Natural Designs

Long-term Decisions (Structural)

• An explicitly stated structural decision in the case is Jim’s consideration of either a second facility or moving to a larger facility.
• There is also a need for Jim to review product costs and identify which costs he can do without since cost has significantly increased from the previous year as evidenced by the declining percentage of profit to sales.  The need for this decision is also clear in the statement that Jim is not sure exactly how much extra labor is needed in fulfilling the customization portion of the order.
•  In terms of capacity, Jim might want to review his current product range since 500 SKUs maybe large enough for a company with only 15 employees.  He may trim down his product offerings or hire additional employees.  But since Jim may currently be having problems with cost control, trimming down the company’s SKUs may be more beneficial.

2. Describe the operations strategy for Natural Designs. Has this strategy changed as a result of the custom bird feeder operation? If yes, how?

        Natural Designs’ original operations strategy was response or time/delivery.  Jim built his business with strong interactions with his customers through presentations and talks making him provide his products to customers right away.  As the business expanded, he made use of the internet to make the order process real quick and provided his customers a 1-week delivery promise.  With the entry of the customized bird feeder product, the company’s operations strategy has shifted to differentiation or flexibility.  Adding the customers’ information made his product unique.  The company’s shift in operations strategy is also evident in its product range of 500 SKUs, which means they are offering a wide range or variety of products.

3. What might have been done differently to facilitate the offering of custom bird feeders?

                We can infer that the company is in a situation where it is torn between competing through response or through differentiation.  Nature Designs wanted to provide a unique product through customized bird feeders but wanted to deliver it the quickest possible time as well with its promise of 1-week delivery.  To be able to continue offering this customized product within the 1-week promise, Jim should have done the following:

• Review activities related to production that will cut production time like replacing carving with pre-cut letters or utilize machines for carving instead of carving it manually.
• Increase the workforce for the production of customized bird feeders.
• Assessed which colors are saleable to customers and have enough stocks of these ready for carving.
• Develop proper costing for activities related to production of customized bird feeders to ensure that it is really profitable.

4. How should McMaster analyze the alternative expansion options? Which would you recommend: a second facility or a move to a single, larger facility?

                Keeping in mind one of the company’s operational strategy of time/delivery, I would recommend moving to a single, larger facility.  This would ensure that they would be able to deliver their products as promised since there is only one source of production.  Other benefits of this option are as follows:

• Quick response to customers in case of complaints and returns
• Easy to manage or oversee.  Jim can still be conveniently hands on to operations
• Less expensive in terms of labor cost for management – can do away with individual managers for each facility.
• Less transportation cost in terms of shipping inventories from one facility to the other.