Lyngdoh Double Decker Bed Ltd.

Suddenly it stopped raining, the dark clouds passed and the sun became visible with bright
light. Looking at the passing clouds, Thom Lyngdoh, Class of 2015 PGDM from IIM Shillong is
also determined to turnaround the fortunes of Lyngdoh Double Decker Bed Ltd. (LDDB), which
he joined as Managing Director. This being his family business, it was owned by his mother,
Theresa Lyngdoh. LDDB, of Happy Valley, Shillong, has been manufacturing high quality
custom made beds since 2009. He joined the family business as he felt there was an excellent
opportunity for a turnaround. His initial plan was to bring this money-losing company to
profitability for eventual sale. He felt that because of the strong demand potential and tough
competition, expanding LDDBs capacity and marketing reach was vital for the company to
reach its ultimate potential. Located in a single 850 square foot facility, Thom felt it was time
to study in detail how an expansion plan could help LDDB become more competitive by
simultaneously cutting its costs and expanding its client base.
Market
In 2015, double decker beds were part of a $ 20 billion dollar furnishing industry. Childrens
furniture was the fastest-growing segment of the industry. According to Thom, the Shillong
market in which he competes was dominated by two main national players: Godrej, which
Thom considered the leader in this type of furniture, manufactured a broad range of furniture
products and sold them through different stores; and Nitraa Ltd. Thom also thought that
customers were, in 80 percent of the cases, young couples with children; in 10 percent of the
cases, single-parent families; and in the last 10 percent of the cases, people with very diverse
profiles for whom the motivation to buy double decker beds was just as diverse. Some of
them, for instance, just bought the beds because they needed to accommodate visiting
relatives. Surprisingly, most of the time, space was not an issue for the customers, and very
often double decker beds were purchased because children wanted them.
Thom had developed his own approach to this market. We want to turn out a quality
product, locally hand crafted and customized, which can sell for a premium price. He
anticipated that each of his outlets would have a workshop in its back, in order to give the
customers the feeling that their bed was handcrafted to their specifications. This is also why
he insisted on offering the customers numerous combinations of beds and on having the beds
delivered directly to the customers and assembled in their homes. Standard delivery was
three weeks, with one-week delivery available for a 2000 premium. Unfinished beds were
sold for 20000 - 30000; stained beds were 25000 - 40000 with a 3000 premium for a
polyurethane finish.

The Manufacturing Process

LDDB double decker beds were made from board that came in ten-foot lengths and two-inch
thicknesses but in five different widths (4", 6", 8", 10", and 12") with the 2" 6" size covering
up to 80 percent of the needs. On average, 25 pieces of wood were used per bed (a bed being
the whole piece of furniture, including two sleeping units). The company offered up to 15
combinations of double decker beds, and the wood workers tasks were organized based on
a schedule posted at the entrance of the workshop, which took into account the specific types
of models.
The first step was to cut the boards according to specification using a radial-arm saw. The next
steps were Planing the four sides and Routing, an operation in which the worker gave the
wood a rounded shape. A drilling phase created holes for assembly. Then, using both power
sanders and sandpaper, the worker
made the wood smooth. The next step was staining the wood for the final colour of the
furniture (LDDB offered its customers a broad range of options, another example of Thoms
customization approach). Then, the wood had to be sanded again. The reason, explained
Thom, was that the stain made the wood fibres rise. If the customer desired, the beds were
polyurethaned. Finally, the ends of the bed were preassembled as kits with cleats and pre-
packaged.
Customers either picked up the unassembled kits or scheduled final assembly that would take
place at the time of delivery at the customers house for an extra 2000. (See Exhibit 1 for
the description and the times of the different steps of the process.)
The current workshop was only 700 square feet and contained one set of equipment for each
step that required power tools: cutting, planing, routing, drilling and sanding. (The other steps
did not require power tools.) There was no space available for additional equipment. Because
space was limited and the area was often dusty from wood work only one type of step could
be done at a time, and extensive clean-up time between steps was necessary.
Thom estimated that materials cost 35 percent of sales. Labour cost 70 per worker per hour
and was available on a full day or half-day basis.
Thom knew little about this industry when he first joined the company. Nevertheless, he was
eager to learn and, after a few months, understood how to improve the process and made
immediate changes.
1. He decided to switch to a supplier that was located much closer than the one the company
had previously used, which was based more than two hours away in Jaintiapur, Jowai. This
reduction in travel time yielded savings for Thom not only in transportation costs, but also
from a lower price for wood (provided he had purchased a larger quantity of wood each time).
2. Earlier we used low-quality Number 2 lumber, which created quality problems and very
inconsistent products. This is why I made the decision to use only higher quality Number 1
lumber.
3. To cut time in the manufacturing process, I decided to put in place a system of templates
that would help the workers drill the holes faster and more accurately. In order to add some
consistency to the quality of our products, we also adopted some quality principles. One of
them, for instance, is avoid drilling holes in a board which has a knot less than five inches from
its edge.
4. Since we had to sand after the staining anyway, I also found out that we didnt need an
extensive first sanding step.

Thom made other decisions about the marketing of the business. In addition to selling LDDB
crafted furniture, his mother used to provide a finishing service for furniture that customers
purchased from other outlets. Thom expanded his line to include unfinished furniture that he
himself purchased. He also decided to make a real profit on the mattresses he sold with his
beds.
Surprisingly, when he raised the prices of his products, there was no negative impact on the
number of beds the company sold. Finally, the delivery system was changed. Formerly, one
person at a time had been in charge of delivering the product to the customers locations,
which took between two and three-and-a-half hours because of the difficulty of single-person
assembly. He decided that two people would deliver the beds, which cut the total average
delivery time to 45 minutes.
Thom felt that his production capacity was limiting his ability to expand. In early April 2016,
an opportunity arose to rent a facility in Nongthymmai, Shillong, for less money than in Happy
Valley. The proposed Nongthymmai facility would have less retail accessibility and visibility
than the Happy Valley shop but would nearly triple the usable space to 2,400 square feet, 760
square feet of which would be the retail area, while the remainder would become the
workshop and offices. The additional room would permit Thom to purchase new equipment
that would decrease both operating and setup times (see Exhibit 2). The new equipment
would also remove the need for planing, although sanding would now increase. The new
process required an additional step, shaping, between routing and drilling.
In addition, the ability to build dividers between the various steps meant that multiple tasks
could be performed simultaneously. For example, in the Happy Valley facility, the polying
process could only be performed after the shop had been thoroughly cleaned. In the new
facility, one worker could sand while another applied polyurethane. Additional storage space
would allow Thom to purchase stocks of mattresses, raw material, and unfinished furniture
at quantity discounts

The Decision
Thom had a gut feeling that the move to the larger shop was right for Great LDDB. He felt that
the additional capacity would enable him to support two more retail outlets, each of which
would be a 600-square-foot showroom. He also wondered how important it was to adhere to
his initial philosophy that every retail location should be a manufacturing facility. His most
immediate problem, however, was to find the investment of 15, 000, 00 needed for
expansion plans. For the sake of the firms future growth, he hoped that he could justify the
relocation to Nongthymmai.