Elizabeth Hine’s “Elizabeth’s Country Wares (ECW)” deals in decorative country housewares and ceramic pottery business. Although ceramic pieces of equal/better functionality and lower price are easily available in the market, product differentiation has helped ECW’s products appeal to its customers. The firm’s products, mainly targeted at middle to upper-income households, have a country theme out of which, 3 “burst” themes are very successful: the “appleburst”, the “heartburst” and “the heart sideburst”. Also, the flexibility in designs and a wide array of choices has helped ECW to cater to the ever-changing consumer preferences.
Currently, Country Pitchers (CP) is the ...view middle of the document...
Else, the firm can also consider outsourcing either already familiar screen-printed decals, known for the unmatched colourful designs, from a supplier based in New York state or entire CP production from Ceramics Manufacturing Company, China. However, there are concerns related to the Chinese supplier that given the lack of strong manufacturing regulations coupled with weak enforcement in China, he may falter in his assurance of using lead-free glazes which, in turn, may pose serious health concerns for the end user. Also, the supplier will require 40 day lead time to supply the committed 3000-unit demand.
The Problem Statement
How can ECW, efficiently, utilise Elizabeth's time currently spent in the production of Country Pitchers (CP) to work on higher margin items like Butter Churn Lamps and at the same time, make more profits by meeting the forecasted demand of 3000 units of CP?
Following options can be considered to fulfil the desired requirements:
1. Purchase Decal Equipment and take help of an additional worker.
2. Outsource Decal Production from a supplier based in New York State.
3. Outsource CP production from a Ceramics Manufacturing Company in China.
Criteria for Evaluation
Criteria in decreasing order of importance
1. The quality of CP.
2. High return on the investment.
3. Flexibility in production and change of designs.
4. Familiarity with the equipment.
Evaluation of Options
a. Although the pieces will no longer be hand painted, CPs would maintain their unique and country appeal. Since decals will be digitally designed, the designs will become more consistent.
b. For the next year, net profits come out to be $55,650 (Exhibit 1.5). Since the investment is a long term one, profits will only increase in the upcoming years.
c. Since the designs for the decals can be easily stored on a computer, and then printed whenever needed. It provides ECW with the flexibility to change the designs as per the customer's needs without any additional costs.
d. Although digitally produced designs have become a trend in the industry, Elizabeth’s inexperience with the equipment might pose some problems.
a. The screen printed decals have a reputation for yielding unmatchable colour designs. Thus, the overall quality of the CP will be improved.
b. For the next year, net profits come out to be $51,720 (Exhibit 1.6).
c. The supplier uses screen printing method, which requires a single upfront cost of $500 for each design. Thus, each time design changes, a setup cost is required to fulfil the requirement. Hence, it can be said that this option provides flexibility in design but at an expense of $500 per design.
d. Since Elizabeth has already worked on the method of screen printing, this option provides the assurance of work.
a. Lack of strong manufacturing regulations coupled with weak enforcement in China may falter the supplier’s...