Case Study#6 Customized Cabinet Co.

Customized Cabinets Co. (CCC) manufactures two major lines of kitchen and bathroom cabinets. The SemiCustom Line consists of cabinets that are variations on a standard design. These cabinets are made to order. The StandardLine is a lower-priced line of cabinets that use standardized designs and materials. StandardLine cabinets are made to stock. The company has been in business for many years and has consistently performed well financially. It was obvious that something big was up as the management staff began to gather for a meeting called by CCC General Manager John Fleming. There was little of the usual light banter, and more significantly, there were no coffee and donuts. The CCC culture celebrates even small achievements with coffee and donuts. Their absence was not a good omen. John began rather somberly. As you know we are almost two months into our second fiscal quarter. Frankly, the financial results dont look very good. You are aware, Im sure, of how the stock market has been punishing companies that fail to at least meet their sales and profit targets. We are in danger of having to announce that we met our sales goals but fell short of our profit goals. This will be a real jolt to our shareholders, and since, except for the interns, we are all in the companys stock purchase plan, that means it will hurt us, too. We only have one month to turn this around. We dont want to take any shortcut approaches to meeting our goalswe want the results to reflect the real results of our operation. The headquarters brass talked with a consultant who analyzed our records. Her opinion is that we need to address operations efficiency. In her words, we have to learn to get more out of our existing resources. She leaves the details to us to figure out. Our biggest personnel resource to assign to this problem is our group of management interns from Nearby University. Ive talked to the interns and alerted them that for the next month or so they are to work directly with Bill Chavez, our Operations Manager, on this project. The goal is to be sure that we get the maximum bang for our resource buck during the next months operations. We have to get the most profit possible to make the quarters results look at least respectable. Needless to say, I want each of you to give the intern group your fullest cooperation. Now you understand why the interns were invited to the staff meeting. Youve just been on board for a few weeks and have just begun to understand the companys operations. That means the boss cant be looking to you for engineering solutions. Your expertise is operations management, not engineering. As the meeting broke up, Bill Chavez asked you (the interns) to stay for a follow-up meeting with him. Ive been very impressed with the work that you have done in your short time with CCC. You obviously get an excellent education at Nearby U. I asked Tom to assign you to me because I think you are our best hope of pulling out some really good profit numbers. You dont have any preconceived ideas about what will and will not work, so I expect you to come up with ideas that are more innovative than the old hands. I spent most of the morning with the other department heads gathering information that I think you might need (that information is enclosed with this case). If you need additional information send me an e-mail or stop in my office. If I can get the information you need, I will do so. Were counting on you. Dont let us down. Ill let you guys figure out when and where to meet. Needless to say you have full access to all our computer resources should you need them. There are a few things you need to keep in mind. Our SemiCustom Line is hot because of our excellent customer service. We never fail to deliver a SemiCustom unit on time. We also need to meet our customer orders on the StandardLine units, but we can cut the stockage levels if necessary. We cant, however, exceed the stockage levels. Making excess inventory is no way to be more efficient. If necessary, we could work 10 percent overtime in assembly and 5 percent overtime in finishing. Each overtime hour will add $5.00 per hour to our labor cost. Ive checked with all our suppliers. We can get up to 50,000 additional board-feet of wood by paying a $0.50 per board-foot upcharge and 10,000 additional square feet of laminate for an upcharge of $0.15 per square foot. There is no reasonable prospect of obtaining more of the other materials at any price. Because of the way our profit center is set up, we get credit for building to the authorized stockage level as if it were a final sale. As you were leaving the meeting, Barbara Wilson invited you to the break room for a cup of coffee. Barbara is the Lead Production Scheduler and has worked for Customized Cabinets Co. for a long time. You have been told that she knows everything about how things work here and is a good person to know. I heard about your assignment, she began. Let me tell you some things about your boss, Bill Chavez. He is a great guy to work for and he really knows his stuff. He is not one of the college guys who act as if they know everythingno offense. He worked his way up. He is very intelligent, but doesnt have the educational background that you do. In the past, new college graduates have made some mistakes in writing reports for Bill. He likes for everything in the report to be written in words he can understand. He likes you to include computer printouts in an appendix to the report (he likes to see all the backup detail), but wants you to explain in the body of the report why they are necessary and what they mean. If he doesnt understand what you are recommending and why, he wont ask questions. He will just discard the report, and that will be the last assignment you will ever do for him. I figured that the least I could do would be to buy you a cup of coffee and try to help you get off to a good start on this project.

Wood bd.-ft.

Trim Granite Solid Surface lin. ft. sq. ft. sq. ft.

Laminate sq. ft.

0 0 0 0

0 135 254 176

Finish Labor

Table A: Bill of Materials and Labor

SemiCustom Line

SC-A SC-B SC-C SC-D

StandardLine

S-10 S-20 S-30 S-40

Available

125 27 175 0 160 42 243 0

Assbly. Labor hrs. hrs.

37 7 57 12 30 5 35 7

21 3 25 5 30 7 27 5

140 35 0 200 52 0

60 21 0 110280 200500 180430

160 140

112 0 0 0

2

MSE 697 Case Study#6 ------------------------------------------------------------------------------------------------------------

SemiCustom Line

SC-A SC-B SC-C SC-D

StandardLine

S-10 S-20 S-30 S-40

Poisson with mean of 75 Normal with mean = 90 and std dev. =10

400,000

Profit/Units @standard

 $325 $575 $257 $275 

 $175 $210 $260 $230 

140,000

45,000 150,000 400,000

Table B: Orders and Profits

Customer Orders Next Month

100,000 25,000

Build-to-Stock authorization Next Month

0 0 0 0

 400 350 450 475 

Normal Normal

Normal Normal

with mean = 110 and std dev. =10 with mean = 140 and std dev. =15

Poisson with mean of 350 with mean = 320 and std dev. =20 with mean = 450 and std dev. =25 Poisson with mean of 300

As Table B shows, the customer order for next month for each of the products of CCC is a random variable with the stated probability distribution. Use the Random Number Generation (RNG) Data Analysis Tool package of Microsoft Excel to generate 50 sample points for each of the cabinet customer order amount, based on its stated probability distribution, and consider the average of those 50 sample points as the customer order for that type of product.

Questions:

Please provide the case summary and problem statement for above