Question

Paper Co. is a medium-sized manufacturer of sanitary tissue products based in New York. The company has been in business for over 43 years, mainly producing toilet paper and paper towels that are sold exclusively through its retail network across the United States. Through the years, it has been gradually expanding its production capacity and consumer base. However, over the past month and a half, the company has been faced with an unprecedented and unanticipated increase in demand, which has cleared out all its storage facilities and exceeded its manufacturing capabilities. At this time, the demand continues to be high. The company has an existing storage facility, which can be converted to a new production line. The new production line would significantly increase the existing manufacturing capabilities. However, this would require a substantial investment in remodeling of the facility and purchasing of expensive equipment from a producer in London, UK. To proceed with this option, it would be also necessary for Paper Co. to obtain a loan from a local bank and hire additional staff. It is estimated that it will take at least one month for the new production facility to start producing. Paper Co. leadership is faced with a dilemma. If they don’t expand the current capacity, they risk losing the market share to competitors that are more flexible in adapting to higher demand. At the same time, the expansion is very costly and the long-term demand is uncertain. You are hired by Paper Co. as a consultant to help make the right business decision and to come up with an action plan.

Part A Question: How would you recommend for Paper Co. to proceed? Should it stay with the same production capacity or increase it as described above? Based on the knowledge acquired in the course, please provide a detailed explanation of the rationale for your recommendation.

Part B Question: Please describe potential challenges Paper Co. could be facing as a result of the decision made in Part A:

1) One month from now 2) Three months from now 3) One year from now

State the challenges and explain how you would recommend Paper Co. to address each of those challenges.

- Your report should be no more than four pages (font size 12) in length. Please do not exceed the length restriction for this assignment.

- Please cite your references

Answer 1

Answer A.
As per the details mentioned in the case study the company is facing the problem of selecting any one of the choices it has. The first is to make the production by itself which requires huge investment and the demand is also uncertain in the future and the second is that the company may lose the existing extra demand to its competitor and its potential profitability may be reduced. Taking into consideration the two possibilities I would the recommend the company paper Co. to outsource the order to a outside company who can be able to produce under its brand name, this will insure two things, the company can wait for few months and see the fluctuation in the demand if the demand is constant the company can plan its own production and if the demand is inconsistent the company may stop ordering from that company it is outsourcing. Taking this option into consideration the company will also not lose the potential demand to its competitor and also it will not require the company to invest huge amount in production.
Answer B.
Case 1. 1 month from now the company will buy paper towel and toilet paper form and outside company and look at the quality and cost at which it is buying if it is satisfied with it it can go on with it.
Case 2. 3 months from now the company can look at the the demand pattern, depending upon the demand the company will start strategizing its action for the future. Immediate decision although cannot be taken at this stage, but it will give it an idea of the the pattern of the trend.
Case 3. One year from now the company will be in a good position of taking the decision, it can now finalize as to whether the production factory is required or not. If the production factory is required the company can go on with it starting it.
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