PRECISION WORLDWIDE, INC.

The purpose of writing this assignment is to write the summary of

the case study of Precision Worldwide, Inc..
The case study revolves around the dilemma faced by Precision
Worldwide, Inc. (PWI) of whether to consider manufacturing the
new lucrative plastic rings or continue producing its steel rings.
Furthermore, if PWI shifts to plastic rings it needs to figure out an
alternative use for the large steel rings inventory it holds.

Precision Worldwide has been manufacturing industrial machines

and equipment for sale in numerous countries for almost 90
years. In May 2014, during a meeting Hans Thorborg, the general
manager of the German plant of PWI discussed the plastic rings
introduced by their French competitor Henri Paulenc. These plastic
rings have significantly low manufacturing cost and are more
durable than the steel rings PWI produces. The only problem that
arises is from PWIs $390,000 worth steel inventory that could not
be sold even for scrap.
The steels rings were specifically used by the PWIs plant in
Frankfurt, Germany manufactured machines and could also be
used in similar competitors machines. Priced between $ 18,900
and $28,900 the rings lasted for a period of 2 months and
different models of machines required 2-6 rings.
With the increasing competition and the introduction of cheap and
superior quality rings from its French counterpart, PWI engineer,
Bodo Eisenbach, estimated the rings could be produced by midSeptember at the new equipment cost of about $7,500.PWI
concluded to start the manufacturing process of plastic rings and
continue selling the steel rings till stocks last as suggested by
Patrick Corrigan, representative of the parent company in Ohio.

On further realizing the potential of the plastic rings that has four
times more wearing property than steel rings, the decision was
made to start selling the rings where the competitors existed and
continue supplying the steel rings elsewhere. Whereas the PWI
sales manager, Gerhard Henk strongly opposed this and said this
would harm PWIs image and sale of it machines. In his support,
he produced figures that if the selling price of both rings remained
same i.e. $1,350 per hundred rings and at manufacturing cost of
$279.65 of plastic versus $1,107.90 of steel rings the profit would
easily recover the value of inventory in less than an years time.
On realizing that on current rate of sale 15,100 finished rings of
the total 34,500 rings would be left by September, and with slack
period around, PWI needs to make an immediate plan of action
after considering all different aspects and draft their business
strategies accordingly.