Pieles de la Garriga IESE MBA Case Report
Executive Summary
Pieles de la Garriga is a medium sized and family owned company, specialized in leather pelt manufacturing. At the end of August 2001, one year and a half after launching a new line of products targeted at the fur garment and accessory market, Pedro Saez, Manager of the rabbit pelt division and son of the General Manager José Saez, has to take an important decision.
The company's main customer, Comerpiel, which accounts for 60% of the rabbit pelts division sales, launched a request for proposal. If Pieles de la Garriga decides to bid, the firm will have to manufacture 20,000 large bands and 30,000 small bands of rabbit pelts by the end of the year, according to a strict planning. The company has the possibility to bid for the whole request or just for one part, either the small or the large bands stream.
If Pieles de la Garriga bids for the contract, it has to buy a new production machine to give the fur the particular look and type of finish Comerpiel expects. The investment is sound : 60,000 Euros, above all if we consider that the machine is unlikely to be usable for any other order.
However, the expectations are worth paying attention to the request. Sales could reach 1.23 million Euros, meaning a 50% increase in total sales for the rabbit pelt fur garment and accessory division led by Pedro Saez.
What the relevant criteria are and how they could help Pedro Saez analyse the issue in depth and take the adequate decision can be summarized as follows :
- First of all, the current company's output capacity. Is the firm able to manufacture the required quantity and meet the deadlines ? We will analyse this issue and show that Pieles de la Garriga will face a bottleneck in September, given that it can not start manufacturing until the new machine is received. We will then point out that the company can not do otherwise than working overtime in September, because of the reason explained before.
- Secondly, the expected profitability of the
Pieles de la Garriga is a medium sized and family owned company, specialized in leather pelt manufacturing. At the end of August 2001, one year and a half after launching a new line of products targeted at the fur garment and accessory market, Pedro Saez, Manager of the rabbit pelt division and son of the General Manager José Saez, has to take an important decision.
The company's main customer, Comerpiel, which accounts for 60% of the rabbit pelts division sales, launched a request for proposal. If Pieles de la Garriga decides to bid, the firm will have to manufacture 20,000 large bands and 30,000 small bands of rabbit pelts by the end of the year, according to a strict planning. The company has the possibility to bid for the whole request or just for one part, either the small or the large bands stream.
If Pieles de la Garriga bids for the contract, it has to buy a new production machine to give the fur the particular look and type of finish Comerpiel expects. The investment is sound : 60,000 Euros, above all if we consider that the machine is unlikely to be usable for any other order.
However, the expectations are worth paying attention to the request. Sales could reach 1.23 million Euros, meaning a 50% increase in total sales for the rabbit pelt fur garment and accessory division led by Pedro Saez.
What the relevant criteria are and how they could help Pedro Saez analyse the issue in depth and take the adequate decision can be summarized as follows :
- First of all, the current company's output capacity. Is the firm able to manufacture the required quantity and meet the deadlines ? We will analyse this issue and show that Pieles de la Garriga will face a bottleneck in September, given that it can not start manufacturing until the new machine is received. We will then point out that the company can not do otherwise than working overtime in September, because of the reason explained before.
- Secondly, the expected profitability of the