Group Case Assignment: Canada’s Cleaners Inc.

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Trends: The dry cleaning industry has shrunk by 20% along with there being an increase in casual wear in the workplace. Home dry cleaning kits and one-price cleaners have also revolutionized the industry.

PROBLEM ANALYSIS: The main problem CCI is experiencing is the shirt pressing machine not operating up to the company’s high standards. Customers have also complained about the quality of the dry cleaning service. This is due to the current machine requiring 70% touch ups, compared to only 30% required by competitors. CCI is currently using a 22-year-old machine, which is slowing down the company’s operations. The machine has also had a number of breakdowns. It is unable to ensure adequate pressing of sensitive “dark shirts”, which require lightweight pressing. In this customer-centric market, glitches and bad quality are easily identifiable and can tarnish the reputation of a company. The current problem is thus affecting CCI’s competitive advantage as the best quality dry cleaner in town, making it very important to find a solution. The decision should be made within a week to prevent the selling price of the current machine from going down and to minimize further quality glitches.

ALTERNATIVE IDENTIFICATION: With the current pressing machine not performing efficiently, CCI’s owner has to replace it. The 3 shirt press machines he can choose from are “The Shantoka”- a Japanese two-piece shirt press, “The Halter HBS-I”- similar to the current one, and “The Universal PRS”- the Cadillac of pressing machines.

DECISION CRITERIA: CCI must choose a new machine to retain their competitive advantage. In order to make a decision, the machine should be able to press more than 55 shirts per hour as the current one presses 40 shirts per hour and there has to be a significant increase. Another criterion is that the machine should last 15 years or more because with such a huge investment it is essential that the machine should pay off its worth. However, the most suitable criterion is of making a profit of at least $160,000 in the first year because CCI has already been experiencing an unaltered growth in sales. With increasing costs, it has to increase its income to be able to sustain itself.

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ANALYSIS OF ALTERNATIVES:

A1: The Shantoka

A2: The Halter HBS-I

A3: The Universal PRS

DC1: Machine can press more than 55 shirts per hour

Yes

Yes

No

DC2: Machine lasts 15 or more years

No

Yes

Yes

DC3: Makes a profit of at least $160,000 in the first year

Yes

Yes

No

The Shantoka: The machine offers the best quality compared to any other machine Burdon had seen. It has the ability to press 60 shirts per hour with minimal error as it requires touch ups for just 5% shirts. It will be making a profit of $164,240 in the first year[1] and is used by only 3 dry cleaners in Canada, which will make it exclusive for CCI. However, the equipment is very delicate and would cause a 10% increase in utility costs. It is expected to last just 12 years.

The Halter HBS-I: Compared to the current machine, this is quite similar. However, it includes fewer moving parts and an automatic clamp on the sleever, making each cycle 5 seconds faster. It can also press 60 shirts per hour with 10% needing touch ups. By charging $2 per shirt, it will earn the company a profit of $160,522 in the first year.[2] Its expected life of 15 years is a justifiable time period, compared to its cost.

The Universal PRS: The Cadillac of the industry can press just 50 shirts per hour, which is rather low compared to the other two and 10 more than the current one. However, it will be requiring touch ups for only 10% of all shirts. It has an expected life of 18 years, the highest of all 3. With a justifiable price increase to $2 per shirt, it will earn CCI a profit of just $142,522, the lowest of all three.[3]

RECOMMENDATION, REACTIONS & RESULTS: We recommend that CCI should buy the Halter HBS-I. This machine is the only one that fits all the criteria. It costs $51,000 and is the cheapest of all three. It even presses the highest number of shirts - 60. Since Burdock would be increasing the price to $2 per shirt, he can easily justify it with the increased quality. Even though it is similar to the current machine and is not the Cadillac or the best one Burdock has ever seen, it will surely be the most feasible alternative as it provides the best value both in terms of profit and efficiency along with minimal cost.

ACTION PLAN:

Steps

Who

When

Where

How

How much

1: Buy The Halter HBS-I

Ron Burdock

Within a week of making decision

CCI head office

Contacting supplier of machinery and making purchases.

$51,000 (including cost of machine, installation and delivery)

2: finalize delivery and installation date of the machine

Ron Burdock

Within 2-3 days of the purchase

CCI head office

Contact supplier and arrange for delivery.

$51,000 (including cost of the machine, installation and delivery) (Included in Step 1)

3: Install new machine and uninstall current machine

Installation workers

Within a week of finalising delivery date