The DeBourgh Manufacturing Company was founded in 1909 as ametal-fabricating company in Minnesota by the four Berg brothers.In the 1980s, the company ran into hard times, as did the rest ofthe metal-fabricating industry. Among the problems that DeBourghfaced were declining sales, deteriorating labor relations, andincreasing costs. Labour unions had resisted cost-cutting measures.Losses were piling up in the heavy job-shop fabrication division,which was the largest of the company’s three divisions. A divisionthat made pedestrian steel bridges closed in 1990. The remainingcompany division, producer of All-American lockers, had to move toa lower-cost environment.
In 1990, with the company’s survival at stake, the firm made arisky decision and moved everything from its high-cost location inMinnesota to a lower-cost area in La Junta, Colorado. Eightysemi-trailer trucks were used to move equipment and inventory 1,000miles at a cost of $1.2 million. The company was relocated to abuilding in La Junta that had stood vacant for three years. Only 10of the Minnesota workers transferred with the company, whichquickly hired and trained 80 more workers in La Junta. By moving toLa Junta, the company was able to go nonunion.
DeBourgh also faced a financial crisis. A bank that had beenloaning the company money for 35 years would no longer do so. Inaddition, a costly severance package was worked out with Minnesotaworkers to keep production going during the move. An internalstock-purchase “earnout” was arranged between company presidentSteven C. Berg and his three aunts, who were the other principalowners.
The roof of the building that was to be the new home of DeBourghManufacturing in La Junta was badly in need of repair. During thefirst few weeks of production, heavy rains fell on the area andproduction was all but halted. However, DeBourgh was able toovercome these obstacles. One year later, locker sales achievedrecord-high sales levels each month. The company is now moreprofitable than ever with sales topping $6 million. Much credit hasbeen given to the positive spirit of teamwork fostered among itsapproximately 80 employees. Emphasis shifted to employeeinvolvement in decision making, quality, teamwork, employeeparticipation in compensation action, and shared profits. Inaddition, DeBourgh became a more socially responsible company bydoing more for the town in which it is located and by using paintsthat are more environmentally friendly.
After its move in 1990 to La Junta, Colorado, and its newinitiatives, the DeBourgh Manufacturing Company began an upwardclimb of record sales. Table 1 shows the DeBourgh monthly salesfigures from January 1993 through December 2001 (in $1,000s).
DeBourgh accountants computed a per-unit cost of lockers foreach year since 1988, as shown in Table 2. Management has providedyou with this data in the form of an Excel workbook.
Source: Adapted from “DeBourgh Manufacturing Company: A MoveThat Saved a Company,” Real-World Lessons for America’s SmallBusinesses: Insights from the Blue Chip Enterprise Initiative.Published by Nation’s Business magazine on behalf of ConnecticutMutual Life Insurance Company and the U.S. Chamber of Commerce inassociation with the Blue Chip Enterprise Initiative, 1992. Seealso DeBourgh, available at htt;://www.debourgh.com: and the Website containing Colorado Springs top business stories, available athttp://www.csbj.com/1998/981113/top_stor.htm.
The Assignment:
This assignment may be completed in groups of up to 4 students.Your task is to provide Steven Berg with a forecast of sales andper-unit labour costs for 2002.
For each data set:
Plot the data as a function of time.
Select an approach you believe will be effective in forecastingthis data set.
?
Write a brief (no more than ½ page) explanation of why you chosethe method you did – observations about the data andcharacteristics of the chosen methodology.
?
Generate a forecast for 2002. Show the spreadsheet(s) you usedto build the model. Annotate briefly to explain yourmethodology.
TABLE 1 | | SALES FIGURES | | | | | | |
| | | | | | | | | |
Month | 1993 | 1994 | 1995 | 1996 | 1997 | 1998 | 1999 | 2000 | 2001 |
January | 139.7 | 165.1 | 177.8 | 228.6 | 266.7 | 431.8 | 381 | 431.8 | 495.3 |
February | 114.3 | 177.8 | 203.2 | 254 | 317.5 | 457.2 | 406.4 | 444.5 | 533.4 |
March | 101.6 | 177.8 | 228.6 | 266.7 | 368.3 | 457.2 | 431.8 | 495.3 | 635 |
April | 152.4 | 203.2 | 279.4 | 342.9 | 431.8 | 482.6 | 457.2 | 533.4 | 673.1 |
May | 215.9 | 241.3 | 317.5 | 355.6 | 457.2 | 533.4 | 495.3 | 558.8 | 749.3 |
June | 228.6 | 279.4 | 330.2 | 406.4 | 571.5 | 622.3 | 584.2 | 647.7 | 812.8 |
July | 215.9 | 292.1 | 368.3 | 444.5 | 546.1 | 660.4 | 609.6 | 673.1 | 800.1 |
August | 190.5 | 317.5 | 355.6 | 431.8 | 482.6 | 520.7 | 558.8 | 660.4 | 736.6 |
September | 177.8 | 203.2 | 241.3 | 330.2 | 431.8 | 508 | 508 | 609.6 | 685.8 |
October | 139.7 | 177.8 | 215.9 | 330.2 | 406.4 | 482.6 | 495.3 | 584.2 | 635 |
November | 139.7 | 165.1 | 215.9 | 304.8 | 393.7 | 457.2 | 444.5 | 520.7 | 622.3 |
December | 152.4 | 177.8 | 203.2 | 292.1 | 406.4 | 431.8 | 419.1 | 482.6 | 622.3 |
TABLE 2 | COST OF LOCKERS |
| |
Year | Per-Unit Labor Cost |
1988 | $80.15 |
1989 | 85.29 |
1990 | 85.75 |
1991 | 64.23 |
1992 | 63.70 |
1993 | 62.54 |
1994 | 60.19 |
1995 | 59.84 |
1996 | 57.29 |
1997 | 58.74 |
1998 | 55.01 |
1999 | 56.20 |
2000 | 55.93 |
2001 | 55.60 |
