Chad’s Creative Concepts began as a manufacturer of high-quality, custom-made wooden furniture. The client base has been the vacation cabin residents surrounding its Sandusky, Ohio location. The company grew successful selling its custom furniture and eventually as sales increased, the sales force began selling to retailers. The furniture demanded by retailers is standardized, price sensitive, and requires faster delivery times. Sales of both lines of furniture are doing well, but the manufacturing facility is facing some problems.
The standard line is competing for processing time on the same equipment as the custom line, which is resulting in unfinished inventory laying around the facility. The plant has run out of excess capacity and must rent expensive warehouse space. Chad must determine how to best meet the competitive priorities of both of his furniture lines in order to manage his operations most successfully. Gaps in Chad’s Operations Strategy The initiative taken by the sales force to sell to retailers directly impacted the operations at the production facility.
Sales and marketing of the standard furniture line put constraints on the staff and equipment at the plant, as they tried to meet the demands of both of the furniture lines. Sales and marketing also impact the delivery times imposed on the processing team. A new production schedule was not implemented with the addition of the standard line. Instead, the custom line receives priority while the standard line is often left waiting at various points in the process. The move to produce standard furniture has left profits lacking.
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While the company and sales of the standard line continue to grow, the costs of producing the standard line are also increasing. The bulk of volume and sales are still in custom furniture. Money is being held in inventory as parts wait to be processed. Additionally, money is being spent for warehouse space to hold inventory. Future Alternatives As the company grew, it should have taken some steps to prevent the current problems. Analyzing these alternatives may help Chad restructure his operations strategy.
The manufacturing schedule should be analyzed and redesigned, perhaps using Gantt charts, so that both lines of furniture can be processed most efficiently. The capacity utilization of work stations and equipment should be analyzed to find room for improvement. The costs and benefits of separating the furniture lines could be considered. Chad and his management team should implement just in time or lean inventory strategies, so that money is not tied up in work in progress or raw materials. Planning software could help Chad better forecast inventory needs and utilize capacity.
If increased productivity in the current plant still cannot meet demand, Chad may need to consider investing in additional space, equipment, and labor. The most restrictive alternative would be to eliminate the standard line and focus only on high quality, custom furniture. References Krajewski, L. , Malhotra, M. , &Ritzman, L. (2013).
Chad’s Creative Concepts. Operations Management Process and Supply Chains (pp. 29-30).
Upper Saddle River, NJ: Prentice Hall. Appendix Appendix A. 5-Step Critical Thinking Decision-Making Process Matrix Step 1: Identify the problem(s) and uncertainties.
What exactly is the problem… The addition of the standard line of furniture is affecting the operations at Chad’s Creative Concepts. The problem is this … The standard line costs are increasing as sales are increasing. The custom and standard lines are competing for processing time on the same machines resulting in unfinished inventory laying around the facility. The plant is pushed to capacity without any excess space left. Processing and delivery times are increasing. Rented warehouse space is very expensive. This is an important problem because… Chad’s bottom line is being affected.
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Profits are not where they should be. Costs of the standard line are increasing. The plant has run out of extra space. The key question(s) that needs to be answered to solve this problem is… How does Chad’s Creative Concepts meet the competitive priorities of both the custom and standard lines of furniture and achieve his operations strategy successfully? Does Chad keep the standard line of furniture? Step 2: Obtain information. The following information is needed to answer this question… The custom line makes up 60% of the volume and 75% of sales. Sales are rising for the standard line.
Costs for the standard line are also increasing. Money is tied up in inventory. Warehouse space is expensive to rent. There is no room to expand in the current facility. Customers of the standard line are price sensitive and demand fast delivery times. The equipment used is general purpose and flexible. Some important assumptions I am using in my thinking are… Buying a new space may be feasible, as well as adding additional equipment and staff. The market for vacation cabin furniture may be more saturated than the market for standard furniture sold at retailers.
The points of view relevant to this problem belong to… Chad Thomas, sales force, plant workers, and customers. Note: Remember to view the information you have obtained for potential bias. This is from the perspective of your own bias to the research and the bias of the authors who compiled the data and the research you gathered. In other words, do not discount the importance of other’s data because of your own bias(is).
Step 3: Make predictions about the future. If this problem gets solved, some important implications are… If Chad can run both lines efficiently, costs and profits may both increase.
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If products are produced more efficiently then sales would need to go up, requiring more of the sales force. Improvements in processes could decrease lead times and improve delivery times. Better inventory management could eliminate the need for renting of the warehouse space. If this problem does not get solved, some important implications are… Lead and delivery times will continue to increase. Production may not meet demand and customers might be lost. Profits may decline in the long term. The potential alternative solutions to solve the problem are… Changes to improve the manufacturing schedule could be made.
The same amount of priority could be given to both lines. The lines could be separated within the facility or additional space could be purchased. Staff and equipment could be increased to improve productivity. Just in time inventory practices can be implemented to reduce the use of warehouse space. The standard line could be eliminated. Changes to the layout and capacity utilization of work stations could be made. Note: if the problem is one-dimensional, there may be just one correct solution. Step 4: Make decisions by choosing among alternatives. What is the best solution and why…
Chad should analyze and improve his scheduling, capacity planning, and inventory management to process both furniture lines better. Currently, the manufacturing schedule is running without any set organization which is hurting the standard line and producing excess inventory. The standard furniture line should be analyzed to create a forecasted schedule and just in time inventory management should be implemented to free up space. The capacity utilization of each workspace should be analyzed to make any possible adjustments to improve productivity and efficiency.
