Case Study Solution
FoldRite Furniture Company

Solution Costs | Sub-contracting | Chase strategy | Level strategy | Stable workforce strategy | Regular production | 7,062,200 | 6,978,314 | 7,062,200 | 7,062,200 | Subcontracting | 767,315 | | | | Hiring | | 4,890 | | | Overtime | | | | 959,143 | Layoff | | 1,926,080 | | | Excess inventory | | | 2,426,919 | 2,426,919 | Shortage | | | 1,929,972 | | TOTAL | 7,829,515 | 8,909,284 | 11,419,091 | 10,448,262 |
The table compares the total costs using the sub-contracting, Chase, Level and Stable workforce strategies. Reviewing the data above, one may choose the subcontracting strategy. However, while calculating the cost incurred, the holding cost of inventory has not been added. The holding cost of inventory will be $2,426,919. Including this cost will increase the total to $10,256,434. Inventory cost must also be considered and the subcontracting strategy leads to more than the two-week inventory constraint. In addition, the subcontracting strategy inventory levels fall below the minimum required.
The Level and Stable workforce strategies will be even more costly than the Sub-contracting strategy. Thus, we suggest that FoldRite use the Chase strategy. The chase strategy is the most profitable and the sales forecasts will be met.
There is a significant concern with the Chase strategy. It may impact the morale negatively. To minimize this effect, the company should not hire new skilled laborers; FoldRite should train unskilled laborers. This will incent the laborers; they will receive positive reinforcement for their additional skills. In addition, this will cost less than new hires, while reducing the number of lay-offs. Training current laborers will also encourage completion and facilitate higher quality work.
Benefits
1. Continued