Recommendations: Thicketwood should purchase the new CNC router offered by High Tech Inc. Company’s manufacturing should be adjusted according to the increasing demand and the new capacity.
Short/Medium Term – Immediately to One Month
1) Thicketwood should purchase the router from High Tech. This machine offers a reduction of expenditures on line workers and maintenance. The price difference with the router from TDL Products Co. will be covered within the life span of the High Tech’s machine. Moreover, longer life of the High Tech’s router and a service warranty reduce the uncertainty of future operations.
2) Adjust Thicketwood’s staffing. Reallocate three current line workers from the routing. Consider the potential bottlenecks in assembly and drilling and add a line worker to each phase.
Long Term – One Month to Six Months
1) Develop deeper relationships with High-Tech. Assign a contact person to keep in touch with High-Tech. Later, Thicketwood should consider purchasing more equipment from High-Tech to increase Thicketwood’s bargaining power and strengthen relationships between the companies.
Control and Feedback
Continuously monitor Thicketwood’s internal process to identify bottlenecks and to adjust capacity to the market demand. Keep regular contact with High-Tech Ltd.
Contingency Plan
Conduct an in-depth background check of High-Tech Inc. and discuss all contract details prior to the purchase. Examine the possibility of service by High-Tech’s Canada-based partner or subsidiary.
Thicketwood Ltd. – Executive Summary
Problem Statement: Thicketwood Ltd. is an Ontario-based supplier of handcrafted kitchen cabinets that are customized to the clients’ preferences. Thicketwood emphasizes the high quality of the cabinets and prices them relatively high. The main target audience are high-income families, who are moving into new homes and would like to purchase a unique kitchen cabinet. An increasing market demand and the limited capacity of the manufacturing site require a purchase of a new CNC router. The key issue is to choose between the two available alternatives for the CNC router and to address future bottlenecks that will appear after the router is installed. The CNC router from High Tech Inc. is currently the preferred option.
Recommendations/Implementation
Short/Medium Term – Immediately to One Month
1) Thicketwood should purchase the router from High Tech Inc. at a price of $150,000 and an expected life of five years. The machine offers a reduction of expenditures on line workers by (3 - 2.5) workers * $16 *8 hours/day *5 days/week *50 weeks = $16,000 as compared to the machine from TDL Products Co., and an additional saving on maintenance of $20 * 50 weeks = $1000. Hence, the difference between the two machines will be covered in (150,000-60,000)/17,000 = 5.3 years that is nearly within the life span of the High Tech’s router. Furthermore, longer life of the High Tech’s machine and the three-year guaranteed warranty reduce the uncertainty of future operations and capacity.
2) Thicketwood should evaluate its staffing and adjust it to the new processes. Firstly, it should reallocate three line workers that will no longer needed during the routing phase. According to the time it takes for each process, assembly is going to be the next bottleneck for the manufacturing. Hence, one more person should be placed there. Additionally, one more person will be required at the drilling phase later on.
Short/Medium Term – One Month to Six Months
1) Develop deeper relationships with High-Tech Inc. in order to ensure smooth communication in case the CNC router requires warranty service in the future. Thus, Thicketwood should assign a person, who would be in a regular contact with High-Teck’s representatives. Later on Thicketwood’s strategy could be adjusted to purchase more equipment from High-Tech This will increase the bargaining power of Thicketwood with High-Tech and strengthen relationships between the two companies.
Control and Feedback
Continuously monitor internal process in Thicketwood to identify current and potential bottlenecks. Considering the forecasted increase in demand, Thicketwood should be able to service all the new customers in order to keep its market share. Regular communications with High-Tech’s representatives and regular updates on the router’s functioning will help to use High-Tech’s expertise with the router to enhance its functionality and to prevent potential problems.
Contingency Plan
The main problem associated with the router from High-Tech Inc. relates to the uncertainty of working with a new partner. In order to mitigate this risk Thicketwood should undertake an in-depth background check on High-Tech as well as examine all the contract details prior to the purchase. The possibility of service by a Canada-based partner or subsidiary of High-Tech should be discussed in order to reduce the time it takes to provide the warranty service.
