Foulke Consumer Products Harvard Case Solution & Analysis

Foulke Consumer Products Case Study Solution

Shut down Orlando Plant & Enlarge Lexington Plant

In this alternative, the Foulke Consumer Products Incorporation’s management is to shut down the Orlando Plant because of the several issues associated with this plant which leads to a decline in profits ultimately the profit margins of the regions. Issues associated with Orlando plants are work force issues and transformation of region form rural to urban which shows the severity of issues associated with this region and plant. In short, in this alternative the management of the company is decided to shut down the Orlando Plant while decided to continue the Atlanta Plant and Lexington Plant.

By utilizing the expanding option of Lexington plant by 50,000 units from 187,500 units to 237,500 units at the marginal cost of 600,000 dollars. In this alternative, the optimized transportation cost after using the minimum objective function in solver would be the 1,448,369 dollars which provides the ratio of transportation cost with total net sales is 10.86 percent which are shown in Table 1.3.

Here, the sale price of Orlando Plant is 3,250,000 dollars which have been added in the total net sales of the company for the purpose to evaluate the outcome of this alternative.

Table 1.3

Shut down Orlando Plant & Purchase Lake City as New Plan

The management of Foulke have another alternative which is to close the Orlando plant and to buy the new lake city plant distribution network of company. A plant situated in the Lake City could most likely be similar to the Lexington plant. It is to notify that the decision would reap financial benefits to the company due to the fact that company’s plant which are located in the rural areas are more profitable and lucrative in comparison to those plants which are located in the urban areas.

In addition to this, the new Lake City would most likely emulating the Lexington plant production performance. A cost of transportation amounted to 3,604,982 dollars and 22.24 percent is the cost to average annual revenues ratio.

It is imperative to note that the Lake City plant capacity ranges 62,500 and 250,000 units. Also, the average capacity of Lake City plant is 156,250 units. It is assumed that the unit transportation cost is similar to Lexington plant due to the similarity to this plant. The Lake City Plant cost is amounted to 625,000 dollars and the cost amounted to 3,250,000 dollars.

Here, the sale price of Orlando Plant is 3,250,000 dollars which have been added in the total net sales of the company for the purpose to evaluate the outcome of this alternative.

Table 1.4

Shut down Orlando Plant & Purchase Ft. Myers as New Plant

The management of Foulke have another alternative which is to close the Orlando plant and to buy the new Ft Myers plant in Florida. Since, the Ft Myers plant is close to the Miami are market, it is attractive alternative to the company. By selecting this location, the company would be able to reduce the cost of delivery, therefore, the likelihood of achieving the production record at this plant similar to Lexington seems less possible due to the region’ demographics.

In order to evaluate the benefits of selecting this alternative, it is assumed that the unit transportation cost of Lexington plant is similar to Orlando plant due to the similarity to this plant. The FT Myers plant capacity falls between 62,500 and 250,000 units, so the alternative tend to be analyze based on the average capacity of 156,250 units for FT Myers plant. Also, the FT Myers plant’s cost amounted to 62,500 dollars.

The optimized cost of transportation amounted to 2,949,178 dollars and 18.96 percent is the total cost to average annual revenues. Here, the sale price of Orlando Plant is 3,250,000 dollars which have been added in the total net sales of the company for the purpose to evaluate the outcome of this alternative.

Table 1.5

Shut down Orlando Plant & Purchase Lake City & Enlarge Lexington Plant

The fourth alternative is based on the decision to shut down the Orlando Plant and to purchase the new plant named Lake City along with an increase in production capacity at Lexington Plant because it is the most profitable Plant in the history of Foulke Consumer Products Incorporation. The acquisition of new plant will be made to make the company more profitable because Lake City Plant is located in rural area which will help to generate more profits along with an increase in production performance of Lexington Plant.

Due to the high potential of rural area where the Lake City is located and the advantageous demographic elements in Lexington plant will lead to the decision to buy the Lake City for the purpose of increasing the company’s overall profitability.

Table 1.6 shows the total transportation cost for fourth alternative is 3,604,982 dollars by using the minimum objective function in excel solver. The ratio of total transportation cost with average annual net sales is 25.62 percent which is considered too high among all alternatives.

Here, the sale price of Orlando Plant is 3,250,000 dollars which have been added in the total net sales of the company for the purpose to evaluate the outcome of this alternative.

Table 1.6

Shut down Orlando Plant & Atlanta Plant & Purchase Lake City & Enlarge Lexington Plant

In the fifth alternative, the company have chooses to shut down the Orlando Plant along with the shutting down of Atlanta Plant and to purchase the new plant named Lake City along with an increase in production capacity at Lexington Plant because it is the most profitable Plant in the history of Foulke Consumer Products Incorporation. The acquisition of new plant will be made to make the company more profitable because Lake City Plant is located in rural area which will help to generate more profits along with an increase in production performance of Lexington Plant.

Table 1.7 shows the total transportation cost for fifth alternative is 1,896,149 dollars by using the minimum objective function in excel solver. The ratio of total transportation cost with average annual net sales is 13.66 percent for this alternative where the company decided to shut down the Orlando and Atlanta Plant and to purchase the new plant named Lake City along with an increase in production capacity at Lexington Plant.

Here, the sale price of Orlando Plant and Atlanta Plant are 3,250,000 dollars and 4,000,000 dollars respectively which have been added in the total net sales of the company for the purpose to evaluate the outcome of this alternative..........

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