Chad's Creative Concepts

To: Professor Miller

From: Susan Jones

Subject: Chad’s Creative Concepts

Date: January 11, 2015

Business Brief

Chad’s Creative Concepts began initially manufacturing custom-made wood furniture primarily for residents who own summer homes along Lake Erie’s coastline (Krajewski, L., Ritzman, L., & Malhotra, M., 2013). Because of their creative designs and quality workmanship, the company’s reputation became widespread. This growing reputation along with an increase in sales led the company to venture into producing a more standard line of furniture which it sold to retail furniture outlets (Krajewski et al, 2013).

The problem of the case is the decision to produce a more standard line of furniture in its single production facility has affected profits in the long run. Management did not take into account constraining resources when it made the decision to produce and sell a standard line of furniture to retailers.

Analysis

The increase in sales and a growing reputation caused the sales team to sell some of their popular furniture to retail furniture stores (Krajewski et al, 2013). This is basically what pushed the company to sell to retail outlets. However, Chad’s Creative Concepts has only one manufacturing facility where it builds both products. Both products compete for processing time on the same equipment and by the same workers (Krajewski et al, 2013). Its custom line accounted for a higher percentage of sales at 75% and a higher percentage of volume. Buyers of the standard line are more concerned about price and expect delivery sooner than buyers of its custom line (Krajewski et al, 2013).

The result of selling to retail outlets was growth in the sales of the standard line so this product was scheduled more than the custom line. But when a decision had to be made about which line to produce, the custom line was always produced first because its sales and profit margins were still higher than the custom line.

This growth in...