Woody 2000 - Project Management Case Study

Background

The Custom Woodworking Company is a small-to-medium sized custom furniture and cabinet making

company, with head-office and a spacious plant site at Industrial Estates, Someplace, BC. Its Chairman

and Chief Executive Officer is Ron Carpenter now in his late-sixties. His wife Mrs. Emelia Carpenter,

being an aggressive business woman and somewhat younger than her husband, now effectively runs the company.

Ron Carpenter is affectionately known to all as "Woody" and so the company is generally known as

"Woody's". Woody, after an apprenticeship as a cabinet maker, started his small furniture manufacturing business back in 1954 and he and his wife moved to their present location in 1959. The company quickly gained a reputation for attractively designed and well constructed furniture, using imported hardwoods and indigenous softwoods for its products. Woody's now produces custom furniture to order, several lines of furniture for wholesaler/retailers, and a number of variations of standard kitchen and bathroom cabinets, including units made to order.

Over the years the Carpenters continued to prosper and built up a loyal staff and work force. More

recently their son, John Carpenter, has joined the company's management after having obtained a

commerce degree at the local university. At John Carpenter's insistence, lured by longer production runs and higher and more consistent mark-ups, the company has moved into subcontract work supplying and installing counter-tops, cabinets and similar fixtures for new commercial construction. To date, Woody's has established a well-founded reputation for supplying millwork to the construction industry.

The Opportunity

In 1989 there was a mini-boom in commercial construction in south-western BC. With the possibility of

a major airport expansion, and free-trade opportunities south of the border, Bruce Sharpe persuaded

Woody's directors that they were well placed to expand their manufacturing business. Miles Faster,

regularly complaining that the company's production efficiency was being thwarted by lack of

manufacturing space, made a pitch to John Carpenter for moving to completely new and more modern

facilities. John Carpenter, with a vision of growth based on computer controlled automation, talked over

the idea with his father. Woody discussed it with his wife who in turn brought Kim Cashman and

Spencer Moneysworth into the debate.

Cashman and Moneysworth felt strongly that they should remain where they were, since there was spare

land on their property, even though not the most convenient for plant expansion. They argued that not

only would this avoid the costs of buying and selling property, but more importantly avoid the

interruption to production while relocating their existing equipment. Besides, the nearest potential

location at an attractive price was at least fifteen miles further out from the residential area where most

of them lived. Polarization of opinions rapidly became evident and so, in the spring of 1989, Woody

called a meeting of the directors and key personnel to resolve the issue. After a visit to the factory floor

and a prolonged and sometimes bitter argument lasting into the early hours, it was agreed that the

company would stay put on its existing property.

The Project Concept

It was agreed at the meeting that additional production capacity would be added equivalent to 25% of

the existing floor area. The opportunity would also be taken to install air-conditioning and a dust-free

paint and finishing shop complete with additional compressor capacity. Equipment would include a

semi-automatic woodworking production train, requiring the development and installation of software

and hardware to run it. The President and Executive Vice Presidents' offices would also be renovated.

At the meeting, the total cost of the work, not including office renovation, was roughly estimated at $17

million. Woody agreed to commit the company to a budget of $17 million as an absolute maximum for

all proposed work and the target date for production would be eighteen months from now. To give

Woody's personnel a feeling of ownership, Molly Bussell proposed that the project should be called

Woody 2000. Spencer Moneysworth would take responsibility for Project Woody 2000.

Planning

Moneysworth was keen to show his administrative abilities. He decided not to involve the production

people as they were always too busy and, anyway, that would only delay progress. So, not one for

wasting time (on planning) Moneysworth immediately invited Expert Industrial Developers (EID) to

quote on the planned expansion. He reasoned that this contractor's prominence on the industrial estate

and their knowledge of industrial work would result in a lower total project cost.

Meanwhile, Kim Cashman developed a monthly cash flow chart as follows. First he set aside one

million for contingencies. Then he assumed that expenditure would be one million in each of the first

and last months, with an intervening ten months at $1.4 million. He carefully locked the chart away in

his drawer for future reference. All actual costs associated with the project