Handling Product Demand Within the Organization Term Paper
- Length: 5 pages
- Subject: Business
- Type: Term Paper
- Paper: #42961320
Excerpt from Term Paper :
FoldRite Furniture has managed to come out of the hard times and improve on its products and production lines. Management changes were inevitable, as the company was on its knees. The new managers came with zeal, and incorporated changes that allowed the company to remain profitable during the economic recession. The company has specialized in producing foldable furniture for use during outdoor occasions. These occasions mostly take place during summer, and this is the time that the company receives many orders. Venturing to overseas markets is another way if increasing sales. The new CEO was optimistic that Europeans would accept high quality stackable and foldable furniture. This was a risky venture as there was no certainty of how the market would respond, but it paid off eventually.
Analysis of the critical success factors
According to (Harrald, 2006) critical success factors will assist a business to determine its success. They are a compilation of the main factors that a business requires in order for it to succeed. A business that fails to apply or ignores these factors should be prepared to fail in their projects (Gray & Larson, 2008). The range of conditions, variables, or characters that have a direct impact on the viability, efficiency, and effectiveness of the business are referred to as the CSFs (Trkman, 2010). It is worth knowing that CSFs are different for each business. Therefore, it is impossible to clearly define them. The CSFs for FoldRite Furniture are continuous innovation, being consumer responsive, lean manufacturing, employee retention, and reduced lead times. Continuous innovation allows the company to remain ahead of the others and to fight the imitators. The company had to make changes and innovate on its products in order to fight off its foreign imitators. The imitators were able to copy the designs for the foldable furniture and sell them off cheaply. Continuous innovation allowed the company to come up with environmentally friendly products. The company replaced foam and plastic parts of its products with recyclable materials. Being environmentally friendly allowed the company to demonstrate to its consumers that it cared for the environment, and this did endear them to their products.
Consumer responsiveness ensured that the company was able to manufacture high quality products. The consumers had demands for quality products and fulfilling these needs was a priority for the company. Quick services were evident in the delivery of products to the consumers. The company also implemented customization facilities. This provided the consumers with the chance to specify their preferred designs. Customization provides consumers with an opportunity to make the product fit their tastes. In order to focus fully on delivering quality to its consumers, the company had to reduce its product line. The company settled on three products namely AlStrongs table, GreenComfort chair, and CloudChair. Reducing its product line provided the company with the capability to focus its efforts on the three products. These ensured that the products were of high quality, and they met strict quality standards.
Previously the company had a huge turnover of employees and this resulted in loss of experienced workers. The new management of the company focused on employee retention, which would be beneficial for the company. Hiring of new employees costs the company around $1,500 in administration and recruiting costs. The employee's efficiency is 80% on average for the first four weeks. This does show that it is costly to hire new employees and vital that the company retains its experienced workers. The lead-time for each product was reduced to a maximum of two weeks delivery. This allowed consumers to make purchases at the very last minute and still rest assured that the products are delivered on time.
Project benefits, organizational readiness, and risk culture
The project benefits for the company are increased sales and revenues, improved efficiency, quality products, and a lean workforce. Reducing the lead times and establishing two-day shipping allowed the company to reduce the possibility of customers cancelling their orders. This ensured that the company remained profitable during the recession. The project is beneficial to the company as it ensures that it manages to maintain its operations and revenues. The project aims at establishing new ways of manufacturing products without having to implement any drastic measures. Being prepared for the seasonal increases in demand, which the company fears it might not be prepared. The company has the facilities to accommodate increased demand in its factories as it had idle machinery and tools. With the machinery and tools, the company could double its production capacity, but this would demand that it also increases its workforce. Having reduced its product lines, the company has also specialized its products, which ensures that it can handle any increases in demand. The hours that the factory operate could also be increased without having to incur huge costs. Opening the factory on Fridays would provide that company with the additional production hours necessary and this would not increase employee fatigue.
The company is also ready to handle increased demand as it has reduced its inventory lead-times. Since the company uses standard raw materials, it does not require long lead-times. They also have agreements with the suppliers of the raw materials to deliver within three days. Maintaining strategic inventory of partially assembled parts has enabled the company to reduce its lead-times. The company holds enough parts to cover product demand for two weeks. This does demonstrate that the company is prepared to handle product demand. The company's management does have a good risk culture, especially considering the idea to reduce its production lines, opening a new warehouse and office Germany, and opting to manufacture using environmentally friendly materials. All this demonstrates that the new managers have introduced a good risk culture. Analyzing the projected sales allowed the company to focus its production, which in a way allows the company to mitigate its risks.
Project risk recommendations
There is an increased demand for CloudChair and the company has to ensure that it meets the demands. This is a risk because a failure to deliver the chairs within the stipulated two weeks would mean that customers would cancel their orders. The chair had also elicited great interest from an outdoor event supplier, who was keen on showcasing the chair to the clients. The only concern the supplier had was ample supplies. The supplier needed to know for sure that they would receive the supplies on time and on schedule. Competitors are also waiting for the company to fail to meet its delivery times on order to capitalize and tarnish their reputation. According to Banks (2012) a company's reputation is not easy to restore, and the company should ensure that this risk is mitigated by having enough raw material supply and production stocks.
There is increasing demand for the products. This demand has put increased the load on the production line as they have to ensure they meet and sustain demand at all times. The company might be forced to hire additional workers if it was going to meet the increase in demand. The costs of hiring new employees have increased, and the new employees need training for at least four weeks before they can perform at 100%. During this training period, the new workers are paid full wages. This is a risk because the additional workers will increase the company's wage bill, and their output would not be felt until they increase their efficiency. The company also risks having to fire some of the employees after the high season is over.
The design change been proposed would lead to a onetime cost of around $15,000. The design change would lead to reduction in production by a minute, but would require at least one month for the changes to be fully implemented. Reducing the timelines for production is vital in increasing the number of products the company can produce a day. The cost implications for this change might not go well with the accounts department because currently the company has some financial problems. The company had a tight credit, and any attempts to increase its cash flow would result credits of 12% per annum. The risk of a high credit would reduce the company's overall revenues and profitability.
Initial categories of risk
The initial category of risk under RBS level one are technical risks, commercial risk, and external risk. Under technical risks, the company faces the following RBS level two risks estimates, assumptions, and constraints might be wrong, which would result in over production or under production. Under production would be the worst scenario as the company would not meet its demands. Another technical risk is technical processes. With the possibility of introducing a new design, the company would have to change its current processes. Test and acceptance is the last RBS level two risk under technical risks. A customer can refuse a finished product if it does not meet their customization requirements. RBS level two risks for commercial risk are suppliers & vendors, and internal procurement. Suppliers for…