B (40 marks) This section consists of a case study that requires students to consider the scenario and advise accordingly using only case-specific recommendations. Company Background PyroGrill is a company that specializes in designing, manufacturing, and selling a range of outdoor grills. The company is based in the country of Cookland, located in Europe, and its currency is known as CLD (Cookland Dollar). PyroGrill's products consist of portable standalone grills that offer users the freedom to set up their grilling stations in any desired outdoor setting. The founders of PyroGrill, Adam and Alicia Cook, established the company in 1984 following their memorable vacation in North America, where they were captivated by the widespread culture of outdoor grilling, dining, and socializing. Before venturing into PyroGrill, Adam had a background as a marketing executive, while Alicia served as a production manager in a metalworking company. Fortuitously, they received an unexpected inheritance, which prompted them to invest in a small manufacturing plant and launch PyroGrill. Both Adam and Alicia shared a deep passion for food and the great outdoors, desiring to inspire others to embrace the joy of dining and entertaining in outdoor spaces. At the time of PyroGrill's inception, outdoor grills were a rarity in Cookland, with few individuals owning or even knowing someone who owned such a product. Recognizing this market gap, Adam and Alicia saw an opportunity to provide high-quality, user-friendly grills. In 1984, PyroGrill introduced its first grill model, a simple yet premium charcoal-fuelled design. The product was initially sold through specialized outdoor furniture retailers and large garden centres located throughout Cookland. Benefiting from a particularly good summer that year, sales were robust, and PyroGrill swiftly gained a favourable reputation. The following year witnessed a significant surge in sales, resulting in heightened brand recognition for PyroGrill. As the concept of outdoor cooking gained popularity in Cookland, PyroGrill responded by expanding its product range. In 1998, they introduced a gas-fuelled grill, and in 2018, they added an electrically powered wood pellet grill to their offerings. Throughout its history, PyroGrill has experienced consistent sales growth every year, with only a few exceptions due to economic recessions or exceptionally unfavourable weather conditions. In 2018, Adam and Alicia retired, passing the reins of the company to their youngest child, Emily Cook. Prior to assuming leadership, Emily had spent four years working at her parents' company, following a successful career as a qualified chef in renowned European restaurants. With her fresh perspective, Emily has numerous ideas for driving the future direction and growth of PyroGrill. Currently, PyroGrill operates from three closely situated locations within a 10-kilometer radius: Corporate Headquarters, Manufacturing Facility, and Distribution Centre. The company does not maintain any retail outlets. In 2021, PyroGrill's sales distribution was as follows: 68% through retailers in Cookland, 20% direct sales to customers in Cookland via the PyroGrill website, and 12% through third-party agents located in foreign countries. For the fiscal year ending on June 30, 2022, PyroGrill generated a revenue of CLD 76.5 million, with a gross profit of CLD 32.2 million and a pre-tax profit of CLD 6.9 million. During that period, the company successfully sold 192,500 grills. As of June 30, 2022, PyroGrill employed a workforce of 316 individuals, all of whom reside and work within Cookland. PyroGrills ethos PyroGrill's current aim is to create grills that will enhance the outdoor dining experience. As a professionally trained chef, Emily Cook envisions PyroGrill at the forefront of all outdoor cooking trends in Cookland. She emphasizes that the business is about creating opportunities for hospitality and camaraderie, extending beyond mere metal fabrication. Emily's vision is to enable the people of Cookland to socialize outdoors while savouring a wide range of perfectly cooked food on a PyroGrill. The company's advertisements always incorporate the phrase, "PyroGrill for delectable cuisine." Emily is also deeply committed to sustainability, ensuring that the raw materials used in production are sourced ethically and sustainably. Building strong relationships with suppliers is considered crucial to PyroGrill's success. The company aims to achieve carbon neutrality within six years and continually strives to enhance its supply chain, manufacturing processes, and outward logistics in pursuit of this goal. Overview of the manufacturing process Steel pressing & welding: This is the first stage of our manufacturing process, where we start to transform the raw materials into what we believe are THE BEST outdoor grills on the market. There are three main activities in this stage: Laser cutting and preparation: Highest-grade steel plate is laser cut into the required size and shape, as determined by the production schedule. The metal is coated in a layer of biodegradable soap solution which minimises friction and helps ensure an even pressing. Pressing: The flat, cut-metal shape is placed on a press. The press punches the metal into the relevant shape using 800 tonnes of pressure. All edges are trimmed to make certain that the cook-box base and lid will fit together exactly. This will enhance cooking and fuel efficiency. Welding: Holes for air vents, plus any needed for components to be attached during assembly, are punched in the cook-box bases. Employees then weld additional grill components (for example, leg couplings, ash sweepers, air vents, handle bases) to each cook-box base and lid. Enamelling: Our grills are protected against rust and corrosion by a layer of porcelain enamel added at this second, and most technically complicated, stage of the manufacturing process. As well as ensuring that our grills survive bad weather and look good for many years, the enamel also helps to maintain the even cooking temperature vital for producing exceptional food. Cleansing: The cook-box bases and lids are dipped into a cleaning solution and rinsed to remove impurities prior to the addition of the porcelain enamel. Cleansing enables the enamel to adhere correctly to the steel. Enamel applied to uncleaned steel will not cover evenly and will bubble or flake once the grill is in use. Application and firing: A dry coat of enamel (known as frit) is applied to the clean cook-box using an electrostatic spray-gun before being fired in one of our furnaces at approximately 850C. This ground-coat bonds the enamel to the cook-box. A finishing coat of frit is then applied and fired in the same way to achieve the signature glass-smooth, high pigmented finish of a PyroGrill grill Assembly: This is the stage where all the different components required are collected and connected. At PyroGrill, we have two assembly teams, known as Mechanical and Technical. While each team has a degree of specialism and skill set, the teams work in the same location and members frequently change team as need arises. Mechanical: This team is responsible for attaching hinges, brackets, wheels, flanges, handles and so on, to the grill cook-box and frame. This completes the grill to a point where it is easy for the customer to finish the assembly after purchase. Technical: This team fixes the dynamic components to the grill. Any component with integrated control mechanism or measurement role (temperature gauges, gas-burner valves, bezels, woodchip conveyers and so on) is fitted and tested by a member of this team. Packing: To help minimise our carbon footprint, and our delivery costs, PyroGrill grills are shipped to customers using boxes that take up the smallest amount of space and use the least amount of packaging possible. This means that, to some extent, all of our grills have to be assembled by the customer themselves (at least in terms of bolting on legs and placing burners and grilling racks). At PyroGrill, we make sure that customers never have cause to regret their decision to buy from us. We take care that instructions are easy to understand and always included and that the risk of missing parts is minimised. All members of the Packing Department are trained to be experts at filling the correct boxes with the correct components plus assembly instructions and product warranty paperwork. Packing: The Packing Department is a large space where bins of fixings, packaging and paperwork are situated close to the workbenches and pallets of grill parts. This configuration maximises the efficiency of the department. All boxes, once filled, are taped closed and have a barcode attached. Boxes are then placed in a pallet for transportation to the Distribution Centre. Additional information The Senior Management Team (SMT) at PyroGrill has just sanctioned the development and manufacture of a new range of smaller, lighter, portable outdoor gas grills for the campers and picnickers market. The range has the brand name PyroGrill-To-Go (PTG). Catherine Jones, the Head of Pressing & Welding, has identified that, because of the nature of the portable design, the new range models will require more welding hours compared to the existing range and this could potentially create a shortage of welding labour hours. This has led the SMT to consider buying in some ready-welded cook-boxes from external suppliers, at least in the short term, until there is sufficient scale to justify buying more machinery to automate the process. The image below shows the costs relating to the four different cook-box models in the PTG range. CB model 1 CB model 2 CB model 3 CB model 4 Per unit CLD CLD CLD CLD Variable production costs 42.48 50.76 58.58 64.80 Fixed production costs 7.34 9.18 10.20 11.02 Total production costs 49.82 59.94 68.78 75.82 Quoted buy-in price 47 48 63 70 Welding labour hours per unit 0.36 0.45 0.5 0.54 Required: Prepare a report in which you: 1. Explain which of the CB models the company should buy-in and which should be made in-house (15 marks) 2. Mention and explain 5 factors that should be considered before making a final decision about buying-in or making in house the cook-boxes (15 marks) 3. Suggest 3 reasons the supplier is able to offer a quoted price lower than the companys full production cost (10 marks)