BA 187 Case Analysis-Toys Inc

De la Pea, Aishwarya Isabel R.
| 3-BSBA (Marketing) | BA 187 |
03-19-15
CASE ANALYSIS | Toys, Inc.: Toys, Inc is a respectable company that manufactures
toys and board games for over 20 years. However despite this, the company has faced declining
sales during recent years which was attributed to the economy by the production manager Ed
Murphy. He devided two methods to improve the situation: minimize cost of production and lay
off in the design and product developments. The vice president of sales has been concerned with
customer complaints about defective model products provided by the company. The assistant of
the vice president proposed the following actions to be taken: replacing malfunctioning models
with new ones, repairing the defective products and selling it at discounted price, and letting the
current workforce to repair the faulty products during slack time period. While the production
assistant suggested the 100% inspection of finished models before delivering them to customers.
The fundamental challenge of the company was the diminishing sales that affected profit but it
could not identify the cause of the problem. Different figures in the company attached different
factors to the issue. Hence, there was no consensus among people about what the radical cause
of the declining sales and profit margin is. The coordination failure also contributed to the
vicious cycle in the attempt to solve the problem.
Even if the production manager suggested it, there is no need for lay off as the way to deal with
the issues of inefficiency in the company. Instead, the company could deploy various actions to
achieve efficiency in the process. Specifically, in order to cut the production cost, the following
alternatives could be opted. First, emphasizing on quality as the way to eliminate non value
adding (NVA) activities like rework, scrap, inspection, storage, transportation, etc. These
activities generate zero return and so getting rid of them can make use of resources and time
more efficiently.
Second, using of economies of scale through large volume production, it is possible to minimize
fixed cost per unit. Third, using the product design tools; like value analysis and modular design
in product design process. The value analysis is the method of improving the product in the
customers eyes by increasing its usefulness and reducing the costs without compromising the
quality of the product. It can result in great cost saving or a better product for the customers.
Similarly, modular approach to product design makes it possible to have relatively high product
variety and low component variety at the same time. This makes production in larger volumes
more efficient as well as allowing standardization. Fourth, can be an investment in automation
and information system; faster production and low cost.
The customers complaints about the defective models should be addressed by having warranty.
By replacing malfunctioned models with new ones, it would incur very high costs as it is one
kind of external failure cost; costs of producing defective items that has been detected by the
customer (eg/ settling complaints, return of merchandise, etc). We can partially avoid these costs
by focusing on preventing the error to happen, i.e. producing zero defects products which are
almost always unavoidable.
Repairing defective models and reselling them could be an option as well but the opportunity
cost would be high. This is because if new staff were employed, they might have come with
innovative idea, special skill and knowledge that are necessary to produce quality product.
Hence, hiring new staff with caliber and providing existing employees with training is advisable
if the company is to succeed.
The production assistant advised a 100% inspection. However, it cannot resolve problem of
quality without incurring costs as well. Inspections are NVA. If after all the inspection is needed,
we have to determine how much, how often, and at what point to inspect. It is neither possible
nor economically feasible to critically examine every part of product. The cost of inspection,
resulting interruptions of a process or delays by inspection, a manner of testing typically
outweigh the benefits of 100% percent inspection.
RECOMMENDATIONS:
Appropriate coordination between various units of the company- everyone should be
involved to increase team spirit and have one clear mindset of overall goals. This takes
care of the coordination failure problem.
Prevent than correct errors- the company should try to design products that are of
superior quality and produce zero-defect products in order to prevent repairs and
replacements problem.
Total Quality Management (TQM)- effective TQM activities are fabricated through the
dedication and combined efforts of everyone in the organization. The company should
find out what customers want and design a product that will meet/ exceed customers
wants, design the production process to make things right the first time.
Increase efficiency than layoff- if the cause of the declining sales was the inefficiency,
then the company should find the ways to cut the production costs rather than resigning
employees.
Continuous Improvement (CI) - the company should make never-ending improvements
to production process.
Proper training of employees- this upgrades the employees potential and capability to
operate modern technologies, efficient use of resources and production of high quality
oroducts.

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De la Pea, Aishwarya Isabel R.

| 3-BSBA (Marketing) | BA 187 |

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