Beau Ties is experiencing mismatch in supply and demand due to the perceived rapid growth. The insufficient supply of 7,000 units per year leads to two important decision of the company: (1) Decision on how to increase the production capacity and (2) Decision on how to improve the present ordering system. Decision points will also be discussed in the analysis in coming up with alternatives.
The alternatives discussed in the production capacity is a combination of whether to rent or buy their own facility; whether to produce the target sales volume of 27,000 units or VSS insuficieny of 7,000 units/ and whether or not it is beneficial for the company to mandate overtime during peak seasons. The alternatives discussed in improving the ordering system will focus on the efficient staffing plan that will attain the target customer waiting time of at most 3 minutes, we will also look into the possibility of lowering this 3 minutes into either 2 or 1 minute.
The strategy that we are recommending is for Beau Tie to rent their own facility and produce the target sales volume of 27,000 which yields to the highest potential savings of $515,345 with overtime starting on the 8th month. And to further improve the ordering system, leasing telephone facility and hiring 2 CRS during peak hours of 10 to11 am will help attain the target of minimizing the customer’s waiting time. In line with the goal of meeting the intermediate revenue target of $810,000, mismatch in demand and supply will surely to occur; thus two major concerns are raised to meet the said target.
(1) Decision on how to increase the production capacity. (2) Decision on how to improve the present ordering system (Please refer to Appendix A for the How-How Analysis). Supporting Argument With the perceived rapid growth, it is clear that Vivian’s Sewing Shop (VSS) production capacity cannot provide Beau Ties target sales volume. The mismatch between the capacity and perceived demand is equivalent to 7,000 bow-ties. (Please refer to Appendix B for the Demand vs. Capacity Computation).
This demand is heightened during peak season (October, November, and December) in which 45% of the total sales occur thereby needing an additional of 3,150 during this season. Moreover, having no formal inventory system or any historical data to forecast sales volume also hinders Beau Ties to properly plan production and meet its target. To meet the increase in production capacity, Beau Ties should go through a series of decision points to achieve the optimal plan for expansion as shown below:
Beau Ties also see an opportunity of improving the service level of customer’s call-waiting time to 3 minutes. With this target it is necessary to develop an efficient staffing plan that would achieve the service level without sacrificing resource utilization. In addition, there is an opportunity lost incurred due to abandoned calls which on average can cost Beau Ties $1,710 per month (Please refer to Appendix C for the Abandoned Calls Analysis). The following are the decision points that Beau Ties should consider in achieving the target service level.
With the rapid growth, it is expected that demand will eventually exceed capacity of VSS. That is why it is important to add facility that will consider factors like cost and benefit. The following are the proposed alternatives that Beau Ties can consider to meet demand as well as to minimize the cost: Beau Ties to rent a lot and handle all the sewing operations producing 27,000 bow ties per year with scheduling of overtime in manpower. (Please Refer to Appendix D for the Cost-Benefit Analysis)
Beau Ties to buy a convenient lot and handle all the sewing operations producing 27,000 bow ties per year with scheduling of overtime in manpower. (Please Refer to Appendix E for the Cost-Benefit Analysis) .Beau Ties to rent a lot and handle partial sewing operations producing the insufficient 7,000 bow ties per year with scheduling of overtime in manpower. (Please Refer to Appendix F for the Cost-Benefit Analysis) . Beau Ties to buy a convenient lot and handle partial sewing operations producing the insufficient 7,000 bow ties per year with scheduling of overtime in manpower. (Please Refer to Appendix G for the Cost-Benefit Analysis)