CASE Chad\'s Creative Concepts Chad\'s Creative Concepts designs and manufacture

Question

CASE Chad's Creative Concepts Chad's Creative Concepts designs and manufactures wood furniture made. As the company's reputation grew and sales increased, the sales force Founded by Chad Thomas on the banks of Lake Erie in Sandusky, Ohio, the began selling some of the more popular pieces to retail furniture outlets company began by producing custom-made wooden furniture for vacation This move into retail outlets led Chad's Creative Concepts into the produc- cabins located along the coast of Lake Erie and on nearby Kelly's Island and tion of a more standard line of furniture. Buyers of this line were much more Bass Island. Being an "outdoors" type himself, Thomas originally wanted to price-sensitive and imposed more stringent delivery requirements than did bring "a bit of the outdoors" inside. Chad's Creative Concepts developed aclients for the custom line. Custom-designed furniture, however, continued to dominate sales, accounting for 60 percent of volume and 75 percent of dollar sales. Currently, the company operates a single manufacturing pro- cess in Sandusky, where both custom furniture and standard furniture are Traditionally, the company focused entirely on custom-made furniture, manufactured. The equipment is mainly general purpose in nature to provide with the customer specifying the kind of wood from which the piece would be the flexibility needed for producing custom pieces of furniture. The layout solid reputation for creative designs and high-quality workmanship. Sales eventually encompassed the entire Great Lakes region. Along with growth came additional opportunities.

Explanation / Answer

1. The issues behind the lowering of productivity levels are excessive inventory lying at different stages of the production process, i.e. raw material, work in progress and the finished goods. This inventory is related to the standard line of furnitures that has lower margins and is growing with time. High lead time needs space to park the inventory which has to be taken on rent as the existing capacity of storage has exhausted, which increases the overall cost. Further the time is a precious commodity,which translates into money. The time devoted to standard line of furniture which has lower margins,on expense of custom furniture which yields better profits results in overall decline of revenue.

2. The growing rate of the standard line furniture manufacture causes accumulation of inventory at different levels which causes the resource usage to its capacity which in turn causes the company to hire more space on rent which increases overall cost of the process which causes decrease in profitability.

3. The root cause of all events is the increasing dediication of resources to the standard line of furnitures which consumes 40% of volume but yields only 25% of revenue. This affects the overall profitability.

4. Chad can make the production line more flexible to accomodate mass production, strike right balance between the two types of furnitures to maximise productivity and reduce the lead time and inventory using appropriate techniques.

5. The most urgent cause is to manage the right inventory levels to bring the cost down. This will remove the unnecessary part of cost whcih hampers the profitability.

6. Chad needs to analyse the rate of movement of different standard items from the shelf, their lead times and variability of orders. He needs to identify the items which consume more resources and yield little profits and remove them from the time being till the capacity expands.

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