FoldRite Furniture Company Case Solution
Moreover, the lead time to make a deliver was reduced to 2 weeks and this helped the company to receive more orders and increases its revenues. In the year 2009, even the economy was in recession, as the company made revenues of $60 million maintain moderate profitability.
Â·Â Â Â Â Â Â Â Â Increased ability for customization
Â·Â Â Â Â Â Â Â Â Green products
Â·Â Â Â Â Â Â Â Â Competitive lead-time
Â·Â Â Â Â Â Â Â Â Skilled labor
Â·Â Â Â Â Â Â Â Â Workforce turnover
Â·Â Â Â Â Â Â Â Â Less diversified product range
Â·Â Â Â Â Â Â Â Â Weak dollar make product attractive- potential growth
Â·Â Â Â Â Â Â Â Â Owned selling facility- proves better business activity
Â·Â Â Â Â Â Â Â Â Diversification in products range
Â·Â Â Â Â Â Â Â Â Competition from small local and foreign companies
Â·Â Â Â Â Â Â Â Â Less-efficient local distributors
There were different alternatives that the company might adopt in order to meet the high demand of products in the upcoming six months. Following options are available:
Overtime by the existing workforce
One option to meet the increased demand is to make the workers to work overtime specifically on Fridays, a 10 hour shift. The adverse results of such overtime will be that the overtime pay is one and a half of the original paywhich includes benefits, therefore it is more expensive to make workers to workovertime. The qualitative negative effects will be the reduction in motivation and subsequently compromised quality and efficiency in production.
- This will give the company flexibility in its operations as the overtime hours can be managed as per demand basis.
- The company will achieve in getting high motivated employees, thus the other option such as hiring and firing might involve the de motivation among the staff as they will feel their job are less secured. Moreover, the laid off workers will require unemployment insurance payment.
- The company will have to pay high cost for overtime hours worked. The overtime labor rate is one and a half of the original labor rates.
- The overtime might result in low morale and motivation level, which will result in less productivity. However labor might not be demotivated as higher pay may works as a motivating factor.
Hiring and firing
The company is also considering hiring new labor as per demand and this new hire will be lay off when demand normalize. There will be $1500 expense incurred on the hiring in respect of administrative and recruiting operations. Moreover, there will be relevant cost which will also be incurred and that is supervisorâ€™s pay, who will interview such new hires. The hired employees might not be efficient as well.
- The labor will be hired as per the demand unlike option 1 that is limited to a certain limit (maximum overtime hours). If the demand increases beyond expectation, then new labor can be hired accordingly.
- The cost of hiring new labor will be high at the initial stage but after that the cost will be normalize and the company will not need to pay overtime costs.
- As discussed earlier, the new hiring and then laying off after the peak season will impact adversely on the motivation of the other employees which led to less productivity.
- Relevant costs such as supervisorâ€™s time will be diverted to hiring process and will incur cost.
- The hired labor will not be fully productive until four weeks.
- Unskilled labor might need four paid weeks training to become skilled.
This involves increasing the level of inventory over the standard level for some time. This will result in more cost for the company including borrowing cost, tied up of capital in inventories and increase in carrying cost………………
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