Executive Post Graduate Programm Case Study : Risk Management FoldRite Furniture Company Submitted by: Abhra Debroy

y Ashutosh Rastogi Nishan Desai N Girimurugan Pranav Gupta

FoldRite Furniture: Company Introduction

FoldRite Furniture was founded in 1987 The company focused primarily on portable, foldable furniture for social functions. Initial operations focused on Banquet Table designed for school and church functions. The company grew organically in 1990s At the start of the new century, the company was manufacturing three product lines for business & government offices, hotels, schools, colleges. Profit margins increased from $47.5M in 1999 to $60.3M in 2006 The company had an above (industry)average growth of 3.5% viz-a viz declining revenues of competitors

FoldRite Furniture: Issues

Financial turmoil starting 2006 resulting from loss of productivity by increasing proportion of inexperienced workers. Lead time increased to 6-8 weeks from standard norm of 4 weeks On time delivery dropped to 30%-40% instead of the standard norm of 90% Decreased cash reserves and distracted management attention due to acquisitions of small firms Private Equity infused in 2007 for getting the desired capital

FoldRite Furniture: Second Innings

Recruitment of new CEO by the Investors Revived Focus on Innovation & customer service. Restructuring of Manufacturing division with recruitment of new Manufacturing VP New Goals Innovation in products and processes Customer responsiveness, good quality service and high quality products Adoption of Lean Manufacturing Retention of well trained and experienced workforce Number of products in the market were reduced and the company focused more on improving quality & turn around time of selected products Reduced product line improved margins and reduced delivery times Consolidation of Manufacturing from four smaller facilities to one Capital freed up from consolidation directed towards automation

FoldRite Furniture: Second Innings contd

Lead time reduced to 2 weeks. Two day shipping policy ensured lean inventory for distributors and possibility of last minute purchasing decision by customer Company back in profitability in 2009 with $60M revenues

FoldRite Furniture: Strategy

Focus on environmentally friendlier products based on market research Competitive advantage due to product customization Customers can configure seat covers and chair colors Delivery time of 48 hours was far quicker than their offshore competitors Focus on high quality, stylish, stackable furniture Focus on Europe New Warehouse & offices setup in Germany

FoldRite Furniture: Operations Process

Strategic Inventory of fully assembled products and partially assembled parts setup along with unpainted frames Partial assembled inventory consisted of products with most popular colors Reduced lead times of Raw Materials procuring based on vendor contracts Forecast of production planning triggered the raw material purchase. Centralized production planning Dynamic nature of procurement of raw materials reduced inventory carrying cost Production activity confined to 4 days a week Focus on increase production using overtime or additional labor only on Friday Focus on skilled laborers to do strategically important tasks Improved incentives and relations with laborers Similar materials used in products resulted in improved quality and reduction in procurement overhead Multiple assembly lines used for final assembly of tables and chairs Improved quality control process with focus on each product

FoldRite Furniture: Current Challenge

Unexpectedly high market demand for the companys product in summer due to launch of new stylish, innovative and environmentally friendly products. Production Issues :Need for optimized production planning to meet the spur in demand & also meet the quality standards and delivery schedules. Alternatives :
Overtime : 10 hour shift on Fridays Temporary increase in staff to use idle production capacity Subcontracting part of work to other companies

Financial issues :Tight credit facilities ensured the company needed to meet the demands from internal cash flows. R&D and Product development budgets can take a hit HR Issues: Hiring new staff results in additional cash outflows and their productivity remains a question (80%). Hiring unskilled staff requires 4 weeks fully paid training