• Chads Creative Concepts is a company foundedby Chad Thomas that designs and manufactureswood furniture.• The company began by producing custom-madefurniture and within a short duration developed asolid reputation for creative designs and high-quality workmanship.• As company’s reputation grew and salesincreased, the sales force began selling some ofthe pieces to retail furniture outlets, which ledthem into the production of a more standard lineof furniture.
• Buyers of standard line furniture were much more pricesensitive and imposed more stringent deliveryrequirements.• Custom designed furniture, however, continued todominate sales, accounting for 60% of volume and 75% ofdollar sales.• Currently, the company operates a single manufacturingfacility where the equipment is mainly general purpose innature for providing flexibility to custom made furniture.• Both custom and standard furniture compete forprocessing time on the same equipment by the samecraftspeople.
• Sales of standard line is increasingsteadily, so it requires more regularscheduling, but custom made furniture is givenpriority because of its higher sales and profitmargins.• Thus, scheduled lots of standard furniturepieces are left sitting around the plant invarious stages of completion.
• The holding cost of the company is increasingwith dollars tied up in inventory, both of rawmaterials and work in process.• The company has to rent expensive publicwarehouse to accommodate the inventoryvolume resulting in further increase of holdingcost.• The increased lead times in both segmentshas resulted in longer promised delivery times.
What type of decision must Chad Thomas make daily for his company’s operations to run effectively? Over the long run?The situation that Chad is facing is between the manufacturing andturn over. He needs to focus on decisions onscheduling, inventory, capacity & layout.• He need to