Aster Furniture: Breaking the Finishing Bottleneck
Aster Furniture makes made-to-order oak tables in three stages: cutting, assembly and finishing. Daily capacity is 40 tables at cutting, 32 at assembly and 28 at finishing. Demand is 35 tables per day; current output is 26 because finishing works one eight-hour shift and has 11% rework. Each table sells for $420 with a contribution of $150. Overtime in finishing costs $600 per day and raises capacity by 20%, but rework rises to 15%. Outsourcing finishing costs $38 per table and adds two days to lead time; customers currently wait five days and a large contract requires three-day delivery. A second finishing shift costs $1,100 per day and would raise capacity to 54, with rework falling to 7% after training. The operations manager must decide how to meet the three-day lead time without exceeding a $900 daily cost increase.
1. Calculate current capacity utilisation at each stage, identify the bottleneck, and explain its effect on output.
Read the worked answer
Utilisation
Utilisation = current output ÷ stage capacity.
- Cutting: 26 ÷ 40 = 65.0%
- Assembly: 26 ÷ 32 = 81.25%
- Finishing: 26 ÷ 28 = 92.86%
Bottleneck
Finishing is the bottleneck: it has the lowest capacity (28 tables) and the highest utilisation (92.86%). Cutting has spare capacity of 14 tables and assembly has spare capacity of 6, but neither can raise total output beyond what finishing can process. This is why actual output is 26 rather than demand of 35.
Effect of rework
The 11% rework rate consumes finishing capacity without producing good output. At 28 tables of capacity, 11% rework leaves roughly 24.9 good tables if all capacity is used, though current output is 26, suggesting some rework is absorbed within the shift. To meet demand of 35, finishing needs 35 ÷ 28 = 125% of current capacity. Overtime at +20% gives only 33.6 tables, still short of 35, and higher rework would worsen the shortfall. The bottleneck therefore limits revenue and makes the three-day lead time impossible without adding finishing capacity or reducing rework.
2. Evaluate the three options against the lead-time and cost constraints, and recommend one.
Read the worked answer
Option 1: Overtime
Cost is $600 per day, within the $900 limit. Capacity rises 20% to 33.6 tables, still below demand of 35. Rework also rises to 15%, so good output may be lower. It cannot meet the three-day lead time reliably.
Option 2: Outsource finishing
Outsourcing 9 tables (35 − 26) at $38 costs $342 per day, well within budget. But it adds two days to the current five-day lead time, making seven days. That fails the three-day contract requirement. It may be useful as a short-term overflow, not as the main solution.
Option 3: Second finishing shift
Cost is $1,100 per day, $200 above the stated cap. Capacity rises to 54 and rework falls to 7%, which is enough to meet 35 tables and protect the three-day lead time. The extra 9 tables generate 9 × $150 = $1,350 contribution per day. Against the $1,100 cost, net contribution rises by $250 per day. The option therefore exceeds the cost constraint but is financially self-funding and is the only option that meets the delivery requirement.
Recommendation
Choose the second shift, but phase it: train the new team first to secure the 7% rework rate, and negotiate the $900 cap with finance because the net gain is positive. Use outsourcing only for temporary peaks. The decision should be judged on net contribution and contract retention, not on the cost cap alone.