Title: Fantasy Products

type a

Company Background

The Fantasy Products Company is a manufacturer of high-quality small appliances intended for home use. Their current product line includes irons, a small hand-held vacuum, and a number of kitchen appliances such as toasters, blenders, waffle irons, and coffeemakers.Fantasy Products has a strong research and development department that continually searches for ways to improve existing products as well as developing new products.

Currently, the research and development is working on the development of a new kitchen appliance that will chill foods quickly much as a microwave oven heats them quickly, although the technology involved is quite different.Tentatively named The Big Chill, the product will initially carry a price tag of around $125 and therefore the target market consists of upper income groups. At this price, it is expected to be a very profitable item. R&D engineers now have a working prototype and are satisfied that, with cooperation from the production and marketing people, the product can be ready in time for the all important December buying season.A target date has been set for product introduction that is 24 weeks away.

Current Problem

Fantasy Products Marketing Vice President Vera Sloan has recently learned from reliable sources that a competitor is also in the process of developing a similar product, which it intends to bring out at almost exactly the same time. In addition, her source indicated that the competitor plans to sell its product, which will be smaller than The Big Chill, for $99 in the hope of appealing to upper-middle as well as upper income groups. Vera, with the help of several of her key people who are to be involved in marketing The Big Chill, has decided that in order to compete, the selling price for The Big Chill will have to be lowered to within $10 of the competitor's price. At this price level, it will be profitable, although not nearly as profitable as originally anticipated.

However, Vera is wondering whether it would be possible to expedite the usual product introduction process in order to beat the competition to the market.If possible, she would like to get a six-week jump on the competition; this would put the product introduction date only 18 weeks away. During this initial period, Fantasy Products could sell The Big Chill for $125, reducing the selling price to $109 when the competitor's product actually enters the market. Since forecasts based on market research show that sales during the first six weeks will be about 2,000 per week, there is an opportunity for considerable extra profit if the early introduction can be accomplished. In addition, there is a certain amount of prestige involved in being first to the market. This should help enhance The Big Chill image during the anticipated battle for market share.

Data Collection

Since Fantasy Products has been through the product-introduction process a number of times, the R&D department has developed a list of the tasks that must be accomplished and the order in which they must be completed.Although the times and costs vary depending on the particular product, the basic process does not. The list of activities involved and their precedence relationships are presented in Table 1. Time and cost estimates for the introduction of The Big Chill are presented in Table 2. Note that some of the activities can be completed on a crash basis, with an associated increase in cost.

Table 1: List of activities and precedence relationships

Activity	Description	Immediate Predecessor
A	Select and order equipment	-
B	Receive equipment from supplier	A
C	Install and set up equipment	A
D	Finalize bill of materials	B
E	Order component parts	C
F	Receive component parts	E
G	First production run	D,F
H	Finalize marketing plan	-
I	Produce magazine ads	H
J	Script for TV ads	H
K	Produce TV ads	J
L	Begin ad campaign	I,K
M	Ship product to consumers	G,L

Table 2: Time and cost estimates

Activity	Normal Time	Normal Cost	Crash Time	Crash Cost
A	3	$2,000.00	2	$4,500.00
B	8	9,000.00	6	12,000.00
C	4	2,000.00	2	7,000.00
D	2	1,000.00	1	2,000.00
E	2	2,000.00	1	3,000.00
F	5	0.00	5	0.00
G	6	12,000.00	3	24,000.00
H	4	3,500.00	2	8,000.00
I	4	5,000.00	3	8,000.00
J	3	8,000.00	2	15,000.00
K	4	50,000.00	3	70,000.00
L	6	10,000.00	6	10,000.00
M	1	5,000.00	1	5,000.00

Questions

Fantasy Products needs to decide whether to bring The Big Chill to market 18 weeks from now as Vera Sloan is recommending. As the project management specialist in the R&D department, you have been asked to answer the following questions:

1. When would the project be completed using normal times?
2. Is it possible to complete the project in 18 weeks? What would the associated additional cost be? Which activities would need to be completed on a crash basis?
3. Is the additional cost justified in terms of the increased profits expected?
4. The estimated demand is very uncertain; how much can this number vary without changing the recommendations you are making?
5. Is there some time frame other than the 18 weeks Vera has recommended that would make more sense in terms of profits?