Reference no: EM133022078

Chad's Creative Concepts Case

Chad's Creative Concepts designs and manufactures wooden furniture. Founded by Chad Thomas on the banks of Lake Eire in Sandusky, Ohio, the company began by producing custom wood furniture for vacation cabins located on the shore of Lake Eire and on the islands near Kelly and Bass. Being a guy who likes the "outdoors" Thomas wanted to bring a bit of that "outdoors" indoors. The Chadian company developed a solid reputation for its creative designs and the high quality of manual work. Eventually, sales spanned the entire Great Lakes region. Along with the growth came additional opportunities. By tradition, the company focused entirely on custom furniture, where the customer specified the type of wood from which the piece would be made. As the reputation and sales of the company grew, the sales force began selling some of the most popular pieces to furniture stores. This move into stores led Chad's Creative Concepts to more standard furniture production. Buyers of this line were much more price sensitive and imposed more stringent delivery requirements than customers of the custom line. However, custom designed furniture continues to dominate sales, accounting for 60% of volume and 75% of dollar value. Currently, the company operates a single manufacturing process at Sandusky, where standard and custom furniture are manufactured. The equipment is primarily general purpose to provide the flexibility needed to produce custom parts. The layout of the plant puts the saws in one section, the lathes in another, etc. The quality of the finished product reflects the quality of the chosen wood and the craftsmanship of the workers. The two types of furniture, custom and standard, compete for processing time on the same teams with the same people. During recent months, sales of the standard line have increased, leading to a more defined schedule of this line of products. However, when trade-offs or scheduled exchanges have to be made, custom furniture always takes priority due to its higher sales and higher profit margins. Therefore, scheduled batches of standard parts wait at the plant at different stages of completion. When he reviews the progress of Chad's Creative Concepts, Thomas is happy to see that the company has grown. Sales of custom furniture remain strong and sales of standard pieces are increasing steadily. But finance and accounting indicate that earnings are not what they should be. The costs associated with the standard line are rising. There is money committed to both raw material and work-in-process inventory. An expensive warehouse must be rented to accommodate the volume of inventory. Thomas is also concerned about increased lead times for both types of orders, which are causing longer lead times. Capacity is at the limit and there is no room in the plant for expansion. Thomas begins to carefully evaluate the global impact of the new standard line on the manufacturing process.

1. Briefly summarize what the case is about. What is the main problem that you can identify?

2. What kinds of decisions must Chad Thomas make every day in order for his company's operations to run effectively? And in the long term?

3. How did sales and marketing affect operations when you started selling standard parts to furniture stores?

4. How did the decision to produce standard furniture affect the financial structure of the company?

5. What could Chad Thomas have done differently to avoid some of the problems he now faces?

6. Write a solution to the problems presented in the case, based on the competitive priorities that the protagonist of the case should focus on.

7. What is understood that can determine a sustainable competitive advantage in the Chadian operations?