ECW Case Study Essay

Introduction
ECW made and sold decorative pottery and other household items targeted at middle-to upper-income households. Hines, the owner of ECW believed that her product lines were differentiated from others because ECW’s pieces were both unique and functional. Most of Hine’s whole sale operation focused on various retailers, including boutique shops throughout Ontario and Quebec, a consignment-based decorative goods chain and several franchise locations of a national pharmacy chain. She had been very successful with the new locations she had approached.
Of particular interest to Hines was her country (CP) line, it typically featured a hand-painted design that Hines created. Therefore, it is very popular among the customers because of
the unique design. And the forecasted demand is 3000 units for the coming year.

Problem Identification and Relevant Issues & Facts
1. Problem Identification
Because of the need for consistency and attention to detail, Hines was the only person painted on the desired design and sponge painted on the border using underglaze. However, Hine committed to her family, producing other product lines and selling at shows during weekends, she was able to dedicate only eight hours per week to country pitcher production. It will become a bottleneck in CP production.
The type of process ECW use in its CP operation is Job shop, which featured with low production volume and complicated work and jumbled flows. This process is not appropriate because the low volume of the process cannot meet the demand of 3000 units.
2. Relevant Issues & Facts
There are three steps in the process and operated by three persons respectively. The first step is on greenware, one worker worked solely on it. It takes totally 20 minutes per unit for this step. The second step is paint on the desired design and sponge painted on the border using underglaze, Hine was the only person to perform this step. It takes Hine totally 12.5 minutes per unit to finish this step. The third person was responsible for glazing the CPs and put them into the appropriate packaging materials to avoid breakage. It takes 129 minutes per run, 10.75 minutes per unit.
For the CP production, ECW’s capacity for each step of the process (CPs per year) based on capacity of Hine’s step, coz she could only work on it for 8 hours every week. As we can see from the Exhibit 1, the capacity for Hines is only 1996 units per year, it cannot meet the demand of 3000 units even though the other two workers’ capacity both higher than 3000units.
Assume that greenware and glaze workers work only enough to keep up with the bottleneck 1996 units in CP production. Refer to the calculation in Exhibit 2, it takes 498.7 hours, 415.8 hours, 357.6 hours respectively to complete 1996 units. If they have to work to make 3000 CPS per year, they need to work 1000 hours, 625 hours and 537.5 hours respectively per year. The process flow shows below.

Alternatives & Analysis
Hines realized that the current production capacity cannot meet the increasing demand of CPs and she also would like to save her time and spend on working on larger, higher items.
She found out three feasible options would help her to get free from the dilemma.
1. Alternative 1: Purchase Decal Equipment
Hines recognized that using a digital decal computer system to print the decals on CPs would be a nice attempt. The usage of the system will replace Hines by an unskilled worker who would be trained only several times. This will not only reduce Hines working time and increase the production capacity also control the whole production and design processes completely. If so, Hines can concentrate on working on butter chum lamps which will generate $210.00 profit ($350*0.6) for each week two to three additional units. However, the fixed cost of purchasing decal equipment will be $6600. If ECW wants to fulfill the order of 3000 CPs in coming year, the total variable cost will be $35,070.00. The profit will be $33,330.00 by subtracting $41,670(fixed cost + variable cost) from $75,000.00. But Hines concerned about the negative impacts by using decal computer system because she claimed that her pieces were “hand painted” and
unique.
2. Alternative 2: Outsource Decal Production
Hines had contact with a decal supplier located in New York State, which supplied customized decals to consumers by using traditional method of screen printing. Hines was very positive to outsource to decal supplier because she had the experiences with it before. However, based on the calculation (Exhibit 3), the profit will be $27,890 by subtracting $47,110 from $75,000. It is the lowest profit of three options. The reason is that the cost of the decals is much higher than other ways.
3. Alternative 3: Outsource CP Production
Hines was very sensitive to consider different approaches to meet the next 3000 units of CPs. As numerous firms and factories have outsourced their businesses to low labor cost countries, Hines also started to speak to ceramics manufacturing company located in Shenzhen, China. The good thing is that the company promised to use the digital equipment to print decals, which will save her a big amount of money on purchasing the computer system and also satisfy her requirements to meet the industry standard. Also, the cost of each CP after shipping would be only $8.45 at a flat rate. That means, the total profit will be $49,650, which is the highest profit among three alternatives. However, outsourcing to foreign countries will distort the original ideas of Hines because she attempts to operate the business as home-made, hand-painted and unique design. The lack of experiences makes Hines worry about this business style because the potential risk of using lead-based glaze by Chinese company will harm her business. Also, Hines wondered the suppliers’ promises whether or not can be carried out due to the weak enforcement of Chinese manufacturing markets.
Recommendations and Conclusion
Considered all the analysis above, we would like to recommend the first option for Hines. Although it is not the most optimal choice from the profit calculation, the first alternative not only can be profitable relatively also keep Hines’ own design ideas and unique concept and make the business much safer. It will waste Hines’ talent to paint on her famous country pitchers and violate her original thoughts of hand-painted, buy she never transmits this information to her customers and will spend much more time on other products design. She has the space to change her operation approach to expand business and gain high profits. However, the recommendation we provided might not be the best one. If Hines is still desire to consider about her business, she must learn more operation management knowledge to make her own decision.

Exhibit 1
Capacity of Each Step
(1)Capacity for Hines
Work time = 8hour * 52week * 60 minutes= 24960 minutes/year
Capacity = 24960min / 12.5 min =1996.8 units= 1996 units
(2) Assume that the other two part-time worker works for 20 hours a week.
Capacity for greenware worker
Work time = 20hour * 52week * 60 minute= 62400 minutes/year
Capacity = 62400min / 20 min=3120 units
(3)Capacity for the glazing worker
Work time =20hour * 52week * 60 minute= 62400 minutes/year
Capacity= 62400 min /10.75 min= 5804.7units = 5804 units

Exhibit 2
Each Worker Working Hours per year
(1)Work time per year for each worker to complete 1996 units
Greenware worker
Work time= 1996 units * 20 min/unit = 29920 min = 498.7 hours
Hines
Work time =1996 units * 12.5 min/unit=24950 min= 415.8 hours
Glaze worker
Work time =1996 units * 10.75min/unit= 21457min =357.6 hours
(2)Work time per year for each worker to complete 3000 units
Greenware worker
Work time=3000 units * 20 min/unit = 60000 min = 1000 hours
Hines
Work time =3000 units * 12.5 min/unit=37500 min= 625 hours
Glaze worker
Work time =3000 units * 10.75min/unit= 32250min =537.5 hours

Exhibit 3
Profit of Three Alternatives