Chad’s Creative Concepts Case Study

ASU Chad’s Creative Concepts Case Study

CHAD’S CREATIVE CONCEPTS

Suggestions for the case

Please use sections in your report 1. Executive Summary 2. Background You need to include some background especially the focus on custom designed furniture and the sales and profits from these two product lines 3. Objectives You need to outline objectives of the firm 4. Analysis This will include the four questions 5. Results 6. Conclusions and Recommendations

 Background

Chad Creative Concepts designs and manufactures wood furniture. This case describes a small furniture manufacturing company that has gained a reputation for creative designs and quality by focusing on producing custom-designed furniture. As its reputation grew, it began to sell some standard furniture pieces to retail outlets. The overall growth in sales volume and the diversification into the production of standard furniture pieces have caused a number of issues to arise concerning both the internal manufacturing operations and its relationship to the other functional areas of the company.

Objectives

Each team needs to discuss the short and long-term objectives for Chads Creative Concepts Major objectives this company faces: 1. Resolve issues and decisions in designing and operating processes 2. The impact that these operating decisions have on the organization, and on marketing and finance 3. The impact that decisions made in other functional areas of the organization have on the operating function 4. The need to go beyond the “functional silo” mentality and manage in an integrative manner so all the functions in this company not just manufacturing customer furniture Analysis

Question 1: What types of decisions must Chad Thomas make daily for his company’s operations to run effectively? Over the long run? You need to discuss a number of short-term-oriented decisions that are facing Chad Thomas. These should include:

a. How to set priorities and schedule different orders. Chad is receiving orders for both custommade, low-volume furniture pieces and higher-volume, standard pieces. Sales have increased, but the amount of equipment and the production capacity of the company have not. Different orders with different manufacturing requirements are now competing for the same productive capacity. b. What orders to accept and how long of a lead-time to plan for in promising a delivery date. c. What type of work policies should be maintained for his employees? Decisions such as the number and type of employees to employ, the number of hours to work per day, and the amount of overtime to allow are all work policy decisions that impact the available capacity level. d. The allocation of resources, equipment, labor, and money to each product line. e. The level of inventory to maintain at various stages of the production process for both the custom and standard furniture lines (i.e., raw material, WIP, finished goods). These decisions are linked to the longer-term, total inventory-investment decision.

Long-term decisions that face Chad Thomas include:

a. Amount of money to tie up in the total inventory investment. b. The type of equipment to invest in to support efficient production. At what point should more specialized equipment be purchased to manufacture high-volume, standard furniture pieces more efficiently? c. What should be the overall workforce level to maintain, and what should be the proper mix of skills and capabilities? d. How should the facilities be laid out to accommodate the two different product lines? Discuss the whole range of capacity and equipment allocation decisions including size, type, and configuration. Your team should see the significance of consistency of both strategic and operating decisions across functional areas.

Question 2: How did sales and marketing affect operations when they began to sell standard pieces to retail outlets? • • Standard furniture pieces compete on a different set of competitive priorities than customdesigned pieces. Timely delivery and low costs are much more important than product flexibility. Quality may also be defined differently. The existing facilities are set up to provide flexibility with its job-shop orientation and generalpurpose equipment. By introducing a standard line that should be manufactured on a flow line with some dedicated, more specialized equipment, a conflict has developed, and scheduling problems have resulted.

Question 3: How has the move to producing standard furniture pieces affected the company’s financial structure? Some points that the teams need to address: • • • Inventory investment and operating costs are rising because of the frequent changeovers to accommodate the two different product lines and their scheduling conflicts. Profit margins for the standard line are smaller, which puts pressure on manufacturing to increase productivity and reduce costs. There may also be an issue concerning the assignment of overhead costs to each product line. Finally, the potential need to rent warehouse space to store either WIP (Work in Process) or finished-goods inventory cuts into the profit margin for the standard furniture line.

Question 4: What might Chad Thomas have done differently to help avoid some of these problems he now faces? Chad needs to address issues relating to functional areas. Please identify decisions that relate to more than one functional area. Examples include the following: Operations Function

• Monitoring capacity and utilization of facilities Formulating inventory policies—dollars, items, and unit levels Setting scheduling policies and priorities Maintaining product line quality Marketing and Sales

 • Accurately forecasting orders for standard pieces Defining market segments and customer needs Determining what delivery schedules can be promised to customers Finance

• Deciding level and type of investment Investigating the effect of capacity investment decisions on ROI Distribution/Logistics

• Managing distribution and pipeline inventory Comparing cost and advantages of various transportation modes Meeting delivery lead times Results Teams will have to come up with results from the analysis Recommendations Teams may want to consider the following:

• Established a plan for a more controlled growth. Part of this plan would be the development of the appropriate infrastructure to manage a controlled growth as to what markets to enter, what product lines to develop, and how to develop the proper manufacturing capabilities.

• Maintained the company focus on custom-designed furniture only. This alternative presents a completely different set of issues and decisions pertaining to future growth, but it would have avoided the issues of mixed competitive priorities and scheduling conflicts.

• Realized the different requirements for each product line and focused the manufacturing facilities into two separate sets of production facilities designed to cater to each product line’s specific needs. Recommendations This case should help your critical thinking about the types and the integrated nature of decisions that operations managers face. In your recommendations, understand the implications of their recommendations for the Chad’s Creative Concepts Company as a whole as well as its functional areas. You can use the Table given below to display and discuss important issues. Each column can be used to compare and contrast the differences in the requirements imposed by custom versus standard furniture for each area.

TABLLE Important Issues Marketing Quality level and quality control Process equipment Process flow Production scheduling system Purchasing Type of inventory and inventory control system Type of engineering Type of labor and supervision needed Wage/reward system Layout Custom Furniture Standard Furniture