rolled into new orders.
5. Inability to improve processes: Like other PCB manufacturers, CBC had