The Conflict Of Victorian Fine Furnishings And Snoozarama - Case Study Example

 Executive Summary: The case is about Victorian Fine furnishings and the order that they have to deliver for an important new client, Snoozarama in eight weeks. Profit margins are very little and they have had to negotiate prices to make some profit for them irrespective. However, things became very difficult for them when Ashley Timber, their main supplier caught fire and claims delivery of raw material in 4 weeks, leaving Victorian fine furnishings with no other option but to look around for other alternatives. Different alternatives and their recommended solutions have been discussed in the case. Introduction:- About Victorian Fine Furnishings:- Victorian Fine Furnishings is a manufacturing firm that manufactures classic Victorian style furniture. Their sales manager at the moment is Ken Lambert and the company is working with 34 employees. They have worked in partnership with a franchise company Snoozarama in the last 7 months. Snoozarama is a national franchise that has had 41 specialized bedding stores all over Australia. They have specialized bedding stores all around the world. Victorian fine Furnishings has recently received an order from Snoozarama. Under the order, they have been asked for 120 of their up market bedroom settings. These include behead, frame, two bed side tables and a 5 drawer dresser. Each of these pieces will have to be made in rose wood and Snoozarama’s wants the delivery to take place on the first Friday of September. That will be during the Spring Carnival and their advertising and sales promotion time which is eight weeks away. Nature of the Problem: Ken and his General Manager have negotiated with the contact price. Despite the fact that it is way below the normal price for such contracts, they have negotiated enough to ensure that the overall volume is lucrative and profitable. Even more important, the fact that for both Ken and Gerry it will bring them an important new client. The consequences of a successful project are remarkable. It could pave way to supplying them nationally. The short time span was a problem as it is. The order has to be delivered in 8 weeks which means that they will have to slog to meet the deadline. Their production capacity will have to be stretched completely. Gerry worked out the details and felt that even if they received raw materials in two weeks and diverting fifteen of their factory employee activities from general manufacturing for six weeks, they will still have enough stock in hand to be able to cover routine orders in the interim period. The schedule will be stiff and tight but it is possible. After doing all the calculations and the planning Gerry went ahead and placed the order for rosewood with their main suppliers Ashley Timbers in Oak Leigh. The terms and conditions of the order were conditional. They wanted a guaranteed delivery within two week. This will give those six weeks of production at a stretched. Gerry had already arranged for the timber to be cut down in appropriate sizes. This will spare his staff of the time needed for additional trimming which would in effect obstruct production and slow down the entire process. However the big problem came after all the planning. Ashley Timbers caught fire in their yard. This meant that they won’t be able to supply timber for another month. The circumstances are dire and other alternatives had to be looked for. One month is way out of question. The order is to be delivered in eight weeks which means they would be left with only four weeks to complete their production if delivered after a month. This left Gerry’s and his team to look around for other viable suppliers at the moment. Facts If the raw materials are delivered after four weeks then that means production of the 120 units within the remaining four weeks will have to be over stretched. It will require, at least 1000-1200 additional hours. And will add 35,000-40,000 dollars to the cost of production. This will not leave the venture profitable for Victoria fine furnishings any more. As it is the costs that they had negotiated were way below the normal prices and they had literally squeezed profits out of it. Any more costs would mean, incurring losses let alone making profits. This does not make the project sustainable any more. Victorian Fine Furnishings needs rosewood timber in bulk. This is not available at any Melbourne store at the moment. No one in Melbourne can deliver the total amount of rosewood timber required this early. Even if 40% of the wood is acquired from 4 different merchants, in the next few weeks, then this will raise costs. It will cost them an additional 3300 to 36000 $ per M. This means this will be 30-40% higher than the prices offered by Ashley. This will not leave the venture profitable for Victoria fine furnishings any more. As it is the costs that they had negotiated were way below the normal prices and they had literally squeezed profits out of it. Any more costs would mean, incurring losses let alone making profits. This does not make the project sustainable any more. There are two Sydney timber merchants who can supply the product in 3 weeks but are being difficult in negotiating a fair and reasonable price. They are aware of the fire at Ashley Timbers and are set to capitalize on the problem. They want to negotiate for ongoing contracts. Their prices are also about 20% - 25% above the price negotiated by Ken with Ashley's... Ashley Timber's major supplier, the North Coast Timber Co in northern NSW, is prepared to provide the required uncut and untrimmed amount of rosewood. The order therefore will need to be about 60 - 62 M3 to allow for wastage. Half can be ready for pickup within the week. The balance within about 10 days. They require cash in advance for the order but will supply it at $2,040 per M3 or 20% lower than Ashley's. However, Victorian Fine Furnishings will have to pay the road freight from the far north coast of NSW and then find a company that can cut and trim the wood to the required sizes. Gerry estimates that this could add an additional $750 - $900 per M3. Major Issues in the entire scenario: Now that the entire scenario is in front of us, the main issue is delivering the order at the right time and at the right costs. The negotiated prices with the retailer are already very less. This means that Victorian furniture’s have very little margin to squeeze profits from. This is a very important client. Success with this client would mean that they would get to supply nationally to them and would become a brand name of their own right. Time management is a big issue given the fact that they have to upscale production to meet the client’s demands. They have to cut down on supplier costs to be able to extract profits Most suppliers are aware of their dire circumstances and want to capitalize on them by negotiating the prices further down. Victoria needs to ensure that the lead times are really short. Possible solutions: Marketing is an oft conceived word used in our daily life. It is a normal word which may often be found as a part of our day to day conversations, and has more to do with the approach then the execution of a business idea. It was first explained by the American Market Association as an “activity”. Later the definition was elaborated and modified to involve the various institutions and processes employed for making, communicating and delivering products which are of value to the stakeholders-customers, clients, partners and the society at large. The term was derived from the original meaning which taken literally meant simply going to the market to shop or to sell goods and services there. Marketing has grown by leaps and bounds today. It is a creative industry that has expanded down to various genres such as advertising, distribution and selling. Customer base is figured out, their needs and aspirations realized and the relevant product developed accordingly. Future predictions and the expected turn the market is to take is often analyzed through various forms and types of Market research. Marketing has derived its influences from innumerable fields of life such as social sciences, psychology, sociology and economics. It is a unique amalgamation of various fronts of life. Anthropology has been impacting marketing for quite some time though the influence is comparatively smaller in scale. Research conducted by marketing analysts has chalked out these activities. Its association with advertisement has co-joined with creative arts too. Today marketing variables have incorporated creative arts too for marketing the product. The Marketing literature is no more constant and is infamous for its rapidly changing nature. There have been a multitude of marketing definitions connoted by various institutes. The Chartered Institute of Marketing is one such marketing premise and it explains marketing in terms of customer needs and the efforts undertaken to satiate them. This is normally achieved by transforming and adapting the product completely in accordance with the needs of the customers. Another organization goes on to define marketing as a process closely related to management which is aimed at identifying and assessing customer needs efficiently while some others claim that marketing is more about getting the right goods at the right time to the right people. It may be one of the oldest of all activities of man yet the phenomenon remains as recent as ever. 1) Victorian fire furnishings can appeal to a more nervous supplier. These are recession times. This means that there will be more suppliers in the market who will be adverse to risks. Find out where the entire deal will be profitable for him and present the proposal to such a supplier. He will be more than willing to go ahead with the deal if he sees no loss for him. As suggested by George “Strategically, a recession means fewer risk takers and visionaries, so take a lesson from Geoffrey Moore’s Crossing the Chasm and use methods that appeal to mainstream pragmatists: industry-specific marketing tactics and solutions; vertical customer references; relevant partnerships and alliances; and whole product marketing.” 2) North Coast Timber Co is an old supplier of Ashley Timber. I suggest that Victorian fire furnishings negotiate the deal with them and continue it with them. It’s always a wise idea to extract deals from in-house customers. B2B marketing is all about cultivating and maintaining relationships with customers. In such circumstances the most viable deal would be to negotiate the terms of the contract with North Coast Timber Co since they have already had a long standing relationship with Ashley Timber. They can be trusted and so can the terms be negotiated with them. B2B marketing suggests focusing on in-house customer lists. North Coast timber Co is a readymade customer. Victorian fire furnishings won’t have to spend time acquiring new customers in this way. As suggest by various researchers that the solution is fairly easy in such circumstances. Marketing should be given a priority to customers who have already been working with you. There are some activities which can be pursued to get the most out of current relationships. These include lead nurturing campaigns, new benefits to offer them existing prospect, and clean the current marketing lead database with progressive profiling. 3) What Victorian fire furnishings could do to cut down on costs is offer a different kind of settlement with North Coast Timber Co. they can get them to trim down wood as well as provide them with transport and in return Victorian Fire would renovate their office up. There must be a lot of spare wood present which can be recycled and re used and the North Coast Timber Co office can be renovated use discarded stuff but after recycling it. This will keep the prices in check where transportation is concerned and also time where finding another supplier to trim down wood is concerned. Both time and cost will be taken care of and Victoria Fire Furnishings will receive their desired supply at the right time. 4) The two Sydney merchants are willing to provide the wood in 3 weeks but at higher costs. If they want go through with this deal, and then the extra 20-25% cost needs be reduced in some other way by Victoria Fire Furnishings in some other way. Instead of offering heavy over time rates to its workers, Victoria can please them by promising them early raises by the end of next quarter. They can also use effective lead management to ensure that the production capacity is not over stretched and the work is done on time each day so that they don’t have to incur heavy costs and are able to neutralize the extra 20-25% in some other way. 5) A new merchant is always in the awareness or research stage and is hesitant in engaging with the sales representatives. If Victoria fire furnishings want, they can even look around for new suppliers by placing ads in specialized magazines targeted to their niche market. This will help them figure out which leads are highly engaged, and later use lead nurturing to develop relationship with suppliers who are qualified enough but are hesitant to go ahead with deal. They should come up with ways to appease them in such a way that the time and cost factors are both taken care off. 6) Victoria Furnishings also has the option of trying to negotiate terms with their buyer, Snoozarama. They can promise scheduled delivery instead of bulk delivery at a go and explaining them how just-in-time delivery will help them cut down on inventory retention costs. Just –in-Time” is a term which is used to describe manufacturing system when raw materials and other products needed to produce a finished product are delivered only when needed. The aim of this approach is to achieve long term Excellency in the manufacturing company through reduction in waste and continuous improvement in productivity. The concept is central to the fact that believes in constant monitoring of production processes with the aim of reducing wastes of all forms. Quality management and control has been strongly emphasized in JIT. The goal is to “get it right, the first time”. JIT believes that quality should be already embedded in the products and is something which should not be inspected. This concept has been there in the business environment for more than half a century now and a lot of success stories have been reported. It simulates new production planning activities within the manufacturing company with considerable impact on the overall organizational performance. It is an approach that conglomerates the conflicting objectives of low costs, high quality, manufacturing flexibility, and ease in delivery. In effect, this is perceived to be achieved by ordering products only when needed. 7) A JIT implementation would mean that there will be no over head costs of transportation, over time employees and supplier problems. Even if Ashley timbers supplies Victoria, the raw material in 4 weeks, they would have enough raw material to work through for the first scheduled delivery to Snoozarama. Once the delivered material is about to finish, Snoozarama can order in for more. This will also help them by reducing their inventory storage cost, giving them just the amount of sets that would be sold during the spring festival and ensuring that even their costs a reduced to a minimum. Recommendations: Of all the solutions that I have suggested, I believed JIT implementation would be the best and the most viable option. There are various factors that need to be considered for just-in-time implementation. Political climate, competitor behavior, economy, market conditions, and other external factors can trigger conditions which are beyond the control of the firm and hence inevitably impact JIT implementation. Similarly internal factors such as knowledge distribution, uncertainty, power distribution disputes, can also create a similar influence and direct production processes. Ergo, this brings us down to highlight two important aspects of managing JIT implementation. These are the need to explore, identify and challenge the assumptions on which production related decisions are based. Once that is done, would the implementation and development of JIT could begin. Also, secondly, it must be facilitated by perceptive and insightful planning, analysis and well crafted implementation phases. However it should be noted, that one has to make a conscious effort to deprive the change of the effects of serendipidity JIT will have a lot of advantages too. It is giving reduced lead times, reduced costs for both the buyer as well as the seller and also taking care of availability of storage space. Profits would be exactly what had been projected by Gerry and his team as before and the customer satisfied. Some other benefits would be: 1. Reduction of waste: The primary aim of this element is to reduce all non-value added tasks. In the traditional production method (EOQ), there is a lot of emphasis on producing items in bulk. With the kind of flexibility and competitiveness requirements needed in today’s age and time, this is no longer a wise method. There are constant customer queries who wanted updated status information on their orders. Lapses in the availability of raw material can hinder the entire process and cause delays in customer orders. JIT implementation can help relieve the organization of these constraints and ensure a smooth production process. 2. Value-adding production oriented: This element is central to the concept of “pull-system”. Under this system, a customer order triggers production process and it makes sure that the customer requirements are satisfied. It does not aim at producing large batches of products. This customer oriented approach is specific to the cause of JIT in which products that have similar productivity are grouped together while manufactures add-value to the products by shortening travel time and lessening production complexity. 3. A lot of money on transport will be saved 4. Relations with suppliers would become even better 5. Employee empowerment: Empowerment of employees means division of problem solving and allocation of decision making responsibilities to middle managers and individual teams associated with the task in hand. If carefully and adequately planned, employee empowerment promotes quality, flexibility, and productivity of the manufacturing process. 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Retrieved Jan 28, 2009, from http://marketingpractice.blogspot.com/2007/04/levis-orginal-icon.html Nexbitt, A. (2007). Social Marketing Case Study. Retrieved Jan 28, 2009, from http://www.digitalpodcast.com/podcastnews/2008/04/22/social-marketing-case-study-levis-project-501/ Read More