Problem Statement
The shoes manufacturing company is experiencing issues with its boot division. Customers are sending complains regarding their products as other return the products to the company. In this regard, the company is experiencing losses from this division as a result of frequent refunds and rejected orders and also losing its market share as more and more customers learn of the defects and consider avoiding the product. The main issue is identifying the cause of complains and rejection and the cost burdens this issue is enforcing on the company.
Types of Cost Centers Impacted by the Boot Division
The company is incurring a number of costs as a result of the current issues being experienced in the boot division. As usual these boots are manufactured using the same process that all other shoes are being manufactured. This include purchase of the raw material and their transportation, production cost which include labor and utility cost, machine wear and tear, cost of packing and cost of shipment. There is also storage cost incurred, marketing cost and also the reshipment back to the company after rejection. It is therefore evident that the current situation is considerably expensive to the company bearing in mind the total production cost is not regained since there are no purchases being made and those made are being rejected and refund demanded. The cost of financial transaction during the refund is also increasing on the costs that the company has to endure. This paper presents the affinity diagram for the presented case. The affinity diagram focuses on the problem facing the boot shoes division and possible costs associated with this problem. The affinity diagram will be based on four stages which include generating ideas, then displaying the generated ideas, this will be followed by sorting ideas into groups, then developing cards header and finally drawing a complete diagram (Balanced Scorecard, n.d.).
Affinity Diagram
Stage One: Generated Ideas for Possible Incurred Cost
- Raw material cost
- Raw material shipment cost
- Labor cost
- Processing cost
- Utility cost
- Packing cost
- Marketing cost
- Storage cost
- Shipment cost
- Re-shipment cost
- Error correction cost
- Refund transaction cost
Stage two: Displaying More Viable Ideas Regarding the Incurred Cost
- Raw material; including raw material purchase, transportation and storage cost
- Processing cost; including labor, utility and machine tear and wear cost
- Marketing cost; including market survey, promotion, advertisement and packaging cost
- Supply chain cost; including storage, transportation,
- Rejection cost- refund processing cost, error correction cost, reshipment cost
- Intangible cost- loss of customer’s trust, destruction of reputation, and loss of market shares
Stage three: Development of Headers.
Stage Four: Complete Affinity Diagram
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