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Abrams Company's strength and weakness
Abrams Company
Abrams Company is a wide variety parts manufacture company. It has three major groups of parts: ignition parts, transmission parts, and engine parts. Abrams’ parts were sold both to original equipment manufacturers(OEMS) and to wholesalers. Wholesalers then resold the parts to retailers and retailers resold to consumers. This called aftermarket (AM).
Abrams had a “product division” for each of its three part groups. Each of these product divisions was managed by a vice president and general manager who was expected to earn a target return on investment(ROI) Each product division manufactured parts in several plants and sold a major portion of its manufactured parts to OEMs. The remaining manufactured parts were sold by the product division to Abrams’ fourth division, called the AM marketing division.
The strength of Abrams’s internal control were: the ability to design innovative and dependable parts that met the customer’s quality, performance, and weight specifications; meeting delivery schedule requirements so that the OEM could minimize its own parts inventories and controlling costs which result Abrams’ product price more competitive.
The weakness of Abrams’ internal control were: first, there always seemed to be a few disputes over transfer prices of parts sold by the product divisions to the AM division. Second, top management felt that the product division too often tended to treat the AM division as a captive customer. Third, top management felt that both the AM division and the three product divisions carried excessive inventories most of the year.
What should be Abrams’ improvement at future?
1.Combined AM division sale to other three division. Whenever AM division bought parts and sale parts, the profit could be belong to both AM and where parts manufactured from.
2. Give AM division to buy product from out resource. This would avoid the OEM division treat the AM division as a captive customer and delay manufacture for AM