• Introduction• Case Findings• Problems• Reasons behind the problems• Questions and Answers
• Chads Creative Concepts is a company foundedby Chad Thomas that designs and manufactureswood furniture.• The company began by producing custom-madefurniture and within a short duration developed asolid reputation for creative designs and high-quality workmanship.• As company’s reputation grew and salesincreased, the sales force began selling some ofthe pieces to retail furniture outlets, which ledthem into the production of a more standard lineof furniture.
• Buyers of standard line furniture were much more pricesensitive and imposed more stringent deliveryrequirements.• Custom designed furniture, however, continued todominate sales, accounting for 60% of volume and 75% ofdollar sales.• Currently, the company operates a single manufacturingfacility where the equipment is mainly general purpose innature for providing flexibility to custom made furniture.• Both custom and standard furniture compete forprocessing time on the same equipment by the samecraftspeople.
• Sales of standard line is increasingsteadily, so it requires more regularscheduling, but custom made furniture is givenpriority because of its higher sales and profitmargins.• Thus, scheduled lots of standard furniturepieces are left sitting around the plant invarious stages of completion.
• The holding cost of the company is increasingwith dollars tied up in inventory, both of rawmaterials and work in process.• The company has to rent expensive publicwarehouse to accommodate the inventoryvolume resulting in further increase of holdingcost.• The increased lead times in both segmentshas resulted in longer promised delivery times.
What type of decision must Chad Thomas make daily for his company’s operations to run effectively? Over the long run?The situation that Chad is facing is between the manufacturing andturn over. He needs to focus on decisions onscheduling, inventory, capacity & layout.• He need to make scheduling decision to make sure there is not many raw materials as work in progress status. The standard line manufacturing need to be scheduled properly to avoid this problem.• The standard product’s warehouse is costly. So, he need to reduce inventory by deciding on good supply-chain and implement it.• As both the manufacturing line are well in demand and well increasing as well. So, he need to increase capacity to accommodate demand for both product lines.• He can also separate out the production lines after increasing capacity
How did sales and marketing affect operations when they began to sell standard pieces to retail outlets? As given in the case, the sales is growing steadily for thestandard pieces. This means, the front end team is workinggood, but the backend team, the operation is not effective toproduce that much of pieces to meet the demand and it is beingwaste in their warehouse or still under work in progress. We can saythat this is happening because the company is more focused oncustom line and gives it higher priority as compared to standard line.The is not the problem of sales and marketing but just a lesseffective operation which Chad should work on to resolve.
How has the move to producing standard furniture affected the company’s financial?• Finance and accounting of the company have indicated that the profits arent what they should be.• Costs associated with the standard line are rising because there is no active sale and the inventory is increasing in the form of raw material and work in progress which is holding the investments of the company.• Additional cost is increased because warehouse has to be rented to accommodate the inventory volume.• If this situation will continue, further Investment in product cycle will be low or even nil at one point of time
What might Thomas have done differently to avoid some of the problems he now faces?Few recommendations for Chad in order to reduce finance and slowmanufacturing process are as below -• Reallocate warehouse to a cheap and cost saving location.• Reduce raw materials from stopping under work in progress.• Change manufacturing schedule to reduce WIP stock of standard line.• Give same manufacturing priority to both custom and standard lines.• Enlarge the business capacity by enabling more facilities.• Recruit more staff or encourage its existing staff for overtime in order to reduce delay in manufacturing line.