2. Based on Smiths forecast, what will be the production capacity utilization percentage for the company?

3. What would be the production capacity utilization if Reed were correct?

4. What would be the supply chain capacity utilization if Reed's numbers are correct?

Drake Manufacturing Case

Company Information

• Product Line: Cables used for a variety of computer applications, for the purpose of this case the cables will be referred to as three cable types:
  • Cable Type A
  • Cable Type B
  • Cable Type C
• Last Year's Total Cable Types Produced (A, B and C): 10.38M
• Company Location: Olney, Illinois
• Last Year's Annual Sales Revenue: $70M
• Last Year's Net Profit After Expenses and Taxes (NPAET): $11.9M

Specific Product Information - Sales and Profits for Last Year

• Cable Type A makes up 22% of sales and 11% of the company's profit.
• Cable Type B makes up 31% of sales and 42% of the company's profit.
• Cable Type C makes up 35% of sales and 37% of the company's profit.
• Others - Remaining sales are related to various services, repair work and consulting contracts, totally 12% of total sales revenue. The profit from these "other" activities total 10% of the company's profit. These "others" do not have any demands on the production department or is there any impact to the supply chain given the nature of these "other" activites - services.

Planned Marketing Forecast

David Smith is the VP of Marketing, and in early January of this year, completed the planned marketing forecast for the year ahead, then presented it the senior management staff. The Smith's planned marketing forecast reflects the following information regarding projected unites to be sold for this year.

Smith's Marketing Forecast (Units to be Sold and Shipped):

• Cable Type A 2.45M units
• Cable Type B 4.8M units
• Cable Type C 3.8M units

Drake Company cable production in total units (types A, B, C units shipped) was 10.38M total units, last year. The 10.38M units represent 93.5% production capacity utilization for last year.

Robert Reed is the VP of Operations and Supply Chain Management Director. Robert was asked to review David Smith's "Marketing Forecast" numbers for this year and report back to the President of the Company, Fred Edwards, his assessment of Smith's forecast. Robert expressed the following concerns to the President in his brief memo to the President after reviewing Smith's forecast report.

The current total supply chain is running at 95% capacity utilization (based on last year's units shipped for cable types A, B, and C) which includes distribution, transportation, warehousing and resources. Additionally, in talking with suppliers, partners and customers up and down the supply chain, Robert feels the Cable Type B line will exceed Smith's forecasted numbers by 23%. Robert has estimated that Cable Type C line will exceed Smith's forecasted numbers by 14%. Given these potential numbers, Robert is very concerned regarding his estimated cable type A, B and C units required and Smith's forecast for these same cable types. As a result Robert would like to speak to the President about the following:

1. The production capacity internal to the company;
2. The supply chain capacity; and
3. Achieving customer delivery expectations.

After reading Robert's memo and his expressed concerns, the President of the Company has schedule a meeting, including Smith, Reed and himself (Edwards). He has asked that both parties do some number crunching, bringing the numbers to the meeting, and to plan to talk about where the company is and what the numbers indicate for this year's production department and supply chain operations.