Introduction:
Polar Sports Inc was established in 1992 by Mr. Richard Weir who was a retired snowboarder. The goal of the Polar Sports was to create high-quality Ski wears for all the ages, gender and class, in the third year of operation Polar Sports Inc achieve its goal by selling few good quality items. The company grows rapidly in the 1990s, and Polar Sports Inc has also collaborated with various highly recognized athletes who prove to be very fruitful for the enterprise. Due to this collaboration, Polar positioned itself as a key player in the industry, however in the global economic recession of 2008-2009 the company is also affected but the company tackles the situation very well.
Despite the expansion of the enterprise, the industry is affected by the high competition; there are many small and huge competitors of the Polar Sports Inc which affects the pricing and other policies of Polar. The production process is of complex nature with many processes are carried manually. Many competitors had shifted their production plants to developing countries where availability of cheap labor is high, but, Polar Sports Inc has not relocated its production facility to promote local manufacturing.
The demand for the products of Polar is highly seasonal because people use this kind of clothing typically in winter and snow season. About 80% of the annual sales generated in four months, Polar made a drastic change in its management style during the four months while many of the staff been hired on an ad-hoc basis and the existing employees of the Polar Sports Inc are encouraged to work for almost 15 hours. However, these temporary management costs much to Polar which is an essential element of the decreased profit margins. These increased expenses push management to consider many changes in the running style of the company.
Polar Sports Inc Harvard Case Solution & Analysis
Problem Statement:
It is clearly evident from the case study that Polar is very concerned regarding the increased costs of the manufacturing of the products. The cost of goods sold for the products that are manufactured in the peak season and also the operating expenses are way too high in the months from September to January. To minimize these costs, the company is planning to implement many changes in its operating structure such as adopt level production in the coming year.
Analysis:
Level Production Plan:
The level production method is a manufacturing strategy in which the manufacturer produces the units or components continuously throughout the period. For example, if Polar Sports Inc wants to manufacture 100000 units in a year and there are 365 working days in the year so, they have to produce almost 274 units per day.
Quantitative Analysis:
To cope with the demand in the season, Polar Sports Inc have to incur substantial labor costs which are assigned on the temporary basis, and the permanent employees have to work longer than the routine. For the permanent employees, Polar Sports Inc have to pay overtime which is usually more than the regular pay, thus, resulting in the increase in the labor costs......................
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