Concept explainers
CASE WARKWORTH FURNITURE1
Warkworth Furniture specializes in environmentally friendly and sustainable furniture. One of its products, the TePaki desk, uses bamboo for the surface and recycled aluminum for the supports. The desk is made in its factory in Vietnam and shipped to all of its 30 stores throughout the United States, primarily in the large urban areas on either coast. Karen Williamson, the owner of Warkworth Furniture, is struggling with how it should organize its supply chain.
Currently, it ships the desks from Vietnam to the United States via ocean carrier. Once they arrive in the United States, they are shipped via a third-party carrier to each store. It usually takes 10 weeks between when an order is placed with the factory and when the product is received in a store.
The TePaki desk may be eco-friendly, but it isn’t wallet friendly: Each desk costs Warkworth $325 to make and it sells the desk for $850. Nevertheless, Warkworth has been able to identify a market segment of customers that value the look of the desk and what it represents. Across its stores, it sells six desks per week, or 0.2 desk per week per store.
Given the upscale nature of its business, Warkworth’s stores are located in nice areas that unfortunately have high rents. Consequently, between the opportunity cost of capital and the cost of physical space, Karen estimates that it costs Warkworth $150 to hold each TePaki desk in one of its stores for one year. It would be a financial disaster if each desk actually spent the entire year in inventory in a store, but the $150 does represent the true cost of holding a desk in a store for that period of time.
Shipping a TePaki desk from Vietnam to a store costs Warkworth $80 per desk, about $40 for the ocean portion of the journey and $40 for the land portion within the United States.
Andy Philpot, Warkworth’s director of operations, has been arguing for some time that Warkworth should set up a distribution center in southern California to receive products from Asia, and from there distribute them to its various stores. Warehouse space is much cheaper than prime retail space. Hence, the holding cost per TePaki desk per year in a warehouse would only be $60. The only problem with this approach, according to Andy, is that the total shipping cost from factory to store could increase by $8 per desk due to the extra handling and shipping distance once all of the desks are routed through a distribution center.
Karen understands why the distribution center approach could make sense, but she worries about getting all of the execution done right. Instead, she suggests that it ship all of the desks directly to the stores as it currently does, but then ship product between stores as needed. The only problem with that approach is that it probably will cost it about $40 per desk to ship from one store to another.
To add to the discussion, Kathy White, Warkworth’s marketing director, is concerned with how these ideas will affect the desks’ instore availability. She proudly reminds everyone that Warkworth currently has a .99 in-stock probability for the TePaki desk. Andy, a typical ops guy, quips that it could save a ton if it were willing to make its customers wait a week or so to get their desk delivered to the store from a distribution center.
Would you recommend that it consider Karen’s idea of holding all inventory at the stores but shipping between stores as needed?
Want to see the full answer?
Check out a sample textbook solutionChapter 14 Solutions
OPERATION MANAGEMENT
- 3) A startup firm, Pocket International, has come up with a tiny programmable computer, NerdCom Mini Air, that sells for $49.99. The firm estimates that the programmable computers have an expected life that is exponential, with a mean of 24 months. The firm wants to estimate the probability that the NerdCom Mini Air will have a life that ends: a) after the initial 24 months of service. b) before the 24 months of service is completed. c) not before 48 months of service. Note: You could work out the problem by hand or use excel; in chapter 4S, section 4S.2 of the Stevenson text, reliability (finding the probability of functioning for a specified length of time) is covered with examples; chapters 4 & 4S Stevenson lecture power point slides 33 to 38 (chapters 4 & 4S lecture: 32.30 mins to 38.56 mins) cover reliability over time with examples.arrow_forwardDiscuss how training and development programs can be best presented to ultimately change the behavior of employees, often without their knowledge or awareness.arrow_forwardDoctor Earrow_forward
- Considering contemporary challenges in business, analyze a real-world case where a company successfully navigated a major shift in its marketing strategy to adapt to changing market dynamics. Discussion Question and Prompt: Identify the key factors that contributed to the success of their marketing strategy in the face of contemporary issues. How can businesses draw insights from this case to inform their own marketing strategies amid current business challenges?arrow_forward1) View the video Service Processing at BuyCostumes (10.41 minutes, Ctrl+Click on the link); what are your key takeaways (tie to one or more of the topics discussed in Chapter 3) after watching this video. (viddler.com/embed/a6b7054c) Note: As a rough guideline, please try to keep the written submission to one or two paragraphs. 2) Orkhon Foods makes hand-held pies (among other products). The firm’s weekly sales of hand-held pies over the past seven weeks are given in the table. The firm’s operations manager, Amarjargal, wants to forecast sales for week 8. Weeks Sales of hand-held pies(000s) 1 19 2 18 3 17 4 20 5 18 6 22 7 20 Forecast the week 8 sales using the following approaches: a) Naïve approach b) 5-month moving average c) 3-month weighted moving average using the following weights: 0.50 for week 7, 0.30 for week 6, and 0.20 for week 5. d) Exponential smoothing using a smoothing constant of 0.30, assume a…arrow_forwardAnswer all parts to question 4 and show all workingarrow_forward
- 1) View the video Service Processing at BuyCostumes (10.41 minutes, Ctrl+Click on the link); what are your key takeaways (tie to one or more of the topics discussed in Chapter 3) after watching this video. (viddler.com/embed/a6b7054c) Note: As a rough guideline, please try to keep the written submission to one or two paragraphs. 2) Orkhon Foods makes hand-held pies (among other products). The firm’s weekly sales of hand-held pies over the past seven weeks are given in the table. The firm’s operations manager, Amarjargal, wants to forecast sales for week 8. Weeks Sales of hand-held pies(000s) 1 19 2 18 3 17 4 20 5 18 6 22 7 20 Forecast the week 8 sales using the following approaches: a) Naïve approach b) 5-month moving average c) 3-month weighted moving average using the following weights: 0.50 for week 7, 0.30 for week 6, and 0.20 for week 5. d) Exponential smoothing using a smoothing constant of 0.30, assume a week 2…arrow_forwardWhat area of emotional intelligence refers to the ability to manage your emotions, particularly in stressful situations, and maintain a positive outlook despite setbacks? relationship management self awareness social awareness self managementarrow_forwardWhat area of emotional intelligence refers to the ability to manage your emotions, particularly in stressful situations, and maintain a positive outlook despite setbacks? relationship management self awareness social awareness self managementarrow_forward
- This area of emotional intelligence describes your ability to not only understand your strengths and weaknesses but to recognize your emotions and their effect on you and your team’s performance self management self awareness relationship management social awarenessarrow_forwardEmotional intelligence is defined as the ability to understand and manage your emotions, as well as recognize and influence the emotions of those around you. True Falsearrow_forwardAt the Ford automobile Highland plant, assume the one-millionth vehicle was produced in 1916 at a cost of $8084 (in 2013 US$), by how much did the Ford company reduce his cost with each doubling of cumulative output from 1916 to 1927?arrow_forward
- Purchasing and Supply Chain ManagementOperations ManagementISBN:9781285869681Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. PattersonPublisher:Cengage LearningPractical Management ScienceOperations ManagementISBN:9781337406659Author:WINSTON, Wayne L.Publisher:Cengage,
- MarketingMarketingISBN:9780357033791Author:Pride, William MPublisher:South Western Educational PublishingContemporary MarketingMarketingISBN:9780357033777Author:Louis E. Boone, David L. KurtzPublisher:Cengage Learning