The Louisville Slugger
The Louisville Slugger has been at the heart of baseball since 1884. A brand name of The Hillerich & Bradsby Co., Slugger has dominated the market of wooden bats for decades. However, in the 1970's, introduction of aluminum brought unforeseen changes within the company's industry. When aluminum bats were approved for amateur and college play, the wood bat production fell from 7 million to 800 000. H&B had to do something about it; otherwise, they would be out of business. Meanwhile, large aluminum companies were already involved in the baseball bat production, in order to increase their aluminum sales. Alcoa Inc. was one of them. Slugger made a decision to buy Alcoa manufacturing plant in order to establish its own production. That was an exceptionally smart solution. By doing so, they exempted themselves from unnecessary competition. If they had let Alcoa continue produce bats, Louisville's enterprise, probably, would have come to a halt. Afterwards, Slugger has built a new plant in California. The location was chosen in order to stay closer to the major aluminum suppliers. Transportation costs of materials play a significant role on the net present value (NPV). NPV is the difference between the market value of the product and the cost of its production. Therefore, close location to the materials supplier decreases the cost of production significantly.
Slugger makes three different varieties of bets. Adult bets, youth bets, and softball bets. They all feature barrel diameters between 2 and 2 ¾ inches. Tubes are cut to lengths from 16 to 30 inches. Therefore, a number of different set ups is provided to facilitate manufacturing. It is a well-known fact that product variety adds to costs for any assembly. Various tube sizes have to be cut that raises material losses. Workers have to modify five different machinery set-ups every day. It takes from 10 to 15 minutes to make that change. In total one hour of the productive time is wasted just to adapt to the new product. Therefore, manufacturing productivity decreases. Productivity is a measure of how well inputs are used in the business. It is a ratio of the created product to the input applied. In order to calculate the cost of machinery alteration, an amount of items manufactured has to be known beforehand. Louisville plant produces 5500 bats a day. If we divide a total number of bats by the amount of hours a day, we will get 229 bats manufactured each hour. Hereafter, we should multiply this amount by the market price of a single bet to determine the cost of the time spent on the machinery alteration.
The next important concept is machine utilization. It is a productivity measure for equipment that is equal to actual running time divided by time available. This figure is expected to decrease with the increase in the product variety. There are about 300 models of bats currently produced at the Ontario plant in California. There are approximately 50 machinery set ups that have to be operated to facilitate manufacturing.
Aluminum bats are more complex to make. In order to increase efficiency, an employee is trained on one station only. This tactics assists workers to gain good skills; therefore, their performance is increased significantly.
There is a considerable demand for aluminum bats in baseball today. However, professional league has not accepted them yet. This has to do with the ball speed. It has been proven that baseball hit by the aluminum bat came off so fast that it could hurt the player. Consequently, NCAA Executive Committee approved the new ball-speed standards requiring the baseball to come off no faster than 93 mph. Therefore, new bats had to perform like wooden bats. This was quite a challenge for the bat producing companies. Transition to the new bat design would increase the company's losses. It takes three years to create, test, and implement new alloys for the bat's manufacturing. Therefore, the company has to continue producing bats that do not qualify for sports competitions, yet only for the home use. Consequently, market share reduces causing a substantial profit loss. When a regulating agency brings new design standards, manufacturer is forced to buy new materials or equipment to fulfill those requirements. For instance, in 1998, NCAA mandate imputed that bats used by college players had to be heavier and narrower. That requirement would involve some new material to be placed inside the tube; otherwise, thickness had to be increased. This is a good example how significant it is to maintain the safety-stock levels. This is an additional inventory used to help in meeting the demand uncertainty. Sports industry companies should adapt to technological changes constantly in order to adapt to new standards.
Hillerich & Bradsby has its own plant in California. All the processes are maintained by them from start to finish. They have an enormous technological capability to bring changes to their designs and follow new trends in the market. The company's peak shipping periods are in February and March. The plant has plenty of operating time to administer new modifications.
Louisville Slugger continued to maintain its market share due to timely response to technological changes by purchasing fully stocked plant in California back in 1970's. Heaving learned how to manufacture aluminum bats, Slugger provided itself with a strong customer base that makes up 95% of all consumer market today.