Jones done by men for an extremely low

Jones done by men for an extremely low

Jones Ironworks Inc. Background Frederick Jones was a master blacksmith who emigrated from England to Erindale, Ontario where he set up his shop. From this small shop, Fred Jones plied his trade, shoeing horses and making wonderful wrought iron works, using simple forges and hand tools. His works can still be found in the village of historic structures like St. Peter’s Church, a masterpiece that sits high above the Credit River.

In the true spirit of Frederic Jones, all the products are hand shaped and forget out of solid steel.Each piece is solid piece heated in a forge until red hot iron is shaped by hand, one part at a time by a master blacksmith. Frederick jones Ironworks offers an extensive selection of historically correct heritage designs by North American masters who plied their trade in a an era when the design and quality of wrought iron was in keeping with the architectural pieces they were embellishing. The wrought iron works of over 100 years ago still grace the ground and building today as a testament to the quality of solid hand forged iron.Frederick Jones Ironworks offers hand forged wrought iron fence, gates and posts in several traditional designs and heights. Available in a variety of traditional designs and heights, these award winning, heritage-inspired products will last a lifetime. Fredrick Jones Iron Works serves the Canadian market from its headquarters in Ontario, and serves the U.

S. market from its new distribution center in Charleston, South Carolina. Executive Summary Jones Ironworks Inc. case was set in Detroit, Michigan in the year of 1973. This case talks about the hand, dirty dangerous works done by men for an extremely low wages starting at $1. 5 per hour. The Jones Ironworks industry is not a growth industry.

Other gray iron foundries are closing due to declining auto industry. They are moving to lighter materials (oil crisis), new materials tech. The job that Jones Ironworks involves is a job shop specializing in heavy duty gray iron castings that needs a very strong back, work in dismal conditions. The average hourly rate is $3. 85, fringe benefits are 20%; base rate is $3. 75, $.

50 raise after for four months is 125 men on each of two shifts (usually 122 actually come to work). Throughout the years profit margins have been declining and currently are ery low. If Frederick Jones Inc. is not able to raise prices, customers will eventually leave. Suggestion: * switch from hourly pay to a unit of production system for foundry workers * $10. 00/unit that passes inspection (only 13% increase over actual cost per hour) * Freddie says the switch won’t cost the company anything Based On: * Currently no incentive for employees to be efficient * Pay rate is too low for type of work, contributes to very high turnover (400%) Case Analysis I generally agree with the arguments presented by Freddie Jones.

I agree with his claim that payment system should be changed from hour rate into piece rate as to stimulate the employees’ incentive to produce efficiently. When paid by hour rate, the employees have no financial incentive to work efficiently because that paying system does not get their earning related to their productivity so. On the contrary, the piece rate will encourage higher efficiency and production to some extent, because the more they produce the more they will earn.

Under that payment system, the employees are financially motivated to work hard and efficiently to get more earnings.Pay based on production should motivate employees to be for efficient in the harsh working conditions. I do not believe the pay is too low. The employees are coming from unemployment agencies and offer very minimal skills. Employees that tend to not be able to hold onto a job may contribute to the high turnover rate, with pay being only one factor.

Freddie’s calculations seem reasonable to me, although a 13% pay increase is a significant amount of money when considering that there are 253,750 total labor hours in a 6 month period. This is a $126,875 increase in wages (4. 5 x 253,750)-(3. 85 x 253,750). I also agree with his claim to replace the current low hour rate with the higher piece rate in order to keep more experienced employees staying at work and dramatically reduce the waste in time and money for training and outfitting new employees.

Since an experience employee can produce a casting in only 20% of the time it takes a new worker, it is very important to keep them stay working in the foundry in term of maintaining high productivity and quality. To encourage them to stay, Jones Ironworks needs to raise their wage to some extent.It’s rather worthwhile and reasonable to do it according to the Freddie Jones’ demonstration: paying with piece rate, the actual increase in cost per hour is only around 13% over the current cost, but it can save the company more than 10% in labor productivity and 6% of total payroll due the elimination of the waste in training and outfitting the new employees. I don’t agree with Freddie’s father’s argument in some aspects. I don’t agree with Freddie’s father calculation of the increase in cost per unit with regard to the change into the piece rate payment system.He sticks to use the lower estimated standard hours per unit (2.

1 hr. /unit) instead of the actual hours per unit (2. 3 hr. /unit) in the past six months; as a result, he gets the higher increase rate. But, the fact is that the actual labor hours are quite possibly higher than the budgeted standard hours because of many unforeseeable conditions.

So it is better to use the actual labor hours of the most recent period to do the calculation. Freddie did not take into consideration the costs associated with the high turnover rate.He failed to include outfitting each new worker, a $150,000 yearly expense. If Mr.

Jones tried a profit sharing plan ten years earlier without success, it will likely not affect productivity or the turnover rate in 1973. Like I speculated earlier, low productivity and a high turnover rate may be due to the undesirable, unskilled workers being hired from unemployment agencies. Freddie also failed to compare the high turnover rate to the industry average, which is 50%.

He only concerns on the short-term profit of his company and are too conservative to take some good change for the long run operation.First, it is not rational for him to turn down the proposal of using piece rate paying system just base on his unsuccessful try in a profit sharing plan 10 years ago, because the market conditions have change a lot and the result of implementing the similar plan could be different today. Second, he is too stressed on the effect of the increase labor wage. Even though the company is experiencing a profit squeeze, it isn’t possible for it to go out of business immediately due to paying a little higher labor costs.Since the labor costs do not cover a big percentage of sales, the increase in labor cost will not have significant effect on its marginal profit, balance sheet, cash flow or working capital.

In addition, he neglects the effect that the wage increase will stimulate the increase in employees’ productivity which is very important and advantageous to long-run operation. Marketing Strategy Seek employees from other places that the unemployment agency. Mr. Jones could post ads in the local newspaper, for instance. Hiring better employees may increase productivity and decrease the turnover rate.

Hire more employees to meet demand.There will be no need to store the castings, as they are currently not meeting production. This will also shorten the time between order and delivery, which will be a positive to customers. More customers may choose to do business with Jones. Conclusion Working at Jones Ironworks Inc. is not an easy undertaking. It involves heavy, dirty and dangerous jobs for an extremely low wages starting at $1.

75 per hour. Not only Ironworks Inc. has low wages, but additionally there are fringe benefits of 20%. Throughout the years profit margins have been declining and are currently very low. If Frederick Jones Inc. s not able to raise prices, customers will eventually leave.

Having this in consideration, there are multiple suggestions that could help Ironworks Inc. stand up on its feet. One of those recommendations is to switch from hourly pay to a unit of production system for foundry workers.

When paid by hour rate, the employees have no financial incentive to work efficiently because that paying system does not get their earning related to their productivity so. On the contrary, the piece rate will encourage higher efficiency and production to some extent, because the more they produce the more they will earn.I agree with Freddie’s claim to replace the current low hour rate with the higher piece rate in order to keep more experienced employees staying at work and dramatically reduce the waste in time and money for training and outfitting new employees. Finally, even though the company is experiencing a profit squeeze, it isn’t possible for it to go out of business immediately due to paying a little higher labor costs.

Since the labor costs do not cover a big percentage of sales, the increase in labor cost will not have significant effect on its marginal profit, balance sheet, cash flow or working capital.