MBA Professional Development Series (BAD 68051)

Case 8: FoldRite Furniture Co.: Planning to Meet a Surge in Demand

Overtime

 Pros: No need to lay off the superfluous labors and thus suffer from the demoralization and high unemployment insurance after the surge in demand Flexibility: can make change according to the change of the demand
Cons:

High cost: overtime wages were 1.5 times the normal fully loaded rates. Decline in quality and yield: overtime may lead to labors fatigue Potential risk: may not able to meet the demand if the demand continues to increase Negative effect on potential labors: the long-lasting overtime may discourage other labor join in the company

Subcontracting Pros Least manufacture cost Save of its labor force and administrative resource Flexibility: can have relatively flexible change according to the demand Cons Inventory cost Extra 20% to the cost of labor for the product No guarantee of the quality

Hiring skilled labor Pros Cost: it is profitable Sustainability: can meet the demand if the demand continues to increase No need to train: the workers can perform well from the start Cons Demoralization: Future lay-off of superfluous labors may demoralize other workers

Hiring unskilled labor and training them Pros Sustainability: can meet the demand if the demand continues to increase Cons High cost: management and supervision resources Subsequent results: layoff these new workers may demoralize the remaining workface and cost the company in added unemployment insurance Time: training unskilled workers to skilled position takes four weeks

Change in Design Pros Once for all: increase the productivity Cons High cost Long time: it takes one month to change Little effect: the change may not have too great influence on the whole productivity