Koch Case Competition
I am very happy to have had the opportunity to compete in the Koch Case Competition. My team and I completed and presented a distribution and personnel focused business case to a panel of judges from KU Business and Koch Industries. We were awarded 1st place from 50+ teams in Business and Engineering. The following is our case write up...
Summerfield Consulting Case Write up
Problem at Hand: Quilted Northern currently makes two types of toilet paper ultra soft & strong, and ultra plush. The ultra soft and strong is 2 ply bath tissue and is Quilted Northern's known breadwinner. The ultra plush is a 4 year old premium 3 ply bath tissue with rapidly increasing demand. Products are made at 3 different locations, Oregon, Arkansas, and Wisconsin. Oregon and Wisconsin produce soft & strong and supply to the east and west, and Arkansas is the only that produces plush, so it has to supply to the whole country. The issue we are facing is that Arkansas has the lowest production capacity of the three locations and has reached production capacity, but there is a significant demand increase for the newer plush product that Arkansas produces and pressure to keep up with competitors. In order to meet the demands, Quilted Northern could either expand the Arkansas mill producing plush, switch production at Wisconsin or Oregon mills from soft and strong to plush, or do nothing.
Solution: Our solution is to expand the Arkansas location. We believe that although this option is costly, the benefit of increasing plush production to keep up with competitors and rapidly increasing demand pays off.
Current Arkansas Mill:The Arkansas Mill differs greatly from the Oregon and Wisconsin mills. First of all, it is the only mill supplying Ultra Plush while the other two supply Soft & Strong. Another major difference is that Arkansas is the only mill to ship products all around the country, while both other mills have specific regions. Part of the reason for its ability to ship products everywhere is the fact that it is very centrally located. However, even though it has a prime location, it still has the lowest production capacity due to outdated equipment. Final thing to note is the management of the Arkansas mill, which is currently a relatively new lady by the name of Emily Green.
Arkansas Mill After Expansion:After the Arkansas expansion the mill will still only supply Ultra Plush. The distribution will continue to be to the entire country . The location, of course, will not change because it is only an expansion. Production however, will be dramatically increased with an added production of 200,000 which will total to 1 million units a year. The added production level will now make the Arkansas mill the mill with the highest production capacity. Last but not least, we have decided to leave Emily Green in her management position for reasons Ellie will discuss later.
Factors to Consider: Some factors to consider start with the demand. Both Strong & Soft and Ultra Plush demand have risen significantly in the past couple years. However, this demand may decrease due to competitors who happen to have very similar products. Another very important factor to consider will be supply, if the demand does keep increasing year to year what steps will need to be implemented in order to keep up with demand? Finally, it is important to note the inexperience of Emily Green, which will play a part in how smoothly the expansion is. Now that I went over a brief overview of our plan, I will let Kruz take you through the strength, weaknesses, opportunities, and potential threats to our plan.
By the Numbers: The first thing that we considered when looking at the numbers was the demand. We found that the demand for both types of toilet paper were rising even though the Plush was rising at a little bit of a faster rate. In 2014, the demand for our toilet paper in total is at the peak of our production capacity so any rise in demand therefore becomes lost profit because we can’t meet that demand. We chose to expand Arkansas which ended up having a break even point of just over nine years. While switching the Arkansas mill to Oregon was obviously the second best option having a break even point of around 2.5 years we still chose to expand Arkansas due to the fact that it will be making double the maximum profit of switching and would quickly make up for the longer break even point.
How Individual Teams Members Contributed: When evaluating our decision, we really looked into the opinions and personalities of individual team members. Sam Wilson the CFO of Quilted Northern, showed lots of excitement seeing the increased demand of Ultra Plush and that played a big role in our decision. He isn’t afraid of taking risks and that’s what the company needs in order to make this transition. Jack Cobalt is the VP of operations and the first person to mention the idea of an expansion of the current Arkansas mill. He realized it would be costly, but it would be a good option for the coming in the future. Jason Allen is the Northern Sales and Marketing manager and was the first team member to express concerns about doing too many changes. His concerns were centered on the fact that Ultra Soft & Strong was known as the company’s “bread winner” and didn’t want all his hard work to go to waste. We agree with him, but we strongly believe that this expansion project will not affect Quilted Northern in a negative way but will create many more opportunities for the company in the future. Olivia Kennedy is the newer Southern Sales and Marketing manager, who also agreed that the unknown change could be worrisome. Like us, she believes that Quilted Northern needs to make a change regarding the increasing demand in the marketplace. She fears that if there is no action, they will start losing customers to competitors. Nick Jones is the Oregon Mill Manager and is one reason why we chose not to move production to Oregon. We know he has been with the company for 30 years and believe that a change was not needed for his division.
Implementation Plan: With such a big move, we need cooperation and involvement from all our team members. Emily Green is the current Arkansas Mill manager. Although she is the least experienced, we believe a younger face will be very beneficial for this huge project. In order for this big transition to be as smooth as possible, specifically our employees of the Arkansas Mill need to step up. There have been issues with Emily Green getting respect from senior employees and to make this work we need them to be one board with the change as well as Mrs. Green. The overall employees at the Arkansas Mill still are in the same jobs before. Not only does this project need help from the Arkansas team, but also the executive team. With the strong leadership abilities and tons of experience in this business, we believe that Jack Cobalt would be one of the best people to oversee the entire project. Along with Mr. Cobalt, Sam Wilson would be another great leader for this transition. We saw that he enjoyed taking calculated risks and trying new things and would be a big help with this project. Altogether, every team member played a big role in our decision making process and that is why we believe this is the best possible solution for Quilted Northern.
Risk & Reward Analysis: Expansion of the Arkansas mill would shut down one half of the mill's production during the time and White Cloud, one of our competitors with similar product reviews, may take our customer base while we are shut down. Also, the ultra plush is only four years old, so we don’t know if demand will continue to increase. By expanding production, we will be keeping up with competitors by keeping up with demand for our product. Another benefit of expanding the Arkansas location is having newer facilities.
SWOT Analysis: The strengths of expansion are that we will have supportive and ambitious executives in Wilson and Cobalt who are willing to take calculated risks for the long term benefit. Also, we will have three established and productive plants that are a fallback if this process were to be interrupted. On the other hand, one weakness of the Arkansas expansion is the lapse in production during expansion period, which is 280 days, over 75% of the year. There are also some concerns regarding respect and leadership in Arkansas mill, specifically with Emily Green’s lack of seniority in a management position. Some of the opportunities that come with expanding the Arkansas mill include a growing market for higher quality bath tissue and fulfilling the want for more comfortable toilet paper. Some threats to this plan are economic recession. There could be an unpredictable market crash leading to community seeing no need for more expensive toilet paper. Another threat is an increase or decrease in demand for Ultra Plush in each region and accommodating these demands with proper production. There also may be environmental or technical issues preventing quick and smooth execution of the expansion. For example, forest fires, earthquakes, or breakdown of vehicles. We also may lose of customers to competitors during expansion.
Conclusion: We believe that expanding the Arkansas location is the best decision for Quilted Northern because of the long-term economic growth promised, the ability to keep up with demand for Ultra Plush, and the ability to keep up with competitors. Ultimately, this is the best choice for Quilted Northern.