Managing Information Technology

Case Study III-2 • A Make-or-Buy Decision at Baxter Manufacturing Company 443

EXHIBIT 2 The Stages of a Motor Housing Stamping

This rapid growth has caused problems at times. For

example, in 1990 its sales were so close to BMC’s produc-

tion capacity that, even when running its production 24

hours a day 7 days a week, it became almost impossible to

meet promised delivery schedules. According to Sue

Barkley:

In 1991 we had to turn down business from existing

customers who wanted to give us new parts to make.

For almost a year we did not accept any new busi-

ness. That was the most difficult thing we ever did

because we were fearful that customers who had to

go to our competitors might never come back. We

told our customers that we hated to refuse their busi-

ness, but we had to because if we took more busi-

ness we couldn’t handle it—we would be late and

couldn’t provide the level of service that we are

committed to providing. Most of our customers

understood. They were not happy about it, but they

respected us for being up front about it. We did lose

some good orders because we weren’t accepting

business when they came out, but I don’t think that

there are any customers who haven’t come back to

us with more business.

By 1992 BMC had made the large investment neces-

sary to significantly increase capacity and was back on its

historical growth track.

In the late 1980s BMC’s automotive customers started

to go to a just-in-time (JIT) philosophy in which they carried

huge stamping presses for a production run, so BMC can-
not efficiently produce short runs and therefore does not
serve the replacement market well.
BMC uses state-of-the-art equipment to develop and
manufacture the necessary tooling for the needs of its cus-
tomers. With the use of wire electrical discharge machines
(EDM), computer numerical control (CNC) vertical
machining centers, and CNC horizontal lathes, it is able to
produce quality tooling efficiently. For the life of a part,
BMC’s computerized equipment can reproduce identical
die components for replacement of worn or damaged dies.
BMC’s 140,000-square-foot manufacturing facility
is one of the best in the country, with 39 presses that range
from 50-ton to 600-ton capacity. Every press is equipped
with accessory items such as feeds, reels, and electronic
detection systems. In addition to the presses, BMC has
recently added the capacity to weld, drill, tap, and assem-
ble stampings into more complex parts to suit the needs
and desires of its customers.
BMC employs about 420 people and is nonunion.
Management believes that these employees are BMC’s
greatest asset. According to Chairman Walter Baxter:

We have a great group of people! We are fortunate to

be located in a farming area where the people have a

strong work ethic and a “do whatever it takes” atti-

tude. We started out as a family company and we

have a lot of families—husbands and wives, their

children, aunts and uncles—working here. My son,

Kyle, is now President, and my daughter Sue is Vice

President for Customer Relations. We cherish our

family atmosphere.

Over its 19-year history, BMC has grown at about
20 percent a year. The last five years of sales have been as
follows:

1992 $32,000,000 1995 $61,976,000

1993 $37,292,000 1996 $74,130,000

1994 $49,900,000