ECLT 5940 Supply Chain Management Group member:
Huang Yi Fang Peiwen Qi Jin Tan Yunxuan Zhang Yanfeng 1155024743 1155021692 1155010896 1155020407 1155024230
1. Background and Issues
1.1 The background of FoldRite
In 1987, FoldRite Furniture Company was founded, and the Company gained some success by producing a folding banquet table. By the late 1990s, FoldRite had kept a stable growth, selling three product lines into a range of markets. In 2006, with financial turmoil, high turnover among factory workers and unbalanced percentage of new workers led to the loss of productivity and yields, which increased margins and lead-time. At the same time, the company used too much cash and distracted management attention to purchase small firms. In 2007, some private investors took over FoldRite to provide fresh capital and management expertise. The New CEO (Marshal Epstein) hired a new Manufacturing VP (JOE Ramos). They set some new policies to achieve new goals and made some changes. In 2009, FoldRite still had about $60M in revenues and was profitable in spite of recession.
1.2 The issues of FoldRite
Analyzing those five options and using the combination of those options, We try to make a trade-off between minimizing the cost and the strategy of company. (a) Changing the designs (b) Using overtime (c) Increasing staff temporarily (d) Increasing the amount of inventory using a constant level of production. (e) Using subcontract
2.1 Recommendations for production plan
(a) When the manufacturing cannot meet the demand, we consider using overtime or subcontract to fill the production gap. The answer is subcontract, because the money we have to pay for the subcontract is less than the overtime. Moreover, choosing subcontract could
avoid the problem which overtime has, such as decline in quality and loss of productivity. (b) Changing design decrease the demand for unskilled workers in manufacturing, even the company need a month and $15000 for changing it, it can save $64576 and bring a long-term profit. Design change works on unskilled workers as follows: Design Change Without(hrs) With(hrs) Hours Saved Mar 32703 32703 0 Apr 39947 38653 1295 May 36539 35395 1145 Jun 45363 43974 1389 Jul 43263 41747 1516 Aug 36774 35596 1178 6523 $64576 Total Total saved
(c) To minimize the cost and to satisfy the demand of each month, our recommendations consider about the subcontracting part of work, increasing staff temporarily and training unskilled workers to skilled. According to the calculation, the optimal solution is as follows: Options New hired skilled workers New hired unskilled workers Workers training from unskilled to skilled Quantity of skilled work subcontracted Quantity of unskilled work subcontracted Table.2
Mar 16 61 7 0 0
Apr 0 26 0 2 0
May 0 12 0 11 6.36
Jun 0 0 0 14 13
Jul 0 0 0 8 0
Aug 0 0 22 0 0
(d) We do not recommend constant level of production. Taking the high level of inventory into account, the total cost of constant level of production may be higher than the flexible level of production. Meantime, although we have high level of inventory on March and April, we still have to increase the backlog from June to July. As the CFO said, high level of inventory need a large outlay of cash and make credit tighter. Moreover, backlog leads to long lead-time and this situation does not fit the strategy of company.
2.2 Different recommendation in European market
There will be some different suggestions in Europe compared with the situation in North America. Our team used the marketing theory 4Cs (Robert F. Lauterborn proposed in 1993) to analyze the current marketing situation in Europe. The 4Cs theory focuses on the customer’s demand and includes four elements.