Amid the excitement of future growth for Thicketwood LTD, decision-makers face increasing pressure to keep up with product demand of their high-end cabinetry line. As the organization evaluates the various options to help enable that growth and streamline the manufacturing process, the company must understand the short- and long-term implications of the investment options. Currently, Thicketwood produces 1250 cabinets per year, however the surge in demand for their products has been forecasted to exceed 2000. To meet the challenge, Thicketwood has the option of buying a new computer number controlled (CNC) router or alternatively, a used one. There will also be the option of relocation of employees on the assembly line to other tasks involving the assembly of cabinets, or dismissal of employees. The recommendation is a combination of a new computer number controlled router and relocation of 2 employees from routing to the drilling and assembling lines, allows for increased production capacity.
Thicketwood Finds Opportunity to Evolve Operations through Investment Thicketwood Ltd sells custom-manufactured kitchen cabinets to high-income families in Ontario. Because each cabinet is hand-crafted and custom-made, customer’s in this segment demand high-quality cabinets especially given the price point ($5-10,000 per cabinet). Though it takes 15 skilled laborers to maintain the current supply levels of 1250 cabinets, Mark Taylor, operations manager at Thicketwood, believes there’s an opportunity to help meet forecasted demand of 2000 units while lowering internal costs and streamlining the operations through an investment in a computer number controlled (CNC) router. While a CNC router can help with output, streamlining the operations also involves understanding the state of operations. Thicketwood’s manufacturing operations are defined as line flow where each step of the process is isolated into separate tasks for employees to execute. Each employee continuously works on their task for producing a given unit. As a result, the company maintains a high-level of quality in the end product. Ultimately, it comes down to what Mark Taylor has to do and what changes have to be made in order increase his production to meet his expected demand of 2000 cabinets.
However, This Opportunity Comes with Challenges
* Current financial position not optimal. A recent review of Thicketwood’s financials suggests an immediate need to begin earning a profit to maintain the going concern of the company. An example of this is the expense line on salaries. Thicketwood’s salary expenses exceed revenue, based on current output of 1250 cabinet units. (Exhibit 1) Because of this, any option involving a substantial capital investment must take into consideration the financial impact to the company. * Sourcing a CNC router comes with challenges. If the company decides to support Mark’s proposal to invest in a CNC router, they will also need to decide which is the most appropriate supplier as well as whether to buy new or used. Each has their pros and cons, as well as varied impact to the operations. * Status quo operations remain untenable under growth projections. The explosive growth Thicketwood anticipates will also bring unintended operational consequences that would be detrimental to the company. Bottlenecking in certain phases of the manufacturing process will occur, which will also have a negative impact on the quality and quantity of the cabinets due to the manual effort involved. Bottlenecking occurs when an employee accomplishes a task faster than another. Any decision to invest for the future must also factor in the impact to the operations. * Unanticipated spike in demand requires additional investments. Though Thicketwood has forecasted and is currently planning for a capacity of 2000 units, operations reach a critical point at 2500 units. If the forecasted demand ever hits 2500...
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