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case

21 Tyndall Furniture
Company (B)

Don Rutkowski (vice-president, manufacturing) was just finishing his presentation


of a proposal to invest in a new rough mill at the company’s component plant in
Grand Rapids, Michigan (see Exhibit 1). He concluded:

It is most important that we come to a decision in the near future. As the issues involved
have been discussed for some time now, the proposed investment is not something that’s
new to us all. However, in order to capitalize on the advantages that having a modernized
rough mill will provide, an important consideration is to phase its introduction in line
with marketing’s plans for a new product range linked to the High Point Furniture Fair
this time next year. Getting the timing right is often, as we all known, as important as the
investment itself.

Company Background
Established in 1898 by Henry H. Tyndall, the company remained a family-owned
business until 1963, when it was bought out by Berkron Industries Inc., a large
conglomerate with interests in textiles, chemicals, food, clothing, retailing and,
more recently, financial services. Although predominantly based in North America,
Berkron also has interests in Australasia and Europe.
Although in the past the company had been an above-average profit earner within
the furniture industry as a whole, in recent years its performance had declined (see
Exhibit 2), a fact that led to the appointment of Matt Culley as chief executive
officer two years before. As with most markets, the furniture industry was both
becoming increasingly more competitive and witnessing significant changes in both
products and market outlets (see Exhibit 3).

This case was prepared by Professors W. L. Berry (Ohio State University), T. J. Hill (University of Oxford), J. E. Klomp-
maker (University of North Carolina) and W. G. Morrissey (North Carolina State University) as a basis for class discussion
rather than to illustrate either effective or ineffective handling of a business situation. © Professor W. L. Berry, Professor J.
E. Klompmaker, Professor W. G. Morrissey or AMD Publishing (UK). Inquiries in the USA to Zip Publishing, 1634 N.
High Street, Columbus, Ohio 43201.
539

T. Hill, Manufacturing Strategy


© Terry Hill 2000
540 M A N U FA C T U R I N G S T R AT E G Y : T E X T A N D C A S E S

Exhibit 1 Tyndall Furniture Company (B)

TO: Tyndall Furniture Company Board of Directors


FROM: Don Rutkowski, Vice President of Manufacturing
SUBJECT: Proposed Rough Mill for the Tyndall Components Plant
We propose to purchase an Oliver rough mill to replace the current manual cross-cutting
operation at the components plant. This mill would convert kiln-dried raw lumber into semi-
finished dimension stock1 for further processing in the fine mill, utilizing advanced
computer-controlled machining and material handling systems. The new equipment would
also include a Taylor edge-gluing system to increase the output of laminated dimension
stock components for the chair, table and miscellaneous case goods assembly plants.
The overall impact of this proposal would be to increase the rough mill capacity to 230 per
cent of the current capacity in terms of net board feet per day. All of this capacity increase
will be used to decrease our dependence on outside suppliers for edge-glued dimension
stock components. The purchase of edge-glued dimension stock components will decrease
from the current level of 85 per cent to 15 per cent of the total requirements for these items.
The overall production output of the other components produced by the components plant
will not be significantly affected by this proposal.
The new equipment will increase the capacity of the rough mill and provide important cost
savings in direct labour and material to enhance our competitive position in price-sensitive
markets. Specific benefits include:
■ Annual direct labour and dimension stock material savings of $1 million.
■ Material cost savings by purchasing lower-grade raw lumber.
■ Direct labour savings due to improved productivity (obtained by a 130 per cent increase
in output with only a 10 per cent increase in direct labour) and reduced set-up time
because families of parts can now be run on the moulding and tenoner machines.
■ Reduced manufacturing lead times from four months to six weeks due to manufacturing
instead of purchasing long lead-time dimension stock components.
■ Improved product quality in chair-seat glued joints and other panel stock.
■ Reduced work-in-progress inventory, finished component inventory, and component
part shortages because of a more even flow of dimension stock material through the
components plant. (Vendors currently tend to deliver material in large batches, which
produces an undesirable mix of products that does not fit well with the manufacturing
schedule, creating unnecessary levels of inventory.)
The investment cost of the new production process is $4.2 million. This includes the cost
of extending the components plant building, the rough mill and edge-glueing equipment,
the additional dry kiln capacity required, and the installation and training costs. If approved
at the board of directors meeting at the end of this week, this equipment could be installed
and in operation within a six-month period.

Note
1. Dimension stock is wood components ready for fine mill operations.

Product Strategy
‘Part of our decline’, explained Greg Procter,

has been the failure in the past to offer an adequate product range. Understandably, our
customers have been demanding a fuller product line as a key feature in boosting overall
sales. Our principal furniture designs are Colonial and Early American, and within these
‘looks’ we use primarily oak and cherry woods.