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CASE STUDY ON TOYS, INC. INTRODUCTION As it is explicitly stated in the case, TOYS, INC.

is the reputable company manufacturing Toys and Board games for about over 20 years. Despite this fact, the company has faced declining sales during recent years. The production manager attributed lack of sales growth to “the economy” and devised two methods to improve the situation. These are minimizing cost of production and lay off in the design and product developments. The vice president of sales has been concerned with customer complaints about defective model products provided by the company. The assistant of the vice president proposed the following actions to be taken: Replacing malfunctioning models with new ones, repairing the defective products and selling it at discounted price, and Letting the current workforce to repair the faulty products during slack time period. Moreover, the production assistant suggested the 100% inspection of finished models before delivering them to the customers, as the way to avoid the problems. Therefore, this paper is designed to identify and analyse the real situation of the company and recommend some measures that we would undertake, if we were in the shoe of the consultant called in by the company’s president. DISCUSSION AND ANALYSIS As it is elaborated in the case, the fundamental problem that challenged the company was diminishing sales which in turn made the profit to slip. But, the company couldn’t manage to identify the root cause of its problem. Different figures in the company attached different factors to the issue. Hence, there was no consensus among people about what the radical cause of the declining sales and profit margin is. Similarly, different personalities in the company proposed various measures to resolve the same problem. According to our analysis, this coordination failure created the vicious cycle on the company in the attempt to resolve the problem. The production manager stated that a cause of sales decline was “the economy”. According to our analysis, even though, the production manager was prompted to undertake the belttightening moves like cost reduction and layoff in product design and development
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department. The customers’ complaints about the company’s defective models production had been considered as one of the cause for diminished sales and profit. To operation. Modular design. the provision of products with warranty had been proposed as the solution. the company was supposed to replace the malfunctioning models with the new ones. emphasizing on quality as the way to eliminate non value adding (NVA) activities like rework. inspection. Besides. This makes it possible to produce more efficiently for larger volumes while also allowing standardization of processes and equipment. To sum up. the company could deploy various actions to achieve efficiency in the process. it can produce large volume of products within shorter time and thereby achieving the company’s performance objectives like fast delivery. First.If the system is automated many operations are performed by computers and robotics which are faster. The value analysis is the method of improving the product in the customer’s eyes by increasing its usefulness and reducing the costs without compromising the quality of the product. nor considered as valuable in the eyes of the customers. quality and low cost production. Value analysis. automation. Second. achieving economies of scale. the company must get rid of them in order to make efficient use of its economic resources and time. taking advantage of economies of scale through large volume production. etc. in order to cut the production cost. Similarly. Specifically. in order to cut the costs of production. storage. there is no need for lay off as the way to deal with the issues of inefficiency in the company. like value analysis and modular design in product design process. modular approach to product design makes it possible to have relatively high product variety and low component variety at the same time. Third. Well! This 2 . It can result in great cost saving or a better product for the customers. Fourth. using the product design tools. there are only a limited number of basic components and processes. it appears that there is great number of different products. scrap. accurate and diligent than human beings. Instead. In a sense. transportation. the company should look for the options such as attacking NVA activities. NVA activities are those activities which neither support business process. etc. To the customer. investment in automation and information system. To address this problem. Since these activities are wastage activities. the following alternatives could be opted. it is possible to minimize fixed cost per unit.

This is based on the assumption that prevention is cheaper than correcting the error after the fact. As it is mentioned in the case. etc. the cost of letting undetected defectives slip through is sufficiently high that inspection cannot be completely ignored.is an appeasement policy towards dissatisfied customers and it also demonstrates the company’s goodwill. However. They include cost of settling complaints. the production assistant of the company proposed 100% inspection of finished model before they were shipped as the way to weed out any defective models and avoid the problems entirely. Other things remain constant. The external failure costs are the costs of producing defective items that has been detected by the customer. Hence. But what about the cost that company is expected to incur in order to replace each and every defective models? The cost would so high as it is one kind of external failure costs. product liability cost. lost sales cost. If after all the inspection is needed. how often. Repairing defective models and reselling them at discounted price is the good option to reduce the total failure costs. what about the opportunity cost of doing so? It would be great! This is because if new staff were employed. if not all. special skill and knowledge that are necessary to produce quality product.e. But. However. the external failure costs are the highest costs of quality that must be avoided. producing “zero defects” products. This is because most of the inspection activities. we have to determine how much. they might have come with innovative idea. the likelihood of producing more defective products will be minimized. if the work forces are qualified. hiring new staff with caliber and providing existing employees with training is advisable if the company is to succeed. It is neither possible nor economically feasible to critically examine every part of product. RECOMMENDATIONS 3 . resulting interruptions of a process or delays by inspection. are non value adding by their very nature. We can partially avoid these costs by focusing on preventing the error to happen. return of merchandise. And also if the repair work is performed by the company’s regular work force. The cost of inspection. the company could save the costs of hiring new employees. our analysis shows that inspection cannot resolve the fundamental problem of quality. i. a manner of testing typically outweigh the benefits of 100% percent inspection. Usually. warranty cost. The amount of inspection needed is governed by the cost of inspection and the expected cost of passing defective items. and at what point to inspect.

the workforces equipped with necessary caliber. Generally.  Implementation of Total Quality Management (TQM) .  Training for the employees.proof”).  Proper coordination between various functional units in the organization. materials and people should be continuously updated to keep the system match with the dynamic environments. the company must try to design the product of superior quality and produce zero defect products. methods. could boost the productivity and minimize wastage.Based on the problems identified and analysis made.  Prevention is cheaper than correcting the errors.  Continuous Improvement (CI) . whereby every department have information about the plans of others and work towards the achievement of the overall organizations goal. and at what point to inspect. we recommend the company to make emphases on the following points. the need for inspection should be minimized by determining how much. efficiently using resources and producing quality products. Therefore. design the production process to make things right the first time (strive to make the process “mistake.In a sense there should be a team spirit in the company.Instead of repairing and replacing the malfunctioning with new ones.the company should make never-ending improvements to production process. attitudes and perceptions of employees to increase the organization’s productivity in general and to upgrade their potential in particular. how often. it is mandatory for the company to provide regular effective training for its workforce.there is inherent need to shape knowledge. By providing employees with different training on various issues. The company that doesn’t engage in CI is more likely creating the gap between itself and the competitors. This is to eliminate the coordination failure. Of course the list of advantages of training for employees and organization is not exhaustive. skills. Therefore. The equipments. it is possible make employees capable of operating modern technologies. The company should find out what customers want and design a product that will meet (exceed) customers’ wants. Hence. 4 . Moreover. it cannot satisfy its customers as they may have better option to look for. it is neither possible nor economically feasible to do 100% inspection of the products and processes.Successful TQM programs are built through the dedication and combined efforts of everyone in the organization.

The various options to cut costs are attacking non value adding activities.if the cause of the declining sales was the inefficiency. then the company should find the ways to cut the production costs rather than resigning employees. REFERENCES 5 . Increasing efficiency of the process rather than layoff. economy of scale. etc. Value analysis and modular design. Automation.

Nicolas J. Richard B. Aquilano and F. 9th ED  William J. 6th Ed  Joseph S. Stevenson. Robert Jacobs Operations management for competitive advantage. Chase. McGraw-Hill. John Wilay & Sons. Inc. Martinich. McGraw. Production and Management: an applied modern approach. 1997 6 . Production/Operations Management.hill/Irwin series.