Island Clothing
Presented to Dr. Bruce Firestone
Due: Monday, April 9th, 2001
Entrepreneurial Culture 42.491
Catherine Cleary #266799
This case study could be used in many undergraduate classes. While a large majority of it focuses on operations management, there are many strategic management issues.
The objective of the case is to create awareness of the importance of properly managing operations. The positioning of the case enables discussion to arise as to the strengths and weaknesses of each operational alternative. As well students would be encouraged to come up with other various alternatives. Some of the questions that could be posed to students are as follows:
1) Should the company implement a computerized inventory system? What are the strengths and weaknesses of this implementation?
2) Should the company continue to print in-house or should they outsource?
3) Are there any other alternatives that Susan should be looking into?
4) How could Susan create awareness of the importance of inventory control?
5) Do you think that in the next few years, most retailers will be using business-to-business operations?
6) Should Susan be looking into expanding the business to another location or should the focus continue to be on the four stores?
7) Since many of the customers are repeat customers, should the company set up a reward system? If so, what kind?
Some of the other alternatives might be
1) The company currently operates the factory for 4 months of the year and they therefore could become a clothing manufacturer for other business in the off-season. This would enable the factory to be used all year and would enable the company to see revenues in the winter months when sales are low. The drawbacks of this alternative are that there would be a change of focus and profit margins are low. There are considerable amount of costs associated with setting up the printer and therefore management would have to set a minimum number of garments at around 10,000 in order to see profits.
2) The company could sell the factory, which would allow them to receive a considerable amount of money. They could then outsource all printing requirements and they wouldn’t have to deal with the extra effort and management required to operate the factory.
Recommendation
Susan Smith, manager of Island clothing will present a recommendation to the owners. Her analysis points to the implementation of a computerized inventory system. This bar code system would enable the company to realize cost savings from reduced levels of inventory. The system would also make it possible for the company to reduce their labour requirements and the high incidences of error in handwritten records. The system could enable the company to avoid unexpected inventory shortages and would enable the managers and the owners to have immediate access to current inventory levels. The system would also help minimize inventory shrinkage. The company would see a rapid payback of the system, about 1 year.
Her analysis also points to a recommendation that the company should continue to print in house. By continuing to print in house the company could save on ordering costs and it would enable them to continue to rapidly respond to market demand. The company has a lead-time of about a day where as outsourcing the requirements would take about 7 days. The company would also be able to have control over their costs if they were to continue to print in house. By continuing to print in house the company also knows what they are going to get, as there are very strict quality controls that the managers and owners ensure that the factory workers meet.
Susan Smith thinks that these recommendations will increase the efficiency of the operations and will enable the company to see significant cost savings.