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. Labor unions had resisted cost-cutting measures. Losses were piling up in the heavy job-shop fabrication division, which was the largest of the companys 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 companys 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 semitrailer trucks were used to move equipment and inventory 1000 miles at a cost of $1.2 million. The company was relocated to a building in La Junta that had stood vacant for 3 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. An 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.

Discussion

After its move in 1990 to La Junta, Colorado, and its new initiatives, the DeBourgh Manufacturing Company began an upward climb of record sales. Suppose the figures shown here are the DeBourgh monthly sales figures from January 2001 through December 2009 (in $1,000s).

a) Produce a time series plot. Are there any trends evident in the data? Does DeBourgh have a seasonal component to its sales?

b) Deseasonalize the data using Multiplicative model with a 0.5 weighted moving average. Produce a time series plot of the deseasonalized data and add a trendline.

c) Forecast the sales from January to December of the year 2010.

d) Include a discussion of the general direction of sales and any seasonal tendencies that might be occurring.

2009 495.3 533.4 635 Month January February March April May June July August September October November December 673.1 2001 139.7 114.3 101.6 152.4 215.9 228.6 215.9 190.5 177.8 139.7 139.7 152.4 2002 165.1 177.8 177.8 203.2 241.3 279.4 292.1 317.5 203.2 177.8 165.1 177.8 2004 228.6 254 266.7 342.9 355.6 406.4 2003 177.8 203.2 228.6 279.4 317.5 330.2 368.3 355.6 241.3 215.9 215.9 203.2 SALES ($1,000s) 2005 2006 266.7 431.8 317.5 457.2 368.3 457.2 431.8 482.6 457.2 533.4 571.5 622.3 546.1 660.4 482.6 520.7 431.8 508 406.4 482.6 393.7 457.2 406.4 431.8 2007 381 406.4 431.8 457.2 495.3 584.2 609.6 558.8 508 495.3 444.5 419.1 2008 431.8 444.5 495.3 533.4 558.8 647.7 673.1 660.4 609.6 584.2 520.7 482.6 444.5 431.8 749.3 812.8 800.1 736.6 685.8 635 622.3 622.3 330.2 330.2 304.8 292.1