Supporting Argument
With the perceived rapid growth, it is clear that Vivian’s Sewing Shop (VSS) production capacity cannot provide Beau Ties target sales volume. The mismatch between the capacity and perceived demand is equivalent to 7,000 bow-ties. (Please refer to Appendix B for the Demand vs. Capacity Computation). This demand is heightened during peak season (October, November, and December) in which 45% of the total sales occur thereby needing an additional of 3,150 during this season. Moreover, having no formal inventory system or any historical data to forecast sales volume also hinders Beau Ties to properly plan production and meet its target. To meet the increase in production capacity, Beau Ties should go through a series of decision points to achieve the optimal plan for expansion as shown below:
Beau Ties also see an opportunity of improving the service level of customer’s call-waiting time to 3 minutes. With this target it is necessary to develop an efficient staffing plan that would achieve the service level without sacrificing resource utilization. In addition, there is an opportunity lost incurred due to abandoned calls which on average can cost Beau Ties $1,710 per month (Please refer to Appendix C for the Abandoned Calls Analysis). The following are the decision points that Beau Ties should consider in achieving the target service level.
Alternatives
- For the increase in production capacity
With the rapid growth, it is expected that demand will eventually exceed capacity of VSS. That is why it is important to add facility that will consider factors like cost and benefit. The following are the proposed alternatives that Beau Ties can consider to meet demand as well as to minimize the cost:
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Beau Ties to rent a lot and handle all the sewing operations producing 27,000 bow ties per year with scheduling of overtime in manpower. (Please Refer to Appendix D for the Cost-Benefit Analysis)
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Beau Ties to buy a convenient lot and handle all the sewing operations producing 27,000 bow ties per year with scheduling of overtime in manpower. (Please Refer to Appendix E for the Cost-Benefit Analysis)
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Beau Ties to rent a lot and handle partial sewing operations producing the insufficient 7,000 bow ties per year with scheduling of overtime in manpower. (Please Refer to Appendix F for the Cost-Benefit Analysis)
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Beau Ties to buy a convenient lot and handle partial sewing operations producing the insufficient 7,000 bow ties per year with scheduling of overtime in manpower. (Please Refer to Appendix G for the Cost-Benefit Analysis)
- For the improvement of the ordering system.
Beau Ties has the option to stay with AIDC or acquire or renting their own telephone facility. (Please refer to Appendix H for Estimated Cost). Adapting the December 4 data, we have simulated AIDC performance and derived the economic implications of Various Staffing Plan and its corresponding cost. As summarized in the table below: (Please refer to Appendix I for the Computation).
Referring to the Economic Implication of Various Staffing Plan above, we can observe that if there is only 1 CSR the waiting for the customer will be 9.03 mins plus the average time the single CSR handling the previous call. This wait time is totally unacceptable and is the main reason of calls being abandoned.
Although the target service level is three minutes, we will also look into the possibility of lowering customer’s waiting time to two minutes or 1 minute. (Please refer to Appendix J for the staff assignment)
Recommendation
For the Production Capacity, we recommend that Beau Ties should handle the full operation in the production of bow ties, requiring them to put up their own sewing production plant. This shall mean that Beau Ties will produce 27,000 bow ties a year. Hiring of 15 workers with no overtime occurring for the first 7 months (non-peak season) and an additional of 7 workers to work in overtime for the 8th month is also necessary to meet the demand. Renting a lot is the best option in accordance to the deciding point of which facility to be used for their location. (Please refer to Appendix K for the summary of Potential Savings)
For the staffing plan, we strongly recommend that TWT should be less than 1 minute. Based on the developed staffing plan we are assured that 90% of total calls are served within the target limit of 1 minute wait time. (Please Refer to Appendix L for the Grapgh Staffing plan vs Phone ordering). Different Target Waiting requires different number of CSR’s., and based from analysis hiring 2 workers with duty from 10AM to 2PM will help achieve the target waiting time of less than 3 minutes. Although AIDC has the lowest cost of $408.25 (Please refer to Appendix M for the Cost of Call Comparison), we are recommending Beau Ties to have their own phone ordering system using the Staffing Plan 2 with target of less than 2 minute customer wait time for the reason that less waiting time will leave a good trademark to customer that will eventually lead to customer satisfaction.
Implementation Plan
- Conduct supplier meeting with VSS & AIDC to discuss the plan of having a sole production for bow ties and own telephone facility
- Start the construction of the sewing production plant, leasing telephone facility as well as the process of purchasing the sewing machines, fabric and other miscellaneous items.
- Hiring of 15 workers with background in sewing industry and 2 seasonal CSR workers with duty from 10AM to 2PM (Screening and Testing of the applicants should be considered)
- Strategically select location of telephone facility and production plant to ensure easy communication and access.
- Final Meeting before commencing about the startup of the sewing production plant
- Start of Production of bowties according to the target per month and projected quantity of demand
- For the long term, Beau Ties may consider the convenient lot wherein they needed to have a more convenient space and flexibility of increasing their total production of bow ties.
Appendix A: How-How Analysis
Appendix B: Demand vs Capacity
Appendix C: Abandoned Calls
Appendix D : Cost-Benefit Analysis
Beau Ties to rent a lot and handle all the sewing operations producing 27,000 bow ties per year with scheduling of overtime in manpower.
Appendix E : Cost-Benefit Analysis
Beau Ties to buy a convenient lot and handle all the sewing operations producing 27,000 bow ties per year with scheduling of overtime in manpower.
Appendix F : Cost-Benefit Analysis
Beau Ties to rent a lot and handle partial sewing operations producing the insufficient 7,000 bow ties per year with scheduling of overtime in manpower.
Appendix G : Cost-Benefit Analysis
Beau Ties to buy a convenient lot and handle partial sewing operations producing the insufficient 7,000 bow ties per year with scheduling of overtime in manpower.
Appendix H : Cost Comparison
Appendix I: AIDC Derived Arrival & Processing Rate
Appendix J: AIDC Derived Arrival & Processing Rate Staff Assignment
Appendix K: Summary of Potential Savings
Appendix K: Graph Staffing plan vs Phone ordering
Appendix L: Cost of Call Comparison