Paper Co
Subject:Operations ManagementPrice: Bought3
Paper Co. is a medium-sized manufacturer of sanitary tissue products in Brooklyn, New York. The company has been in business for over 33 years, mainly producing toilet paper and paper towels that are sold exclusively through its retail network across the United States. Through the years, it has been gradually expanding its production capacity and consumer base. However, over the past 10 months, the company has been faced with an unprecedented and unanticipated increase in demand, which has cleared out all its storage facilities and exceeded its manufacturing capabilities. At this time, the demand continues to be high. The company has an existing storage facility, which can be converted to a new production line. The new production line would increase the existing manufacturing capabilities by 50%. However, this would require a substantial investment in remodeling of the facility and purchasing of expensive equipment from a producer in Seoul, Korea. To proceed with this option, it would be also necessary for Paper Co. to obtain a loan from a local bank and hire additional staff. It is estimated that it will take at least four months for the new production facility to start producing. Paper Co. leadership is faced with a dilemma. If they don't expand the current capacity, they risk losing the market share to competitors that are more flexible in adapting to higher demand. At the same time, the expansion is very costly and the long-term demand is uncertain. You are hired by Paper Co. as a consultant to help make the right business decision and to come up with an action plan.
How would you recommend for Paper Co. to proceed? Should it stay with the same production capacity or increase it as described above? Please describe potential challenges Paper Co. could be facing as a result of your recommendation: 1) Four months from now 2) Six months from now 3) One year from now
As an alternative to internal expansion, Paper Co. was just presented with an option to acquire a small-sized manufacturer of sanitary tissue products. While this acquisition will allow Paper Co. to increase its existing manufacturing capabilities by 50% in a very short time, it will however, be drastically more expensive than converting an existing storage facility to a new production line. Should Paper Co consider this acquisition project? Please base your recommendation on the analysis of the triple constraint and provide a detailed explanation of the rationale for your recommendation.
