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Case Study Assignment – Winter 2013
March 5, 2013

Business Strategy of CRP Products
A business strategy is the mechanism by which the direction of a business is coordinated, and the steps it will take to achieve its goals. CRP Product’s goal is to “create beautiful and functional designs from recycled plastic.” CRP Products has incorporated environmental values into their culture and products by featuring a new type of “lumber” made from recycled plastic. This practice has differentiated CRP from their competitors also providing the opportunity to conserve their finite resources. A wide commitment was also towards the quality of their outdoor furniture, providing its customers with the best quality products in a variety of colors. By building these quality products, time was compromised but customers were willing to wait a bit longer for quality goods and to build repeat business.

The four generic performance dimensions of CRP’s products are as listed: Quality: CRP maintains the quality of its products because they control every aspect of the production process. This includes the control of color and stability to ultraviolet radiation. Time: Delivery delays of CRP’s product grew longer, and estimated times were less reliable. The company is unable to keep up with demand because it has reached maximum capacity on borrowing resources. This resulted in the increase of CRP’s finances. Flexibility: With its self-controlled operations, flexibility is almost without limits. The unique material allows its product line to include different types of outdoor furniture and in various colours. Costs: Raw materials cost are $1.00 per pound and labour costs are $10 per hour.

CRP Product’s business strategy is developed in three steps: analysis,
integration and implementation. In the analysis step of their business strategy several methods are used to analyze a firm’s market, resources, obstacles to success and specific advantages. In strategic analysis, the goal is to identify what a business wants to accomplish. In this case, Ballantyne would have to determine what equipment was needed over the next three weeks in order to ensure that it was delivered and installed before the peak season. Bailey concluded that CRP did not have the financing available for both the new equipment needed to make its unique design of outdoor furniture and the seasonal working capital required to support inventory and accounts receivable. Therefore, the sales could not grow faster than the business’s financing. However, these strengths can assist us in accomplishing the goal and weaknesses that need to be addressed prior to integration and implementation. Strategic assessment methodologies can include evaluating the business environment, gaming various competitive scenarios, determining what market forces are at work and rating competitors, among others.

The process flow of CRP Products is illustrated below:

Workstation and System Capacity
The Bottleneck is a special type of a constraint that relates to the capacity shortage of a process, and is defined as any resource whose available capacity limits the organization’s ability to meet the service or product volume, product mix, or fluctuating requirements demanded by the marketplace. As listed below is the four stages in CRP products as well as their station capacity.

In the second stage it says that for production of Adirondack chairs is between 2.6 to 2.9 chairs per hour and each molding machine produced on average of between 156 to 177 pounds of plastic per hour so we can say that for 1 chair it should requires 60 pounds (156/2.6) and we conclude that 18.33 chairs per hour (1100/60) can be produced. Also, it states that CRP dedicated three of its five extruders to making parts for Adirondack chair so that 3 machines can produce 7.8 (3*2.6) up to 8.7 (3*2.9) chairs per hour.

In the third stage the production planning, CRP’s existing plan for 2011 was to run all machinery at full capacity during a single eight-hour shift in the off-season from September to March and use 3 shifts in the busy summer season from April to August. Also in the peak season, 3 staff could produce enough parts for 1 chair every 8 minutes and it is come to 7.5 (60/8) chairs per hour. On the other hand, in the off-season the number of operators was reduced to two and the production of Adirondack chair parts slowed to 1 chair every 11 minutes and it is come to 5.45 (60/11) chairs per hour.

The final stage is to partially assemble the products and package them for shipping. Before 2010, one employee is to package 3 chairs per hour. Since 2010, three employees were to package 14 chairs per hour.

Prior to 2010 individual operators did this process manually and assemble and package 3 chairs per hour. At this time, step 4 was the bottleneck. In 2010 CRP purchased an automated assembly cell, which required two operators to load and unload the machine and a third operator to package the partially assembled chairs. The purchase of the automated cell in 2010 increased this stations processing capacity to 14 chairs/hour. Currently, the bottleneck is station 3, at a capacity of only 7.5 chairs/ hour in the on-season, and 5.5 chairs/hour in the off-season.

Theory of Constraints
The theory of constraints (TOC) is a systematic management approach that focuses on actively managing those constraints that impede a firm’s progress toward its goal of maximizing profits and effectively using its resources. One of the constraints in CRP products is that as the company grows, so does the need for resources required to finance equipment, inventory and receivables. Unfortunately, sales could not grow faster than their business’s financing. CRP had to borrow the maximum available resource from its lenders, because the company is unable to keep up with their demand and customers had expressed frustration over shipment delays. Expanding capacity will help overcome the constraint.

In applying the Theory of Constraints, we have identified the bottleneck, as stage 3, milling. The next step is to exploit the bottleneck. It is important that the CNC machines are utilized consistently and with little or no down time. One option is to ensure that the bottleneck works on the highest priority, such as the Adirondack chair. CRP could dedicate an extra machine solely to this or other top selling products. Breaks for this machine should be minimized, and/or have the machine operate longer hours than the other machines. CRP could ensure that at the end of the workday, there are extruded parts immediately ready to go into the CNC machine first thing the following day. They could even reduce the set of milled parts to reduce work-in-process storage.

The next step requires the coordination of all other stations to facilitate the bottleneck. For example, removing resources from other stations to invest in the bottleneck such as adding extra shifts on the CNC Milling machine. Another option would be to reduce set up time in extruding by producing larger batches of each color.

Next, to elevate the bottleneck, CRP would have to consider adding an extra CNC machine and more staff to work on this station. They could perhaps look into implementing better or faster machines, perhaps if there was a way to trade in their old machines for new ones. If there were any other way to invest in improving the process, this would need to be considered as well.

Lastly, CRP must continue to re evaluate the system and capacity of workstations, in order to identify new bottlenecks and to keep the system flowing smoothly. Another problem I think is that in their plant layout, every time the milled parts are stacked in bins and stored in work-in-process (WIP) storage, and they have 4 WIP in the plant layout, the problem is the capacity of the storage is kind of small and in terms of their sales grow faster, they need to change or relocate the storage and build a large one or distribute different places near the WIP in order to increase the speed of assembly line and shipping.