Q1. What is Craig's major operations problem?
The main problem of Craig Manufacturing is basically related to the improper or under-utilization of the total capacity of the plant. The main product of company’s product line was snowplow. These snowplow grades were being produced for motor graders and the wheel loaders. The snowplow blades and the wings were the most common carriers used in the removal of the snow during the peak seasons. Therefore, looking at the nature of the company’s products, it is clear that the company was also facing the problem of seasonal demand which led to the loss of sales most of the times. Fall and spring were the two seasons where the demand for the company’s products was high. At the time of offseason, the demand fell significantly for the company’s products and it was difficult to keep the company’s staff hired. The nature of the product and the seasonality of the demand made it difficult to predict the right demand and in turn the plant capacity was under-utilized and the sales were lost.
Q2. How would you solve this problem?
This problem could be resolved by two methods. The first method which has been proposed by Ben. Pricing was to use a tool which could help in saving the lost sales of the company and it should also be helpful to increase the utilization of the plant capacity and increasing the demand for the company’s products. The pricing of the company could be made flexible to increase the sales for the business. Since the delivery of the orders is a very critical issue for the buyers, therefore, the pricing strategy would use this to offer different levels of discounts to the customers which would be tied to different delivery dates. As the delivery date is extended by the customer, more percentage discount would be offered to the customer to buy the desired products. In this way the company could operate its plant in different months, regardless of the demand for the products. Those customers that do not require tough delivery dates could save a lot by extending their delivery dates. Apart from this method, the second method to overcome the lost sales is that, the company should focus on differentiating its products slightly and placing higher margins over the price of the products. These higher margins would help the company to counter the loss arising from the lost sales. Although, this method would not help the company to increase the plant utilization rate but it could help to cover the loss arising from the loss of sales.
Q3. What additional data does Ben need to collect or estimate?
Before the implementation of the above two methods, Ben will have to collect or estimate some of the data related to both of the above methods. Before the implementation of the new pricing strategy, Ben will have to make sure that there are enough customers that have flexible schedules regarding the delivery of their products and that they will likely extend their delivery dates. He needs to obtain information regarding the nature of the business of the customers. For example if the customers are those that place express orders who need a single part for their ready machines to be sold off, then they are not likely to extend their delivery dates. So Ben needs to obtain this data and project on the basis of certain assumptions that whether this pricing technique would save the sales and increase the plant utilization rate or not. Regarding the second method to overcome the problem, Ben needs to obtain extensive competitors data about what price they are charging and how much margin they have set. The company will also have to invest in the research and development to find new systems to reduce the costs of the production. This information would be hard to obtain but it would be necessary for Ben to make certain assumptions before the final implementation of this flexible pricing strategy.................................
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