Economics and Lead Time Essay

Words: 969
Pages: 4



Submitted to: Submitted by:
Dr. P. K. Dash Abhinav Anand Operations Management PGDM-BHU010

Case facts about FoldeRite Furniture:- * Established in 1987 * Throughout 1990s company grew organically. * 1999-2006 annual growth rate 3.5%. (More than market growth rate) but one competitor grew by 6% annually. * In 2006 company’s performance was very bad due to following concluded reasons- * Loss of productivity and yields caused by high labor turnover. * Cost of raw materials was increasing * Increasing proportion
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Ans.The risk associate with it are:
Financial Risk:- * According to their CFO Yung credit situation is tight. * They have to generate cash from costly resources as expensive as 12% p.a.
Human resources Risk:- * Hiring a skilled worker would cost $1500 * Supervisor cost for these workers $25 per hour + 33% for benefits * Training of unskilled worker takes 4 weeks during which full wages are paid.
Changes in economy and environment are as follows:
1. If staff would be doing overtime than it would increase the productivity in short run but at the same time this would have lead to fatigue and boredom among the staff leading to decrease in efficiency.
2. Hiring staff temporarily would automatically increase the cost of training and would also require management and supervision resources.
3. If the demand did not materialize than laying of the workers would demoralize the remaining workforce and cost the company in adding unemployment.
4. Another major concern was the cost of carrying inventory beyond two weeks.
Ques-(4) Weighing options in term of non-financial implications
Ans. The non-financial implications are:
1. Overtime work done by Employees:
This will affect the profitability in short term in a positive manner but in long term as the workers do have chance of getting fatigue it might lead to decrease in quality of product which in turn decrease the profitability. The overtime formula will not affect the