Introduction: For nearly 50 years, Loganville Window Treatments (LWT) of Loganville, Georgia, has made interior shutters that are sold through decorating centers. The figure below shows some of the various styles of shutters LWT makes.
Past Manufacturing and Service Operations: 2014
Traditionally, LWT supported a limited mix of standard products. At any particular point in time, the mix of products might consist of 6 different styles offered in 5 predetermined sizes, resulting in 30 possible end products. LWT would produce each of these end products in batches of 500 to 1,000 (depending on the popularity of each style/size combination) and hold the finished products in the plant warehouse. When a decorating center called in with an order, LWT would either meet the order from the finished goods inventory or hold the order to be shipped when the next batch was finished. LWT’s products were sold through independent decorating centers located across the United States and Canada. LWT would send each of these decorating centers a copy of its catalog, and the decorating centers would use these catalogs to market LWT’s products to potential customers. It was the responsibility of the decorating centers to work with customers to price out the shutters, make sure the correct size and style were ordered from LWT, and resolve any problems. As a result, LWT almost never dealt directly with the final customers.
Manufacturing and Service Operations: 2015
By 2011, the influx of low-cost shutters made in China had forced LWT to reconsider its business model. Specifically, because of the low labor costs in China (1/15 of LWT’s labor costs), Chinese manufacturers could make exact copies of LWT’s products for substantially less and hold them in warehouses across the United States and Canada. LWT’s traditional customers—the decorating centers—were turning more and more to these alternative sources. LWT decided to fight back. As Chuck Keown, president of LWT, put it: The only permanent advantage that we have over our Chinese competitors is that we are located here in the United States, closer to the final customer. So from now on, we will be a process focus manufacturer. We will deal directly with customers and make shutters to whatever specific measurements and finish they need. This means we can no longer count on producing batches of 500 to 1,000 shutters at a time and holding them in inventory. Rather, we will need to be able to make a few at a time in one-off sizes, if that’s what the customer needs.
On the service and marketing side of the house, we will now take orders directly from the customer. We will reach them through the Internet and through catalogs. We will work with them to determine what style best suits their needs, and to take the measurements needed to make the shutters. When there is a problem, we will work directly with the customer to resolve them.
Yes, this will require dramatic changes to our business. But it also means we will be able to charge a premium for our products and create a relationship with the customers that our Chinese rivals will find difficult to emulate. As I see it, this is the only way we can survive.
Questions
1- Provide a five-sentence summary for the case (the company and the problem it faces) not exceeding 70 words.
2- Why is this company likely to change its mission?
3- Chuck Keown, president of LWT, is about to make a major decision for his company:
What is this decision? and How will it affect its strategy for competitive advantage?
4- Develop a list of five things (related to activities and resources) that must happen in order to accomplish the changes Chuck Keown envisions.