Operations Management: Inner-City Case Study

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APPLIED OPERATIONS MANAGEMENT
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Executive summary
Inner-City manufactures wall paints for the small to medium market size decorating
companies. The company manufactures both flat white and colored paints. The type of paint
manufactured depends on customer specifications. Over the years Inner-City has experienced
financial difficulty due to an economic slowdown in the country. Prior to the slowdown, Inner-
City had the reputation of fast services in terms of delivery to the customers. However, with the
suppliers of raw materials demanding cash on delivery, the company has failed to uphold
reputation.
Inner-City has implemented the strategy of manufacturing in low volumes for the small
and medium-sized markets. The approach has enables the company to satisfy customers even
without the luxury of the vast resources usually available to large companies. Additionally,
Inner-City also ensures fast delivery an act that has cultivated trust and loyalty among the
customers. The use of the two strategies has enabled Inner-City to grow in sales from $60,000 to
$1,800,000 with 38 employees.
However, Inner-City experiences various problems that affect operations, customer
relations and financial performance. The problems faced at the company include poor
management where the owner does all managerial duties and fails the delegate. The sole
management results in delays and traditional methods of business such as manual handling of
mails. Additionally, the plant’s manager lacks experience in manufacturing, which causes
problems in decision making. The other problem includes employees having no union and lack
the skills to perform duties professionally. Therefore, the business faces failure due to poor

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execution of the strategy. Furthermore, the business faces financial challenges such as tax debts,
unaudited financial reports and little net profit due to high expenses. Consequently, the
customers have lacked confidence in the company’s going concern.
Introduction
Inner-city is a small company that manufactures wall paint to supply to the medium sized
market. The company has operated for several years since the beginning of operations in
rundown site in Chicago. The products include flat white and coloured paints made from various
components such as titanium oxide. Inner-city has managed to increase from a two people
company with 60,000 dollars in sales to a 1.8 million dollars company. Therefore, Inner-city has
managed to manufacture and sell paint efficiently and effectively.
Inner-city has a facility that measures 16,400 square feet where all operations take place.
The building is favourable due to low rent charges. However, the site is in a poor condition and
does not portray Inner-city’s image as a financially stable medium sized paint factory. On the
other, hand Walsh the owner has failed to improve management standards. Walsh still handles
mails manually and does all decision making and sales activities. Additionally, the company has
employed an inexperienced.
Walsh intends to undertake various efforts to affirm the company’s going concern. The
actions include such as engaging consultants to offer managerial advice on the problems facing
the company. The consultant should also give solutions to the problems to ensure that Inner-city
does not fail. The company aims at improving market image since customers currently perceive
that the business is not a going concern.

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Financial analysis of Inner-city
Various financial ratios aid in establishing Inner-city’s performance. One of the financial
ratios includes the profit margin. The formulae for calculating the profit margin is 1-
(Expenses/Net sales). Therefore, to calculate the profit margin for inner formulae we take the
expenses and net sales (Giordani, 2014).
1- (337,740/ 1,784,080) = 0.81
0.81 = 81%
Therefore, the company was able to make 81 cents from every dollar worth of sales. The
ratio indicates that Inner-City has the ability to make much profits from the sale of paints by
reducing the expenses (Giordani, 2014).
The current ratio:
Current assets/current liabilities
262,515/285,030 = 0.92
The 0.92 ratio indicates that Inner-City does not have enough current assets to pay liabilities
(Orton, 2015).
(Appendix 1 has a statement of financial position and an income statement with more
information about the amounts of revenue, assets and liabilities.)
Resource availability
Inner-City has equipment for mixing paints, which include three large mixers and two
small mixers. The large mixers produce 400 gallons while the small mixers produce 100 gallons
per batch. The mixers enable the company to meet demand by producing batches of paint.
However, the company lacks human resources with expertise in factory operations. The company