Clarkson Lumber Case Analysis Essay

Lorman Lumber is a publicly traded company with widely held shares. Its Yamica location in rural Oregon is one of the company’s largest. The purpose of the plant is to process and treat wood, which it does through a number of facilities. The Sawmill began producing lumber products in 1947, which it does by peeling, milling, and chipping raw wood. Lorman has a known record of producing good profits, and will often pay out generous performance-based bonuses to executives. Although the Yamica plant is somewhat outdated, it is still considered to be efficient and profitable. Starting in 1968, the company began using new methods to condition and pressure-treat wood products through the

The company is weakened mainly by its lack of technological advancement in every area of production. For example, if the company chose to modify their equipment to produce their “Atherley” model as well, it would be able to lower production costs of this model, in turn increasing the profits of this model further. In addition, the Atherley Furniture Company greatest threat is the decreased market for their “Parkdale” model. The “Parkdale” model has the most time consuming and costly production. With lack of a market for this model, the company stands to continue to lose profits. In conclusion, if the company wishes to continue to operate their chair division profitably as well as efficiently, the above issues need to be addressed and corrected.

Gene Denning, an employee of Welco Lumber Company, decided to run a study by videotaping a sample size of 365 logs being processed. However, actual data provided proved that it was a true sample size of only 362 logs, as data for logs # 30, 123, and 127 are missing from his report. He videotaped 3 operators, April, Sid, and Jim, marking the logs, how each log was broken down and the degree to which the cants were properly centered. Gene then did a comparison of what the cost was of the log in its current condition (actual value), to what would have been the correct value of the log if the cut had been

As shown in the ratios chart, working capital has increased by $13M. Maturities of short-term investments and cash flow from operations are projected to be sufficient to sustain the company’s overall financing needs, including capital expenditures. The following corporate strategic plan identifies a project that needs financial backing.

1. Productivity of the crew would be below standard. I believe for the productivity to be below standard because they were sent to this crew because of their lack of work. Just because they have been assigned to another crew, does not mean that they will begin to work well right away. When compared to the Equity Theory, I believe there to be positive inequity for the three men assigned to the new group. For being assigned to the group due to lack of work, it is unfair to have a higher pay grade than those who have been in the company for a longer period of time and who are doing their job correctly. This may cause issues with subprofessionals being motivated to work to their full

If Parkland wants to achieve the aggressive growth that the board desires his ability to improve the capabilities and the operations of the company will be one of his greatest barriers. Due to the affluent nature of the customers and the possible variety in the product Parkland should focus on improving the company’s organizational capabilities. A new plant will eventually be needed but that decision can be delayed if Charles can streamline its operations. Parkland needs to institute policies that will measure productivity and develop an accurate method of forecasting sales. This will result in lower inventory carrying costs, fewer out of stock issues, and fewer backorders that need to be filled. If Charles can reduce the number of back orders and out-of-stock products it can focus on a single product line at a time which will reduce the frequency of expensive switching costs.

Even though the company has been turning in profits, the ineffective collection practice, not availing trade discounts on time and ineffective inventory management has led the company in need of larger financing needs.

The Cartwright Lumber Company had been found in 1994 as a partnership by Mark Cartwright and his brother-in-law Henry Stark. Later in 2001, Mr. Cartwright bought out Stark’s shares and incorporated the business. Now, Mr. Cartwright is a sole owner and president of the company. The business is located in the Pacific Northwest region and does the retail distribution of lumber products in the local area. Plywood, moldings, and sash and door are some of the typical products of the company.

The company has been functioning well in terms of generating profit and demand so far. However, there will be a 20% increase in demand for the next month of operations as predicted by management, and the production and supply management's problems may come as a problem they can no longer afford.

Support: The inventory increase in 1997, YOY, was 58%. Additionally, the COGS to revenue ratio reduced from to 72% in 1997. This combination of increase in inventory and reduction in COGS as a percentage of revenue seems to indicate that the fixed costs may have been spread over a larger base through over production, thereby causing the COGS to reduce. This may be a cause for concern and could be a potential red flag.

Conversely, looking at the income statement for PMWL, operating income shows healthy gains of $45,862, which means the operating expenses are significantly lower in comparison to AWBL’s. However, PMWL’s cost of goods sold appear abnormally high, which makes an investor question whether this company is at it’s maturity phase in the product life cycle, and how much additional capital is necessary to bring this figure down to a number that leverages economies of scale and allows for profit maximization.

Because they have faced cash shortage trouble. Their profitability has grown for 1993 ~ 1995 period, as we can see from their I/S (e.g. Sales and Net Income, etc.). However, as its business size grows, their A/R increased, which means that it is getting difficult to collect cash. On the other hand, A/P decreased for the same period, which means that the company paid cash for A/P, resulting in critical cash shortage. Furthermore, the A/P payment period is shorter than A/R collection periods, the company’s cash problem happens to be accelerated.

* Increase the value of the firm through the benefit of tax shield from current $960million to $1.063billion.

At the event of any change to the company may it be negative or positive, profitable or non-profitable their will be an adverse effect to the stakeholders. Such effects are as follows: increase on overall sales of the company will yield increase on shares and earnings to either shareholders, employees and business owners; which in-turn will create profit that could be use for company expansion and purchasing of additional tools to use for improvement; that will lead in helping increase customers service elevating the aid provided to our customers; and also by increasing sales will also mean profit for Lowe’s vendors and suppliers, and so on…

We calculated that Mr. Wilson would need an estimate of 982000 not 750000 to finance the expected expansion. As well after viewing the liquidity ratios who tend to decrease in last years, it would be risky to take such a loan.