CASE: DeBourgh Manufacturing Company

The DeBourgh Manufacturing Company was founded in 1909 as a metal-fabricating company in Minnesota by the four Berg brothers.In the 1980s, the company ran into hard times, as did the rest of the metal-fabricating industry. Among the problems that DeBourgh faced were declining sales, deteriorating labor relations, and increasing costs. Labour unions had resisted cost-cutting measures. Losses were piling up in the heavy job-shop fabrication division, which was the largest of the company's three divisions. A division that made pedestrian steel bridges closed in 1990. The remaining company division, producer of All-American lockers, had to move to a lower-cost environment.

In 1990, with the company's survival at stake, the firm made a risky decision and moved everything from its high-cost location in Minnesota to a lower-cost area in La Junta, Colorado. Eighty semi-trailer trucks were used to move equipment and inventory 1,000 miles at a cost of $1.2 million. The company was relocated to a building in La Junta that had stood vacant for three years. Only 10 of the Minnesota workers transferred with the company, which quickly hired and trained 80 more workers in La Junta. By moving to La Junta, the company was able to go nonunion.

DeBourgh also faced a financial crisis. A bank that had been loaning the company money for 35 years would no longer do so. In addition, a costly severance package was worked out with Minnesota workers to keep production going during the move. Aln internal stock-purchase "earnout" was arranged between company president Steven C. Berg and his three aunts, who were the other principal owners.

The roof of the building that was to be the new home of DeBourgh Manufacturing in La Junta was badly in need of repair. During the first few weeks of production, heavy rains fell on the area and production was all but halted. However, DeBourgh was able to overcome these obstacles. One year later, locker sales achieved record-high sales levels each month. The company is now more profitable than ever with sales topping $6 million. Much credit has been given to the positive spirit of teamwork fostered among its approximately 80 employees. Emphasis shifted to employee involvement in decision making, quality, teamwork, employee participation in compensation action, and shared profits. In addition, DeBourgh became a more socially responsible company by doing more for the town in which it is located and by using paints that are more environmentally friendly.

After its move in 1990 to La Junta, Colorado, and its new initiatives, the DeBourgh Manufacturing Company began an upward climb of record sales. Table 1 shows the DeBourgh monthly sales figures from January 1993 through December 2001 (in $1,000s).

DeBourgh accountants computed a per-unit cost of lockers for each year since 1988, as shown in Table 2.Management has provided you with this data in the form of an Excel workbook.

Source: Adapted from "DeBourgh Manufacturing Company: A Move That Saved a Company," Real-World Lessons for America's Small Businesses: Insights from the Blue Chip Enterprise Initiative. Published by Nation's Business magazine on behalf of Connecticut Mutual Life Insurance Company and the U.S. Chamber of Commerce in association with the Blue Chip Enterprise Initiative, 1992. See also DeBourgh, available at htt;://www.debourgh.com: and the Web site containing Colorado Springs top business stories, available at http://www.csbj.com/1998/981113/top_stor.htm.

The Assignment:

This assignment may be completed in groups of up to 4 students. Your task is to provide Steven Berg with a forecast of sales and per-unit labour costs for 2002.

For each data set:

1. Plot the data as a function of time.
2. Select an approach you believe will be effective in forecasting this data set.
3. Write a brief (no more than page) explanation of why you chose the method you did - observations about the data and characteristics of the chosen methodology.
4. Generate a forecast for 2002.Show the spreadsheet(s) you used to build the model. Annotate briefly to explain your methodology.

TABLE 1		SALES FIGURES
Month	1993	1994	1995	1996	1997	1998	1999	2000	2001
January	139.7	165.1	177.8	228.6	266.7	431.8	381	431.8	495.3
February	114.3	177.8	203.2	254	317.5	457.2	406.4	444.5	533.4
March	101.6	177.8	228.6	266.7	368.3	457.2	431.8	495.3	635
April	152.4	203.2	279.4	342.9	431.8	482.6	457.2	533.4	673.1
May	215.9	241.3	317.5	355.6	457.2	533.4	495.3	558.8	749.3
June	228.6	279.4	330.2	406.4	571.5	622.3	584.2	647.7	812.8
July	215.9	292.1	368.3	444.5	546.1	660.4	609.6	673.1	800.1
August	190.5	317.5	355.6	431.8	482.6	520.7	558.8	660.4	736.6
September	177.8	203.2	241.3	330.2	431.8	508	508	609.6	685.8
October	139.7	177.8	215.9	330.2	406.4	482.6	495.3	584.2	635
November	139.7	165.1	215.9	304.8	393.7	457.2	444.5	520.7	622.3
December	152.4	177.8	203.2	292.1	406.4	431.8	419.1	482.6	622.3

TABLE 2	COST OF LOCKERS
Year	Per-Unit Labor Cost
1988	$80.15
1989	85.29
1990	85.75
1991	64.23
1992	63.70
1993	62.54
1994	60.19
1995	59.84
1996	57.29
1997	58.74
1998	55.01
1999	56.20
2000	55.93
2001	55.60