1. As of 2017, what type of manufacturing process did LWT appear to be using? What level of customization was it offering? Where was the point of customization?

2. Using Table 3.2 and Figure 3.12 as guides, how would you describe the service side of LWT’s business prior to 2018? What were the managerial challenges?

3. What type of manufacturing process is needed to support the changes proposed by Chuck Keown? What level of customization will LWT be offering? Where will the point of customization be?

4. Using Table 3.2 and Figure 3.12 as guides, how will the service side of the house change in 2018? What will the new managerial challenges be?

5. Develop a list of 8 to 10 things that must happen in order to accomplish the changes Chuck Keown envisions. Will the new business model be more or less difficult to manage than the old one? Justify your answer.

Figure 3.12

Table 3.2

Introduction
For nearly 50 years, Loganville Window Treatments (LWT) of Loganville, Georgia, has made interior shutters that are sold through decorating centers. Figure 3.20 shows some of the various styles of shutters LWT makes.

Past Manufacturing and Service Operations: 2017

Traditionally, LWT supported a limited mix of standard products. At any particular point in time, the mix of products might consist of six different styles offered in five predetermined sizes, resulting in 30 possible end products. LWT would produce each of these end products in batches of 500 to 1,000 (depending on the popularity of each style/size combination) and hold the finished products in the plant warehouse. When a decorating center called in with an order, LWT would either meet the order from the finished goods inventory or hold the order to be shipped when the next batch was finished.

LWT’s products were sold through independent decorating centers located across the United States and Canada. LWT would send each of these decorating centers a copy of its catalog, and the decorating centers would use these catalogs to market LWT’s products to potential customers. It was the responsibility of the decorating centers to work with customers to price out the shutters, make sure the correct size and style were ordered from LWT, and resolve any problems. As a result, LWT almost never dealt directly with the final customers.

Manufacturing and Service Operations: 2018

By 2017, the influx of low-cost shutters made in China had forced LWT to reconsider its business model. Specifically, because of the low labor costs in China (20% of LWT’s labor costs), Chinese manufacturers could make exact copies of LWT’s products for substantially less and hold them in warehouses across the United States and Canada. LWT’s traditional customers—the decorating centers—were turning more and more to these alternative sources.

LWT decided to fight back. As Chuck Keown, president of LWT, put it:

The only permanent advantage that we have over our competitors is that we are located here in the United States, closer to the final customer. So from now on, we will be a make-to-order manufacturer. We will deal directly with customers and make shutters to whatever specific measurements and finish they need. This means we can no longer count on producing batches of 500 to 1,000 shutters at a time and holding them in inventory. Rather, we will need to be able to make a few at a time in one-off sizes, if that’s what the customer needs.

On the service and marketing side of the house, we will now take orders directly from the customer. We will reach them through the Internet and through catalogs. We will work with them to determine what style best suits their needs, and to take the measurements needed to make the shutters. When there is a problem, we will work directly with the customer to resolve them.

Yes, this will require dramatic changes to our business. But it also means we will be able to charge a premium for our products and create a relationship with the customers that our Chinese rivals will find difficult to emulate. As I see it, this is the only way we can survive.

Transcribed Image Text:

High Contact Low Low High Customization Service Package Intangible Physical Nature of Primarily physical activities --> Primarily intangible activities --> Greater emphasis on managing physical Greater emphasis on managing people and knowledge assets (law firm, software developer). Higher customization --> the service package assets (airline, trucking firm). Degree of customization Greater emphasis on closely controlling Greater emphasis on being flexible Lower customization --> the process and improving productivity and responsive to customers' needs (quick-change oil shop). (full-service car repair shop). Higher contact --> More of the service package must be performed in the front room. Service layout, location, and hours must be designed with customer convenience in mind (physical therapist). Degree of Lower contact --> More of the service package can be performed in the back room. Service layout, location, and hours will be based more on cost and productivity concerns (mail sorting). customer contact