642
CASE STUDY IV-5
Systems Support for a New Baxter
Manufacturing Company Plant in
Mexico
Baxter Manufacturing Company (BMC), located in a small
midwestern town, is a leading manufacturer of metal stamp-
ings, particularly deep-drawn electric motor housings. The
company was founded in 1978 by its chairman, Walter R.
Baxter, as a supplier of tools and dies, but it soon expanded
into the stamping business. BMC is a closely held corpora-
tion, with the Baxter family holding most of the stock.
BMC’s major customers include Ford, General
Motors, Honda of America, General Electric, Whirlpool,
Amana, and Maytag. BMC has two markets. It makes
brackets and other components sold directly to appliance
and automotive assemblers to go straight into the end prod-
uct. But BMC also makes motor casings and the like that go
to intermediate suppliers that make components (such as
motors) that then go to the appliance and automotive assem-
blers of the finished products. For example, BMC ships a
motor housing to a motor manufacturer who makes the
motor, and BMC also makes the bracket that holds the motor
onto the frame and ships it directly to the manufacturer who
assembles the motor and bracket into the finished product.
BMC’s 170,000-square-foot manufacturing facility is
one of the best in the country, with 43 presses that range from
50- to 800-ton capacity. Every press is equipped with acces-
sory items such as feeds, reels, and electronic detection sys-
tems. In addition to the presses, BMC has recently added the
capacity to weld, drill, tap, and assemble stampings into more
complex parts to suit the needs and desires of its customers.
BMC employs about 420 people and is nonunion.
Over its 22 year history, BMC has had steady growth. The
most recent 6 years of sales were:
Before joining BMC in 1994, MIS manager Don
Collins had 20 years of experience as a lead systems ana-
lyst with a large manufacturer and broad experience with
manufacturing systems. In 1997 the MIS department had
five people, but there was some turnover and Collins was
unable to hire replacements because of the high salaries
commanded by people with the necessary skills.
Therefore, the MIS department was down to three people,
including Collins, and in a maintenance mode for the past
3 years. BMC management has recognized that improved
systems are a high priority, and Collins has recently been
authorized to hire two more people at competitive salaries.
BMC managers have generated so many requests for
new systems that an MIS steering committee has been
established to approve projects and set systems develop-
ment priorities. The members of the MIS steering commit-
tee are President Kyle Baxter, Vice President for Customer
Service Sue Barkley, Controller Lou Wilcox, and Don
Collins. Sue Barkley is a sister of Kyle Baxter and has
been a champion of information technology within BMC.Recent Developments
In May 1999, a major appliance manufacturer customer
contacted BMC President Kyle Baxter and encouraged
BMC to consider building a plant in Mexico to serve the
needs of the customer’s Mexican operations. This customer
had carefully studied its suppliers and selected a small num-
ber to invite to become favored parts suppliers in Mexico.
In January 2000, the BMC board approved the deci-
sion to build a plant in Mexico. BMC management had
been thinking about building a plant in Mexico for some
time, for about 20 percent of BMC’s production was being
shipped to factories located in Mexico. Although Mexican
wage rates are much lower than those in the United States,
BMC management was not primarily motivated by the
prospect of low Mexican wages. Stamping is very capital
intensive and semiautomated, so labor costs are not a big
part of the total cost of production, and there will be addi-
tional costs that will make up for any wage savings. But1994 $49,900,000 1997 $85,785,000
1995 $61,976,000 1998 $97,550,000
1996 $74,130,000 1999 $112,337,000Copyright © 2000 by E.W. Martin. This case study was prepared to
be the basis for class discussion, rather than to illustrate either effective or
ineffective handling of an administrative situation. It is a continuation of
Case Study III-2, entitled “A Make-or-Buy Decision at Baxter Manufacturing
Company,” which appears earlier in this book; one can find further informa-
tion about the history of the company and its use of the computer there.