OPERATIONS MANAGEMENT
CASE STUDY ANALYSIS: CHAD’S CREATIVE CONCEPTS
Chads’s Creative Concepts
Case Summary
Chad’s creative concepts designs and manufactures wood furniture. The founder of the company is Chad Thomas. The company is located on the banks of Lake Erie in Sundusky, Ohio. The company began by producing custom-made wooden furniture for vacation cabins. It developed a solid reputation for creative designs and high-quality workmanships.
The company focused entirely on custom-made furniture, with customer specifying the type of wood. Sales increased as the company’s reputation grew. Then the sales force started selling some of its popular pieces to the retail outlets. This led them into the production of more standard line furniture. The standard line customers were very price sensitive and imposed more stringent delivery requirement. However, the custom-made furniture dominated the sales; 60% of volume and 75% of dollar sales. Custom furniture and standard furniture are made at a single process. The equipment is a general purpose one which provides the flexibility needed for producing custom pieces. The layout puts together saws in one section, lathe in another and so on. As both are made on same equipment by the same craftspeople, they compete for processing time.
As the sales of the standard line increased steadily, it led to more regular scheduling of this product line. However, during the scheduled trade-offs, custom furniture were given priority due to its higher profit and profit margin. This led to the incompletion of the standard furniture.
As Chad Thomas reviewed the progress, he noted that the company has grown. Sales of the earlier remained strong and the later were steadily increasing. But finance showed a not to be unexpected profit. Standard line cost keeps rising. Dollars are being tied up with inventory. The increased lead times for both the earlier and the later are causing longer delivery times. Capacity is pushed causing...