History Of Manufacturing

HISTORY OF AERO MANUFACTURING
Mr. Giles had received the annual report

for the year ending 1975, net income after taxes has declined. Mr. Giles desired to allocate the problem areas, review appropriate solutions proposed by the staff, the company obtain rapid growth.

The company produced diversified products for the use in the agricultural industry, the firm’s market its grain equipment todealers via distributors in Iowa, Illinois, North Dakota, South Dakota, etc.

Initially had established an electric motor service in Iowa. The company specialized in electric motor rewinding and repair.

Growth of the company had been rapid in terms of sale, product line and expanding facilities, the company expanded the product line to include other component accessories.

The firstbuilding measured 50 feet by 100 feet. The building has doubled in size the next year. The same year they acquired a plant to house the perforated floor machine and the steel tub mill.

The rate of sales growth slowed, short term debt tripled from the previous year. The company obtain a loan for acquire new facilities

The company faced diverse difficulties such as an economic recession of thenation as a result of this farmers were reluctant to buy and the result has been much poorer that the past year.

MARKETING

The company expects to expand his sales territories, he has no specific goal to regard the market share. Mr. Giles had hired a marketing manager to revamp the future marketing strategies, also he consider to increase the number of dealers.

The firm’s main competitor in thearea tubing is Valmont, other major manufacturers have not been in direct competition since Aero sold its products from 15 to 20 % less.



Even though the company wished to introduce new products every year, these were still in the research stage.



FINANCE

The inventory accumulation resulted in approximately three times too much in raw materials, and two and one-half times too muchin finished goods.

75,000 additional square feet was added within the building by constructing a second floor which was used to store the excessive inventory. The main reason for this buildup was that the firm experienced difficulty in obtaining raw steel products in earlier years of peak demand, Mr. Giles didn’t want to jeopardize relations with suppliers b cancelling orders.



Theincrease of raw materials and finished goods inventory was making difficult for the firm to reduce its short-term debt and a new law requiring prepayment. Aero Manufacturing was unable to liquidate $600, 000 worth of short-term debt. This was the first time the corporation was unable to eliminate its debt. The line of credit extended by the bank was $1, 250, 000; the sort term and the cash flowsituation were causing deep concern among the firm’s management.



PERSONNEL

Aero Manufacturing currently employs between 50 and 60 people. Mr. Giles continue to produce finished goods because he felt it was Aero’s social responsibility to keep its employees. It was difficult to obtain, retain and house technically skilled people in a small town.



PRODUCTION/ FACILITIES

The Akronfacility consisted of 10,000 square feet, two people were employed at the site, and production consisted of one gravity grain box per day. Aero has also had an aluminum foundry at St. Thomas, Iowa. The plant is full of inventory that has accumulated during the past year.



THE FUTURE AT AERO MANUFACTURING

Mr. Giles plans to have his company back to full production within three months assumingthat the economy will be back to normal by that time.



PROBLEMS & SOLUTIONS



• Raw material accumulated.

Reduce the purchase of raw material, or if possible to cancel it, up to level the amount of raw material. Use the accumulated material would help us to leave for spending to buy more material, to continue keeping it. Because the saved material generates costs of storage and...