BU467 - Fall 2020 Case Assignment 1 North Shore Cabinets Inc. North Shore Cabinets Inc. (NSCI) is a manufacturer and installer of kitchen and bathroom cabinets. NSCI was founded 20 years ago by David Chan, who is the CEO and sole shareholder of NSCI. NSCI is committed to environmentally responsible manufacturing processes, including recycling the sawdust it produces and using eco- friendly finishing techniques that minimize emissions. NSCI manufactures its cabinets from start to finish in its facility in British Columbia. Centralizing all steps of the cabinet-making process in one facility allows NSCI to ensure it maintains the quality craftsmanship and excellent customer service for which the company is known. NSCI manufactures 11 different styles of cabinets, with the three most popular accounting for 60% of sales and the three least popular accounting for less than 5%. NSCI experienced steady growth up until 2019, when sales declined for the first time, with NSCI dropping from full capacity to 80%. NSCI has two divisions - a manufacturing division and a sales and installation (SI) division. Each division's manager reports directly to David. Luke is the head of the manufacturing division and Michelle is the head of the SI division. The divisions are treated as profit centres, with the managers evaluated and paid a bonus based on divisional profits. David is frustrated because the divisional managers are often in disagreement over decisions impacting the company. He is hoping your guidance will help address some of their issues. Today is February 3, 2020. You are a CPA hired by David as an external consultant to provide an independent point of view. General information on NSCI and the cabinet-manufacturing industry is provided in the Appendix.Appendix You have visited NSCI's plant and made the following notes on NSCl's operations and the cabinet-making industry. Cabinet Industry Low interest rates and declining unemployment over the past ve years have led to increased spending in the housing market. This demand is expected to continue to increase over the next ve years. A shift toward cabinets Wi'l improved amenities such as charging ports for electronic devices and LED lighting will also drive growth. Competition in the industry has increased, in part due to an increase in cabinets being imported from overseas. Generally, imported cabinets are priced lower than those manufactured in Canada. Increasingly, customers are concerned about the environmental impact of their purchases and show a preference for manufacturers with environmentally friendly practices. The well-established distribution networks between existing manufacturers and their suppliers can deter new entrants. In order to be successful, cabinet manufacturers must secure a steady source of wood supply for an affordable price. This is especially important given that the price of wood has been increasing, a trend that is expected to continue
