Super Suits Manufacturers - Case Study Example

BUSINESS REPORTOF SUPER SUITS MANUFACTURERS Super Suits manufactures gents and ladies’ fashion suits of high quality. The design and fabric of the suit changes every season but the same fabric is used in the manufacturing of both men and ladies suits. The manufacturer holds the same quantity of stock every season but the sales volume increases during winter. The company employs 25 permanent staff and uses subcontractors to meet their production demand as they have trouble managing the required number of staff they need over winter and summer. The business has been doing quite well but there are some operational management issues that are hampering the company’s performance. Identifying the problem areas The main operational management issues that have been identified are as follows: Super Suits uses the services of subcontractors during high productivity seasons as they are unable to manage the required number of staff over winter and summer. This has both positive and negative effect on the business. The manufacturer maintains a uniform level of stock every season but sale increases significantly during winter. The same fabric is used for both men and ladies. The design of the jacket for both men and ladies is the same. Zips used in men and ladies suits is similar Suits manufactured during summer lack variety. Strategies Using the services of the subcontractors during the high productivity season increases the cost for the manufacturer. It is more cost effective to hire additional staff for the job. (Please refer to financial analysis for details). Introduce more varieties in designer suits manufactured in summer to increase sales prospects. Different varieties of fabric can be used but they should maintain the quality. Designer jackets can be designed differently for men and ladies keeping in mind the latest trend. Colored zips and buttons can be used for ladies suits and jackets. Keeping these strategies in mind, the manufacturer can bring about appropriate changes in his business to make it more successful. Production Plan Cost analysis Cost analysis of the present manufacturing activity of the company reveals the cost of the materials as discussed in the forth coming paragraphs. Inventory holding cost and marginal cost of stock remain the same whether the job of manufacturing is done by the current staff (25 nos) or by contracting to sub-contractors. The labor cost alone varies according to whether the company gets the job done in-house or by sub contracting. Hence a detailed study of the labor cost alone is conducted here. During summer (production capacity 15000 units) -Labor Costs (25 staff 8 hrs /per day @ $ 5 per hr) : $ 110,000 {Manufacturing only 11000 units} Since only 11000 units can be manufactured in 110 days during the normal working time of the factory, the job of manufacturing the balance of 4000 units can be outsourced either by subcontracting or by inducting 10 additional staff or paying overtime wages to the existing staff. A detailed costing of these factors is as follows: Labor cost of manufacturing 4000 units employing Sub Contractor : $ 600,00 (4000 units @ $ 15) Labor cost for mfg 4000 units by employing existing staff overtime : $ 600,00 (4000 units in 8000 labor hrs @ $ 7.50) Labor cost of employing additional 10 staff : $ 417,50 (4000 units X $10 per unit Plus cost of Hiring & Training $175 each) Hence hiring additional 10 staff to do the job of manufacturing 4000 units will be cost effective compared to either sub-contracting or employing over time the existing staff. The advantages of hiring additional staff on the job are: The existing manufacturing facility of the company can be utilized to full capacity In-house production can always be better managed. Quality control can be maintained. Time schedule for completion of the production cycle can be adhered to. Better inventory management becomes easy. Positive effects of sub contracting Fast turnaround in the company’s production The regular staff can concentrate on the work assigned to them The manufacturer can specify the type and duration of the jobs that are to be done There is more flexibility in the business The subcontractor can provide additional staff when a permanent staff goes on leave Negative effects of sub contracting It costs the business more than the rate paid to the permanent staff. The staff do not get an opportunity to develop their skills hence production/stock mainly depends on the supplier. There is no direct control over the quality of work. Permanent staff lacks motivation and commitment. Material requirement process It is important for the manufacturer to have a thorough knowledge of the materials required for the business. Adequate quantities of materials for each season should be stocked keeping in mind the demand. Different fabrics are used in different seasons so the market availability should also be kept in mind. The manufacturer should not run out of stock during the particular season or during peak production time. This will cause severe manufacturing losses and so they should stock adequate quantities well in advance. Inventory system Maintaining a good inventory system is crucial to any business. Here the stock control system can be adopted as it keeps the manufacturer aware of each kind of merchandise on hand. It provides a guide for what, when and how much to buy of each style, color, size, price and brand. It will reduce the number of lost sales resulting from being out of stock of merchandise in popular demands. The system will help to indicate change in customer’s preferences. The size of the establishment and number of people are determining factors in devising an effective stock control plan. In the management of inventories emphasis should be given to strict adherence to production schedules, shortening of the production cycle if possible and active disposal of goods that are surplus, obsolete or unusable. While decisions relating to inventories are taken primarily by executives in the production, purchasing, and marketing department, the finance manager should try to ensure that inventories are properly monitored and controlled. He must emphasize the financial point of view and initiate programs with the participation and involvement of others for effective management of inventories. Works cited Koontz, Harold., and Weihrich, Heinz. Essentials of management authors. Mc Graw Hill international editions. . Read More