Beau Ties Ltd. Of Vermont

Abstract

Bill Kenerson, the owner-operator of a retail bow-tie business faces two decisions. The first is whether to bring production of bow ties in-house. The second concerns his telephone-order- entry system. The case invites students to calculate the capacity of the production facility and determine the appropriate staffing plan for telephone operators.

Excerpt

UVA-OM-0836

BEAU TIES LTD. OF VERMONT

In August 1996, Bill Kenerson, founder and president of Beau Ties Limited of Vermont, was viewing his newest bow-tie offerings and trying to develop appropriate names for them. His company served a niche market of bow-tie users, and Kenerson tried to generate interest in his product by linking the distinguishing features of each bow tie to a representative city. This decision, however, was not Kenerson's only concern. His three-year-old company was fast approaching a decision on whether and if so, how to consolidate the present system of using a subcontractor to handle all stages of production and shipping into an in-house production facility with full-time employees.

Beau Ties was a rapidly growing concern: revenues had increased by 79%in 1995 and were on track for a 41%increase in 1996. At this rate, Kenerson would reach his intermediate revenue target of $ 810,000 by the end of 1997. This target would require Beau Ties to double its 1995 production volume. After Kenerson's latest tour of Vivian's Sewing Shop, which was Beau Ties' production facility, he wondered if the present space, equipment, and personnel could produce the required volume. An alternative facility would involve initial capital outlays and increased exposure to market fluctuations. In addition, Kenerson needed to decide whether to continue with his current provider of toll-free customer-service operations: he could purchase or rent new telephone-answering equipment and end his existing contract with AIDC, which was Kenerson's outsourcing partner for telephone-order entry.

The Product: Bow Ties

Bow ties have been around for more than 300 years, their origin traceable, as one story goes, to the court of Louis XIV of France in the 1600s. The king noticed a company of Croatian soldiers who wore white-silk kerchiefs around their necks. The king apparently loved the look, and appeared at court shortly thereafter with the white kerchief plus some lace and embroidery to heighten the effect, along with a small bow in front to finish it off.

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Keywords: capacity planning, entrepreneurship, make, buy, or lease, queuing, small business, waiting-line analysis, agency management, diverse protagonist