Economics and Lead Time

CASE ANALYSIS FOLDRITE FURNITURE CO. PLANNING TO butt on A SURGE IN DEMAND Submitted to Submitted by Dr. P. K. Dash AbhinavAnand operations Management PGDM-BHU010 Case facts about FoldeRite Furniture- * Established in 1987 * passim 1990s caller-up grew organically. * 1999-2006 annual growth rate 3. 5%. (More than merchandise growth rate) but one competitor grew by 6% annually. * In 2006 companys performance was very bad due to future(a) concluded reasons- * Loss of productivity and yields caused by high school labor turnover. embody of raw materials was increasing * Increasing proportion of un trained labor. * Continuous encyclopaedism of small firms which distracted steering from their main issues. * This thing also generated liquidness rookage * These things resulted in reduced margins as well as outgrowth lead time from 4 to 6-8 weeks. Major policies that company adopted aft(prenominal) change in management- * New CEO marshal Epstein from a study consumer goods comp any was appointed. * Manufacturing VP Jose Ramose was hired. Together they decided 4 major goals- * Continued trigger in both products and processes, * Customer responsiveness producing high bore products that fulfilled market needs, and providing quick service, * Lean manufacturing, and * Retention of a well-trained, stable, and productive workforce, with reduced turnover. * Reduced no of products to provide high quality products. Consequences- * All these helped in reduction of lead time. * They had a $60M revenues and profitable condescension recessionQues-(01) what are the Manufacturing Options purchasable with Mr. Martin Kelsey? Ans. The objective of the aggregate plan was to certify comprise-effective ways to meet the demand while maintaining productivity, quality, reliability and providing on-time rescue at effective yields. The following are the manufacturing options with Mr. Martin Kelsey 1. The first option available was to ask the lag to work an extra shift. 2. In crease the faculty temporarily to take advantage of idle production capacity. 3.Changing the designs of the cloud extend slightly to require one minute less in fictionalisation 4. To increase the amount of inventory using a constant level of production. 5. The last option available with Kelsey was subcontracting part of work, such as the perform of seats for stackable chairs. Q2. What are the financial implications of the three options? How does it impacts the lead time? recompense of the Skilled workers is = 19 + 33% of 19 = 25. 27 Wages of the unlearned workers is = 9 + 10% of 9=9. 9 Change StrategyIn alstrong, the hiring apostrophize would be zero for skilled and $2593. 5 for unskilled labors. The layoff cost would be $327288 for skilled $349752 for unskilled labours In case of cloud chairs, the hiring cost would be zero for skilled and $633. 6 for unskilled labours. The layoff cost would be $264342 for skilled $533520 for unskilled labours In case of fountain comfort, th e hiring cost would be zero for skilled and $1662. 5 for unskilled labours. The layoff cost would be $214058 for skilled $231270 for unskilled labors Subcontracting StrategyIn case of cloud chairs, units subcontracted cost would be $720355. 32. In case of alstrong, units subcontracted cost would be $46959. 28. In case of green comfort, units subcontracted cost would be zero. The lead time depart reduce in all the 3 cases. Ques (03) what are the risks? How does each of the options accommodate changes in parsimoniousness and environment? Ans. The risk associate with it are Financial Risk- * jibe to their CFO Yung credit situation is tight. * They have to generate cash from pricey resources as expensive as 12% p. . Human resources Risk- * Hiring a skilled worker would cost $1500 * Supervisor cost for these workers $25 per mo + 33% for benefits * Training of unskilled worker takes 4 weeks during which full fight are paid. Changes in economy and environment are as follows 1. If sta ff would be doing overtime than it would increase the productivity in short mold but at the same time this would have lead to wear upon and boredom among the staff leading to settle in efficiency. 2.Hiring staff temporarily would automatically increase the cost of training and would also require management and supervision resources. 3. If the demand did not materialize than laying of the workers would demoralize the rest workforce and cost the company in adding unemployment. 4. Another major line was the cost of carrying inventory beyond two weeks. Ques-(4) Weighing options in border of non-financial implications Ans. The non-financial implications are 1. Overtime work done by EmployeesThis entrust assume the profitability in short stipulation in a substantiating manner but in long terminus as the workers do have chance of getting fatigue it might lead to decrease in quality of product which in turn decrease the profitability. The overtime formula will not affect the rela tionship among employees but the competitiveness will affect if the efficiency decreases in long run. 2. Increasing the staff This will lead to increase in profitability in short term as well as in long term if company does not lay off workers. The sales will increase if the efficiency of work increases as a result of increase in workers. . Changing the Design In short term there will be a decrease in profitability as the company would have to pay a onetime charge of $15000 but in long term as because of innovation the profitability will increase. Dut to innovation the company will have a competitive and also the sales will increase as its a new knowing product. 4. Sub contracting The company will focus in the core area which will lead to profitability in short term and long term both. This will further lead to increase in sales as a result of efficient production. The employee morale will also be boosted because of increase in sales.