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Case Study of by Decision Tree Hawthorne Plastics Inc

In: Business and Management

Submitted By archanapw
Words 1454
Pages 6
Hawthorne Plastics, Inc.

Hawthorne Plastics, located in Hawthorne, California, specialized in the fabrication of plastic parts as a subcontractor to companies marketing plastic products, such as manufacturers of toys, kitchenware, fishing tackle, etc. Most of its production involved the molding or extrusion of plastic raw materials and over half of its production was for two major manufacturers of toys, located nearby. The vast majority of its customers were located in Southern California, with a few in Arizona, Nevada, and Northern California. In its market area the company was known for its high quality, low cost products. Its low cost was based on extremely efficient production methods, so efficient that on some items it produced at prices lower than the costs of the company for which it was subcontracting. Other items were produced for companies lacking their own production facilities. Still others (about 40% of total dollar volume) were produced as “overflow” for companies whose own production facilities were operating at capacity.

On October 10, 1968 Hawthorne had just signed a contract to deliver 100,000 lbs of plastic strapping to the David F. Pynes Strapping Co., located in nearly Gardena, California. Pynes produced and sold a line of plastic strapping, the fastest growing part of which was used for bundling such items as magazines and newspapers. Plastic was rapidly displacing bailing wire in this segment of the strapping market. The cost of wire and plastic were comparable but plastic was more flexible than wire. Using plastic results in fewer newspapers or magazines being torn by the strapping material when the bundles were thrown during shipment.

The price per pound that Pynes would pay depended on the quality of the strapping that Hawthorne delivered. Pynes had agreed to pay Hawthorne 60 cents per pound for high quality strapping and 50 cents...

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