Welco Lumber Company Case Analysis
Group 2 – Case 1
MBA 610-T301_2127_1
Bellevue University

Welco Lumber Company Case Analysis
Gene Denning, an employee of Welco Lumber Company, decided to run a study by videotaping a sample size of 365 logs being processed. However, actual data provided proved that it was a true sample size of only 362 logs, as data for logs # 30, 123, and 127 are missing from his report. He videotaped 3 operators, April, Sid, and Jim, marking the logs, how each log was broken down and the degree to which the cants were properly centered. Gene then did a comparison of what the cost was of the log in its current condition (actual value), to what would have been the correct value of the log if the cut had been accurate (potential value). This allowed him to see the potential revenue that Welco Lumber Company is losing out on their business (profit gain).
Question 1: How much profit is lost on imperfect board cuts?
During the processing of 362 logs, it was found that exactly half (181) or fifty percent were processed without error. The remaining 181 logs were found to have undergone some type of error in the breakdown process—excessive log breakdown, off center cant, reduced value cut. As a result, the Welco Lumber Company missed out on $735.14 in potential profit. Taking these results one step further, the potential amount of money lost on each of the 181 logs with errors was broken down into ranges of value lost as shown below. From the graph we can see the nominal value that was lost the most fell between the $1.51 to $4.50 ranges.

Question 2: How does performance vary among operators?
Below is a table that shows the analysis of each operator by log size, log volume, and with the monetary values of actual versus potential values. We can see that April produces the most volume of logs; however has the highest monetary lost in