Case | HBS Case Collection | June 2010
FoldRite Furniture Company: Planning to Meet a Surge in Demand
by Steven C. Wheelwright and Afarin Bellisario
Demand for folding and stackable chairs and tables at FoldRite Furniture Co. is unexpectedly strong. The company spent the previous two years improving manufacturing quality and efficiency, dropping poor-performing product lines, developing new products that are stylish and environmentally friendly, and instituting a program that allows customers to customize their orders and still get delivery within two weeks. As a result, sales interest in the new products is higher than forecast, in the U.S. and in Europe, where favorable exchange rates make American products highly competitive. In response to the surge in demand, Martin Kelsey, the production manager, must create a manufacturing plan that controls manufacturing and inventory costs, mitigates risk, and aligns with the strategic goals of the company. Students must complete a quantitative assignment as part of case analysis.
Keywords: risk management; manufacturing; Production capacity; Production scheduling; Risk Management; Growth Management; Production; Logistics; Order Taking and Fulfillment; Business Strategy; Manufacturing Industry; Consumer Products Industry; United States; Europe;
Presentation on theme: "FoldRite Furniture Approaches"— Presentation transcript:
1 FoldRite Furniture Approaches
ISQA 459/559Dr. Mellie Pullman
2 Planning StepsCalculate the existing available skilled and unskilled workersCase states that company has sufficient workers to make the annual forecast over 200 production days (2010)-levelSo calculate average need for each product at each skill levelDetermine the Labor actually needed to fill demand (March-August)Determine the total cost of fulfilling demand for each option by figuring cost of:OvertimeUse of subcontractorsHiring and Training workersCost of Design ChangeCost of Carrying Inventory
3 Calculate Available Workers
Based on Forecast 2010 dataData From TemplateSufficient Capacity to produce Annual Forecast with 200 production days in 2010Workers work 10 hour daysCapacity to produce:524,280 Cloudchairs306,916 AlStrong253,570 Green ComfortStaffing =labor time * Daily Capacity/ (daily hours/worker *yield)Example: Cloud Chair w/ Skilled(2 min/item)(hr/60min)*( ch/day)/ (10 hours/day/worker)*.95= 9.2 workersRequiredLaborDaily CurrentCapacityCurrentStaffing LevelMins/item=yearly/ 200 daysSkilledUnskilledCloudChair292,621.49.2?AlStrong12.8281,534.634.5GreenComfort13311,267.928.9Total Skilled Workers = 73Total Unskilled Workers=?
4 Determine Labor Hours Needed (March)
Calculate hours for eachCategoryData From TemplateStaffing =labor time * Daily Demand/ (yield)Example: Cloud Chair w/ Skilled(2min/item)(hr/60min)*(2500 ch/day)/.95= worker hours/dayOr (per 18 days)= worker hours/day *18= hoursRequiredLabor per productMarch ForecastLabor hours neededMins/itemDaily(18 days)MonthlySkilledUnskilledUnskilledCloudChair2925001578.9?AlStrong12.82815006063.2GreenComfort133112605172.6
5 Determine Labor Hours Needed (March-August)
MarchAprilMayJuneJulyAugustCloudChair45,00073,80065,25079,20086,40067,150AlStrong27,00029,70028,50036,00032,40029,750GreenComfort22,68025,20022,50027,90021,250Production days181517Required skilled hours12,81515,00613,821Available skilled hours13,14010,950Excess (shortfall)325(1,866)(2,871)Needed Skilled workers(2)1019Required unskilled hours32,70339,94736,539Available unskilled hours33,480777(6,467)(8,639)Needed unskilled workers(4)3658
6 Tackling the shortages & surpluses
Average all the required people per month for 6 months gives:13 additional skilled & 40 unskilledOr don’t hire until April and Use excess worker capacity to build inventory in March then average the remaining demand over 5 months.
7 Consider other options (at least 2)
Overtime. What is the additional labor cost?Subcontract. Frees up skilled labor hours and some unskilled hours, still need to hire some.HiringEarly hiring in March with carrying extra inventoryHiring in April with carrying extra inventoryHiring and Training in MarchChange in DesignHire all workers March 1 and use overtime for someHire all needed workers in AprilHire unskilled workers to train in March and start extra production in April