Graded Homework

2.. Assignment extension request has to be applied 5 days before
the submission date with valid evidence as a proof, please note
being busy or out of country will not be accepted as a reason of
extension. 3. Penalty of late submission – 10 % deduction of marks with every
24 hours delay and after 3 days assignment will be graded as
Zero. Total Marks: _______ / 40 Read the case carefully and answer all the questions.

Chad’s Creative Concepts (Krajewski & Ritzman, 2002: 23)
Chad’s Creative Concepts designs and manufactures wood furniture. Founded by Chad Thomas
on the banks of Lake Erie in Sandusky, Ohio, the company began by producing custom-made
wooden furniture for vacation cabins located along the coast of Lake Erie and on nearby Kell’s
Island and Bass Island. Being an ‘outdoors’ type of person himself, Chad Thomas originally
wanted to bring ‘a bit of the outdoors’ inside. Chad’s creative concepts developed a solid
reputation for its creative designs and high quality workmanship. Sales eventually encompassed
the entire Great Lakes region. Along with its growth came additional opportunities.
Traditionally, the company had focused entirely on custom-made pieces of furniture, with the
customer specifying the kind of wood from which the piece would be made. As the company’s
reputation grew and sales increased, the sales force began selling some of the more popular
types of furniture pieces to retail furniture outlets. This move into retail outlets led Chad’s
Creative Concepts into the production of a more standard line of furniture. Buyers of this line
were much more price sensitive and imposed more stringent delivery requirements than did
clients for the custom line. The custom-designed furniture continued to dominate the company’s
sales, accounting for 60% of the volume and 75% of dollar sales. Currently, the company
operates a single manufacturing facility in Sandusky, where both custom and standard furniture
pieces are manufactured. The equipment is mainly general purpose in nature in order to provide
the flexibility needed for producing custom pieces of furniture. The layout groups saws together
in one section of the facility, lathes in another, and so on. The quality of the finished product
reflects the quality of the wood chosen and the craftsmanship of the individual workers. Both
the custom and the standard furniture pieces compete for processing time on the same
equipment by the same craftspeople.
During the past few months, sales of the standard line steadily increased, leading to more
regular scheduling of this line. However, when scheduling trade-offs had to be made, the custom
furniture was always given priority because of its higher sales and profit margins. Thus,
schedule lots of standards furniture pieces were left sitting around the plant in various stages of
completion.
As he reviews the progress of Creative Concepts, Thomas is pleased to note that the company
has grown. Sales of custom furniture remain strong, and sales of standard pieces are steadily
increasing. However, finance and accounting have indicated that profits aren’t what they should
be. Costs associated with the standard furniture line are rising. Dollars are being tied up in
inventory, both of raw materials and work in process. Expensive public warehouse space has to
be rented to accommodate the inventory volume. Thomas also is concerned with increased lead
times for both custom and standard orders, which are causing longer promised delivery times.
Capacity is being pushed and no space is left in the plant for expansion. Thomas decides that the
time has come to take a careful look at the overall impact this new standard furniture line is
having on his operations. Answer the following questions. Each question carries 20 marks
1
2 What kind of operating decisions are facing Chad Thomas’ business today?
What might Thomas have done differently to avoid some of the problems he now
faces?