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