Beau Ties Ltd. of Vermont Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Telephone order servicing:

Kenerson is considering to bring telephone order processing in-house. He is considering this in order to reduce cost charged by the AIDC service providers i.e. $ 0.72 per minute. The time taken to take to order is 6 min out of which 3 mins are hold time. So, the extra 3 min holding time is doubling the cost of service received by Kenerson.

The new service will consist of 4 lines and 12 stations and if two servers are introduced then the customer holding will reduce to 14.

Bringing the telephone service will reduce significant cost to Kenerson:

Option 1:

To purchase the equipment for $ 33,000 and paying $ 281 per month.

Analysis:

Buying the new equipment will increase their assets in the balance sheet and will increase the value of the company.
It will increase the maintenance cost to the Kenerson.
They will have to pay fixed amount of premium regardless of the phone call made which might reduce the profitability in the period of less calls made.
It will also increase the telephone operating cost of Kenerson.
The purchase of new equipment will make saving for kenerson of $ 51097.
Kenerson can use the equipment for long term period which will be beneficial for Kenerson for long term period.
Total saving made by considering option 1 will be $ 7,628 which is lesser than the saving made in option 2.
Kenerson can reduce the staffing cost by reducing the waiting / holding time. (See Appendix for staffing plan calculation)

Option 2:

To lease the equipment at a cost of $ 1270 per month.

Analysis:

Leasing the equipment will increase their operating cost and thus will reduce their profitability.
Kenerson will not need to worry about the maintenance cost.
No premium will need to be paid; the only payment of lease amount would be required.
Kenerson will be able to make saving of $ 51097.
Kenerson cannot use it for long term period and thus Kenerson will have to renew the lease.
Total saving per annum by considering option 2 will be $ 28,760 which is higher as compare to option 1.
The operator wages will needed to be paid at the rate of $ 6 per hour, but this could be reduced if they can manage and minimize the holding time per call (See Appendix for staffing plan calculation).

New Proposal for consolidated facility:

Option 1:

To buy new facility, which is 6000 sq feet.

Analysis:

The Kenerson business is growing too quickly, it has found the increase in revenue by 79% in 1995 and 41% in 1996. So, the new area will be helpful if they will need to increase production capacity in future.
The purchase of a place will generate 4000 sq. feet of excess capacity useless, which will show under utilization of assets.
Saving made from opting out the Vivian Sewing Shop will be $ 92,450 per annum.
Other costs such as thread, renovation and machine purchase cost will increase.
Total cost to Kenerson of considering this option will be $ 304,300.
They will need to control their inventory and maintain proper record of it due to change in style of ties.
Kenerson will need to introduce the appropriate no. of machines in order to reduce staff overtime cost.
It might increase transportation cost as well for the Kenerson.

Option 2:

To acquire the property / site on rental basis.

Analysis:

It will provide short term solution for Kenerson, if we consider the growth of the company.
The rental site will increase the rental cost for Kenerson which will reduce the profitability of the company.
The saving made from Vivian Sewing Shop will be $ 92,450.
The total saving by considering this option will be $ 58,700 (See Appendix)
The Rental site will be appropriate for the current production need i.e. 2000 sq. feet of place.
The transportation cost will increase.
They will need to incur additional cost to handle and maintain the inventory.
They will also need to maintain the record of inventory as well as the production process in order to identify the weakness and address them.

Staffing strategy:

Kenerson should consider The Staffing Strategy in order to reduce the cost significantly as calculated in the appendix.....................

This is just a sample partial case solution. Please place the order on the website to order your own originally done case solution.

Bill Kenerson, the owner-operator of retail bow tie business is faced with two decisions. The first is to bring the production of bow ties in the house. The second relates to their telephone order entry system. The case invites students to calculate the power production facility and determine the appropriate staffing for telephone operators.
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by Elliott N. Weiss, Steven Shepherd Source: Darden School of Business 12 pages. Publication Date: December 4, 1996. Prod. #: UV0337-PDF-ENG