Akron Crane Works: The Insourcing Proposal

In 2017, Peter Tang must prepare the economic analysis of a proposal to insource production of certain parts currently purchased by the Tower and Lattice division of Akron Crane Works, a world leader in heavy lifting machinery. The primary motivations for the proposal were rising costs due to vendor price increases and long vendor lead times. Excerpt UVA-F-1839 Rev. Nov. 15, 2018 Akron Crane Works: The Insourcing Proposal In November 2017, Peter Tang sat down to prepare the economic analysis of a proposal to insource production of certain parts currently purchased by the Tower and Lattice (TAL) division of Akron Crane Works (ACW), a world leader in heavy lifting machinery. The primary motivations for the proposal were rising costs due to vendor price increases and long vendor lead times. The fabrication technologies for the parts targeted by the proposal were not complex. The TAL division believed internal production would cost less and that, with increased control of production, the division could reduce lead times. To achieve these gains would require a significant investment in new equipment and a modest increase in working capital. ACW was a respected manufacturer of heavy lifting machinery for the construction industry. In particular, ACW designed and manufactured equipment serving two heavy lifting needs: the large site-installed cranes used primarily in the construction of buildings and the mobile cranes used for hoisting and placing heavy manufactured items such as generators and bridge girders. These two sectors were served by the TAL and the Hydraulics and Platforms divisions, respectively. Insourcing Proposal . . .