Question

Chad's Creative Concepts designs and manufactures wood furniture. Founded by Chad Thomas on the banks of Lake Erie in Sandusky, Ohio, the company began by producing custom-made wooden furniture for vacation cabins located along the coast of Lake Erie and on nearby Kelly's Island and Bass Island. Being an "outdoors" type himself, Thomas originally wanted to bring "a bit of the outdoors" inside. Chad's Creative Concepts developed a solid reputation for creative designs and high-quality workmanship. Sales eventually encompassed the entire Great Lakes region. Along with growth came additional opportunities.

Traditionally, the company focused entirely on custom-made furniture, with the customer specifying the kind of wood from which the piece would be made. As the company's reputation grew and sales increased, the sales force began selling some of the more popular pieces to retail furniture outlets. This move into retail outlets led Chad's Creative Concepts into the production of a more standard line of furniture. Buyers of this line were much more price-sensitive and imposed more stringent delivery requirements than did clients for the custom line. Custom-designed furniture, however, continued to dominate sales, accounting for 60 per-cent of volume and 75 percent of dollar sales. Currently, the company operates a single manufacturing process in Sandusky, where both custom furniture and standard furniture are manufactured. The equipment is mainly general purpose in nature to provide the flexibility needed for producing custom pieces of furniture. The layout puts together saws in one section of the facility, lathes in another, and so on. The quality of the finished product reflects the quality of the wood chosen and the craftsmanship of individual workers. Both custom and standard furniture compete for processing time on the same equipment by the same craftspeople.

During the past few months, sales of the standard line steadily increased, leading to more regular scheduling of this product line. However, when scheduling trade-offs had to be made, custom furniture was always given priority because of its higher sales and profit margins. Thus, scheduled lots of standard furniture pieces were left sitting around the plant in various stages of completion.

As he reviews the progress of Chad's Creative Concepts, Thomas is pleased to note that the company has grown. Sales of custom furniture remain strong, and sales of standard pieces are steadily increasing. However, finance and accounting indicate that profits are not what they should be. Costs associated with the standard line are rising. Dollars are being tied up in inventory, both in raw materials and work-in-process. Expensive public warehouse space has to be rented to accommodate the inventory volume. Thomas also is concerned with increased lead times for both custom and standard orders, which are causing longer promised delivery times. Capacity is being pushed, and no space is left in the plant for expansion. Thomas begins a careful assessment of the overall impact that the new standard line is having on his manufacturing process.

QUESTIONS

1. What types of decisions must Chad Thomas make daily for his company's operations to run effectively? Over the long run?

2. How did sales and marketing affect operations when they began to sell standard pieces to retail outlets?

3. How has the move to producing standard furniture affected the company's financial structure?

4. What might Chad Thomas have done differently to avoid some of the problems he now faces?

Answer 1

Answer Q 1: The situation that Chad is facing is between the manufacturing and switch over. He should target decision programming, inventory, capability & layout. • He needs to build a programming decision to create bound there don't seem to be many raw materials as add progress standing. The standard line manufacturing needs to be scheduled properly to avoid this downside. • The standard product’s warehouse is pricey. So, he needs to reduce inventory by electing good supply-chain and implement it. • As every manufacturing line unit well in demand and well increasing what is more. So, he needs to increase the potential to accommodate the demand for every line of business. • He can also strain the assembly lines once increasing the capability

Answer Q 2: As given within the case, the sales area unit growing steady for the quality items. This means, the forepart team is functioning well; however the backend team, the operation isn't effective to provide that abundant of items satisfy the demand and it's being wasted in their warehouse or still beneath add progress. We can say that this is often happening as a result of the corporate is additionally targeted on custom lines and offers it the next priority as compared to the quality line. This isn't the matter of Sales and selling however simply a less effective operation that Chad ought to work on to resolve.

Answer Q 3: • Finance and accounting of the company have indicated that the profits are not what they have to be.• costs associated with the standard linear rising as a result of there is not any active sale and thus the inventory is increasing inside the fashion of fabric and add progress that's holding the investments of the company.• any worth is increased as a result of the warehouse should be rented to accommodate the inventory volume.• If this case will continue, any Investment within the product cycle is low or even cipher at one purpose of some time

Answer The Q 4: Few recommendations for Chad thus on prune finance and slow producing methodology unit of measurement as below -• apportion warehouse to an affordable and price saving location.• reduce raw materials from stopping below add progress.• modification manufacturing a schedule to chop back WIP stock of traditional line.• supply an equivalent manufacturing priority to every custom and commonplace line.• Enlarge business capability by sanctionative extra facilities.• Recruit extra staff or encourage its existing staff for overtime thus on prune delay in the manufacturing line.