Chads Creative Concepts
Harmanpreet Singh
500284928

Question 1
During the course of a regular business day, Chad Thomas makes many decisions in order for his company to run effectively. On a daily basis Chad must decide which production type he will focus on for the day. Since he produces two lines of furniture, standard and custom, he must decide which one gets the priority when both orders need to be completed. Since he usually bases his decisions based on profits, the custom line usually gets completed first. Deciding which product to produce satisfies the order fulfillment process, which is core to effective daily operations. In order to meet the demand, Chad also needs to allocate machine hours for each production type. Since both lines require the same machines it’s a constant balancing act. Chad also takes his employee hours into consideration because his employees are all specialized in different aspects of the manufacturing process. Chad preforms supplier relationship process duties because he need’s to order specific materials for the customized pieces from his suppliers.

In order to Chad to be effective over the long run he must reduce the lead times on both the custom and standard line of furniture. With the increase in volume, Chad finds it difficult to meet the promised delivery dates for both custom and standard line. Increased lead times has had a ripple effect throughout the company. Increased lead times results in added costs such as storage and inapt use of raw materials. Training employees to become more flexible can improve long-term effectiveness. Currently, each employee is specialized at one stations, this could cause a backlog of work incase of high volume in one area or if an employee is out sick. Allowing different employees to work in different areas will reduce lead times. Chad must also worry about expansion in the long run. Currently, the company has no more space for storage and is renting out storage units. Storage units are cutting into their profits. Chad needs to relocate the business by moving into a larger space. The larger space will allow him to store the extra inventory, work-in-process and create two different production lines. Two production lines will help reduce the lead-time and scheduling would be easier.

Question 2 Since Chad Thomas decided to sell his furniture at retail outlets, he created a standard line for his more popular pieces. Since entering the retail outlets, Chad’s sales and marketing has increased. Marketing was generally done through word of mouth because his customers really enjoyed the workmanship. Since his custom line was already popular, the standard line had no trouble gaining traction. Customers who first purchased a standard line, learnt about the custom line. When some of the customers made the switch over, Chad realized more sales and ultimately higher profits.

The gain in sales made an impact on their operation. Since their operation was only set up for the custom line, the increased volume created higher lead times in both their product lines. Operation did not flow seamlessly as before because machining and labour hours were not scheduled efficiently. Custom line had gotten the priority because the profits were higher. Prioritizing the custom line over the standard line meant that the standard furniture line was left sitting in various parts of the warehouse. This also led to a storage issue, forcing Chad to invest in additional storage units, thus adding to their costs. Delivery times could not be met for the standard line or custom line because of the increased volume.

Question 3 Creating a standard line to sell at retail outlets has proven to be more difficult that previously thought. On the surface the idea seems to be working but the execution was not well done. The standard line had increased sales, but the profits are not equivalent. The profits did not grow at the same rate as sales. The custom line still accounts for 60% of the volume and 75% of dollar sales. The reason why the standard line was not as profitable was because there are too many costs associated with the line. The customers who purchase the standard line tend to be price sensitive and imposed more stringent delivery requirements. Thus, the profits are minimal with the standard line. Since Chad started producing the standard line, volumes have increased to the point where extra storage is needed. Extra storage cuts into the profits that were acquired from the standard line. The remaining profits are also tied up in raw materials and work-in-process. Increased volume meant that the custom line was given priority, so those unfinished standard line products are just left sitting around.

Question 4 There are many things that Chad could have done differently to ensure both his product lines succeeded. Chad should have started off by evaluating how much production materials, labour hours, and machine hours were required to produce both lines simultaneously. He should have done this by using various scheduling techniques. Chad could have set policies in effect such as production rate for each line or which pieces will get priority. Even before deciding to produce the standard line, Chad could have set his plant up for maximum utilization. He could have stress tested the whole setup before he started selling in retail outlets. If he had stress tested the production line, he would have realized that the setup or production method did not fully utilize the equipment or labour. Everything should have been planned from the get go. Chad should have setup two different production lines for his furniture lines. One line should have strictly focused on the custom pieces. That line would require the highly skilled workers because of the high skill level needed to produce a custom piece. The second line, for the standard piece, would require more employees and less skill because the main focus is lead-time. Reducing lead times would help with the storage issue Chad faced and would have kept his customer happy.

Chad needed to explore more ways to reduce the costs associated with the standard line, since the profit margins are smaller than the custom line. The standard line customers are very price sensitive and require more stringent delivery times so reducing the lead times would have made his customers happier. Chad should have also hired an operations manager to oversee all the activities. He could have helped realize the issue before entering the retail outlets. If Chad had entered the standard line with all these considerations operations would have run smoothly. Production volume would have increase, efficiency would have been higher and all machinery and labour hours would have been used to its full potential.