To: Chad Thomas, President, Chad’s Creative Concepts
From: Consultant

Background
Chad’s Creative Concepts located on the banks of Lake Erie in Sandusky, Ohio, designs and manufactures wood furniture. The company developed a solid reputation for creative designs and high-quality workmanship. They focused entirely on custom made furniture. Their customers specify the kind of wood that’s used to create the pieces they want. As the company’s reputation grew and sales increased, the Chad’s Creative Concepts began to sell some of its more popular pieces to retail furniture stores. This has allowed the company to produce a more standard line of furniture. These buyers however, are much more price-sensitive and impose a more stringent delivery requirement. Over the past few months sales for the standard line furniture has increased, however custom made furniture has continued to dominate their sales. Although the company’s sales for the standard line has increased, scheduling trade-offs have to be made to meet the demand of the custom made products because of the higher profit margin from the custom sales. This has led to a delay in shipping of the standard line furniture, a lack of warehouse space and increased lead times for the standard line of furniture.

Analysis
Significant issues have been identified with the company’s standard line of furniture. Although sales have increased, the custom made line has taken precedence, leading to customers who are not able to receive the standard line in a timely manner. This has created long lead times as well has because a backlog in the warehouse space. Sales have indicated that there is a steady increase in the standard line furniture, but because the profit margin is much greater with the custom line, these customers are being pushed behind the custom orders. The company is now using expensive rented warehouse space to accommodate this inventory volume. Currently the manufacturing process is only being done in Sandusky; this is contributing to the backlog and lack of warehouse space. Sales and manufacturing areas need to look at a better way to streamline this process in order to avoid any customer delays. With the continued increase in sales, this area needs to be closely monitored to avoid dissatisfied customers and the potential of loss of revenue from lost sales.

Conclusion
In order for the company to continue to keep up with current and future demands recommendations are to open up another location that focuses on the standard line. This would alleviate any warehouse issues, as well as allow the company to meet the customers’ requirements as related to lead times. This would also save the company of the cost currently being spent on expensive warehouse space for inventory. It is also recommended that the company re-evaluates the layout of the manufacturing process and equipment configurations in order to reduce setup times. In doing so focus should also be pointed to the current resource allocation of raw materials. Do you have what is needed? Are the delays a result of waiting for materials? This evaluation will also help to determine if the company has the manpower needed to get the orders completed in a timely manner. Strategic decisions should also evaluate the long-term impacts and consequences to the company by developing forecast methods to understand the customer demands.

Reference
Krajewski, L., Ritzman, L., & Malhotra, M. (20103). Operations management: Processes and supply chains. (10th). Upper Saddle River, NJ: Pearson

5-Step Critical Thinking Decision-Making Process Matrix
Step 1: Identify the problem(s) and uncertainties.
What exactly is the problem… The company has had an increased volume in sales due to the standard line of furniture they sell, however because the custom line brings in more revenue, those standard line sales are pushed back to meet the demands of the custom sales. This is causing a delay in delivery, lack of warehouse space, and increase in lead times. |

The problem is this … Do you have the correct manpower needed for the increase in volume? Are all raw material available to produce both lines of products |

This is an important problem because… The delay in delivery and lead times can cause dissatisfied customers and a loss of revenue. |

The key question(s) that needs to be answered to solve this problem is… Why are there delays?What is contributing to the delay in lead times?How much is required to be produced to keep up with demand?Are raw materials available or is this delay causing the backlog? |

Step 2: Obtain information.
The following information is needed to answer this question… What type of decision must management make for the company operation to run effectively? |

Some important assumptions I am using in my thinking are… How did sales and marketing affect operations when they began to sell standard pieces to retail outlets? |

The points of view relevant to this problem belong to… Management and its current and future customers. |

Note: Remember to view the information you have obtained for potential bias. This is from the perspective of your own bias to the research and the bias of the authors who compiled the data and the research you gathered. In other words, do not discount the importance of other’s data because of your own bias(is).
Step 3: Make predictions about the future.
If this problem gets solved, some important implications are… Sales can continue to increase which will give the company a continued increase in revenue. Also can help the company to grow and obtain new customers. |

If this problem does not get solved, some important implications are… The company will lose revenue. The company can lose its customer base. Can get a bad reputation. |

The potential alternative solutions to solve the problem are… Increase manpower, open up another location to meet demands. |

Note: if the problem is one-dimensional, there may be just one correct solution.
Step 4: Make decisions by choosing among alternatives.
What is the best solution and why… Strategic planning to forecast demands, open up another location to focus on the standard line manufacturing. |

Step 5: Implement the decision, evaluate performance, and learn.
In business, the fifth step in the decision making process is implementation. In the MBA program, most times you will end with Step 4 since you will not have the opportunity to implement. You may be asked to develop an implementation plan and recommend how you will evaluate performance in some assignments.

Criteria | Unacceptable | Acceptable | Proficient | Student Score and Comments | Develops an opening paragraph that introduces the case. | Vaguely develops an opening paragraph that introduces the case or does not have an opening paragraph.(0-3 points) | Develops an opening paragraph that introduces the case and, for the most part, fulfills assignment requirements.(4 points) | Develops an opening paragraph that introduces the case and demonstrates solid ability to accomplish the assignment.(5 points) | | Analyzes how sales and marketing affect operations when they began to sell standard pieces to retail outlets. | Vaguely analyzes how sales and marketing affect operations when they began to sell standard pieces to retail outlets or completely off the topic.(0-3 points) | Analyzes how sales and marketing affect operations when they began to sell standard pieces to retail outlets and, for the most part, fulfills assignment requirements.(4 points) | Analyzes how sales and marketing affect operations when they began to sell standard pieces to retail outlets and demonstrates solid ability to accomplish the assignment.(5 points) | | Analyzes how the move to producing standard furniture affected the company’s financial structure. | Vaguely analyzes how the move to producing standard furniture affected the company’s financial structure or completely off the topic.(0-3 points) | Analyzes how the move to producing standard furniture affected the company’s financial structure and, for the most part, fulfills assignment requirements.(4 points) | Analyzes how the move to producing standard furniture affected the company’s financial structure and demonstrates solid ability to accomplish the assignment.(5 points) | |