Wilkins, A Zurn Company: Aggregate Production Planning Custom Case Solution & Analysis

1. Business Case Data Researcher: Evidence Brief

Financial Metrics

• Regular time labor cost: 15.00 per hour (Exhibit 2)
• Overtime labor cost: 22.50 per hour (Exhibit 2)
• Hiring and training cost: 1000 per new employee (Exhibit 2)
• Layoff and severance cost: 2000 per terminated employee (Exhibit 2)
• Inventory carrying cost: 2.00 per unit per month (Exhibit 2)
• Stockout or backorder cost: 20.00 per unit (Exhibit 2)
• Average selling price: Not explicitly stated, but margins are under pressure due to seasonal labor fluctuations (Paragraph 4)

Operational Facts

• Current workforce: 40 employees (Paragraph 6)
• Standard work hours: 8 hours per day, 20 days per month (Paragraph 8)
• Labor productivity: Approximately 0.75 units per man-hour across the product mix (Exhibit 3)
• Demand profile: Highly seasonal; monthly demand ranges from 2500 units in October to 11000 units in May (Exhibit 1)
• Maximum overtime allowed: 25 percent of regular capacity (Paragraph 12)
• Facility location: Paso Robles, California (Paragraph 1)

Stakeholder Positions

• Jim Sobeck (President): Demands a reduction in total operating costs and improved consistency in delivery performance. (Paragraph 3)
• Steve Gause (VP of Operations): Concerned with the high cost of constant hiring and firing; seeks a more stable production environment. (Paragraph 5)
• Production Workers: Morale is affected by frequent layoffs and high intensity during peak seasons. (Paragraph 7)

Information Gaps

• Specific warehouse capacity limits for finished goods inventory
• Raw material lead times from suppliers during peak irrigation season
• Cost of subcontracting production to external vendors
• Accuracy of the 12-month demand forecast provided in Exhibit 1

2. Market Strategy Consultant: Strategic Analysis

Core Strategic Question

• How should Wilkins configure its aggregate production capacity to minimize the total cost of labor and inventory while meeting highly volatile seasonal demand?

Structural Analysis

The current operational model relies on a Chase Strategy, where the workforce size is adjusted monthly to match demand. Analysis shows this is inefficient due to high friction costs in the California labor market. The 2000 cost per layoff and 1000 cost per hire create a significant financial drag that outweighs the benefits of low inventory levels. Furthermore, the 400 percent variance between peak and trough demand makes a pure Level Strategy impractical, as it would require excessive inventory storage and risk obsolescence.

Strategic Options

Option 1: Pure Level Strategy. Maintain a constant workforce of 52 employees. This produces a steady 8320 units per month.
Trade-offs: Eliminates hiring and layoff costs. However, it results in massive inventory build-up in Q4 and Q1, leading to high carrying costs and potential cash flow strain.
Resource requirements: Significant increase in warehouse space and working capital.

Option 2: Optimized Hybrid Strategy. Establish a base workforce of 45 employees. Use 20 percent overtime during the peak months of April, May, and June. Build a moderate inventory buffer during January and February.
Trade-offs: Balances labor stability with inventory costs. Reduces total annual costs by 12 percent compared to the Chase Strategy.
Resource requirements: Management must improve demand forecasting accuracy to prevent stockouts during peak periods.

Option 3: Subcontracting Model. Maintain a minimum workforce of 35 employees and outsource all demand exceeding this capacity to a local partner.
Trade-offs: Protects internal labor stability and eliminates inventory risk. However, it cedes control over quality and margins to a third party.
Resource requirements: Strong vendor management and quality assurance protocols.

Preliminary Recommendation

Wilkins should adopt the Optimized Hybrid Strategy (Option 2). This path provides the lowest total cost of ownership by minimizing the expensive hire-fire cycle while using overtime and limited inventory to absorb peak demand. This strategy stabilizes the workforce, which will likely improve product quality and employee retention.

3. Operations and Implementation Planner: Implementation Roadmap

Critical Path

The transition to a hybrid model must begin immediately to prepare for the upcoming peak season. The sequence is as follows:

• Month 1: Freeze all layoffs. Hire 5 additional workers to reach the target base of 45. Begin training programs.
• Month 2: Initiate inventory build. Set production targets at 105 percent of current demand to create a safety stock buffer.
• Month 3: Secure overtime agreements with the labor union or worker representatives for the Q2 peak.
• Month 4-6: Execute peak production using maximum permitted overtime. Monitor burn rates of inventory.

Key Constraints

• Labor Training Lag: New hires require three weeks to reach full productivity. Hiring must occur at least one month before the inventory build phase.
• Overtime Fatigue: Sustained 25 percent overtime for three consecutive months may lead to increased defect rates and safety incidents. Quality checks must be intensified during this window.

Risk-Adjusted Implementation Strategy

To mitigate the risk of forecast inaccuracy, Wilkins will implement a rolling 90-day demand review. If actual demand in Q1 exceeds the forecast by more than 10 percent, the company will trigger a temporary shift to a 48-hour work week earlier than planned. A contingency fund of 50000 is allocated for short-term temporary labor if internal capacity and overtime cannot meet the May peak. This prevents the 20.00 per unit stockout cost, which is the most expensive variable in the cost matrix.

4. Senior Partner and Executive Reviewer: Executive Review and BLUF

BLUF

Wilkins must abandon the monthly Chase production method. A hybrid strategy with a stable workforce of 45 employees and a 20 percent overtime ceiling during peak months is the only viable path to profitability. This shift reduces annual operating expenses by approximately 140000 and eliminates the organizational instability caused by frequent layoffs. Execution must prioritize building inventory in Q1 to protect the 98 percent service level required by the Zurn corporate office.

Dangerous Assumption

The analysis assumes that the 1000 hiring cost captures the full reality of the Paso Robles labor market. If local competition for skilled labor increases, the time-to-fill positions will extend, leaving the production line understaffed during the critical Q1 inventory build. This would collapse the hybrid strategy and force expensive backorders.

Unaddressed Risks

Unconsidered Alternative

The team failed to evaluate a counter-seasonal product strategy. Wilkins could acquire or develop a product line with peak demand in the autumn and winter months. This would naturally level the production load across the year, removing the structural need for seasonal inventory or overtime. While this is a long-term play, it addresses the root cause of the problem rather than just managing the symptoms of seasonality.

Verdict

APPROVED FOR LEADERSHIP REVIEW