Operations Management of Hudson Alpine Furniture - Case Study Example

Running Head: Production and Operations Management Production and Operations Management Customer’s Name: Customer’s Course: Tutor’s Name: 11TH March, 2012. Introduction This essay sets out to identify and discuss the operational aspects that are affecting Hudson Alpine Furniture; this will be done by paying attention to both the strategic issues and day to day implications of the aspects to the organization. In doing so the essay will outline and discuss the current production systems and processes used by Hudson (technical analysis), the effect of the new commercial furniture orders on Hudson operations, this area will include aspects such as the capacity constraints in the organization, operational efficiency and overall effectiveness of the plant, the daily operational decisions that the operations decisions that the operations manager needs to make under the current operating conditions to maintain effective production and lastly the effect the move to producing commercial furniture might have on the company’s financial structure. Technical analysis This section of the essay outlines and discusses the current production systems and processes that are applied by Hudson Alphine furniture. Hudson currently applies various systems and processes which aid them in the production of their products that is furniture for both the custom line and commercial line customers (Burtonshaw-Gunn, 2010). Over time the number of ordered commodities has been on the rise thus the need for scheduling in the company so that work can be performed in the right way and completed within the required time limit. Due to this increase, scheduling is made and the custom furniture is always given priority since of the higher sales volume and profits obtained from the sale of the custom furniture as compared to the sales volume and profits that are obtained form the sale of commercial line furniture’s. Scheduled lots of components for commercial furniture are often left sitting around the plant in various stages of completion. The company’s operations are mainly done in one location which is also their manufacturing facility in Queanbeyan which is close to Canberra. It is where both the custom and more standardized commercial furniture pieces are manufactured. The equipments that are used by the company for their production are mainly general purpose in nature since they are expected to provide additional flexibility which is necessary for the production of the custom made pieces of furniture. Based on the layout of the manufacturing factory, the equipments are grouped together based on the function they are supposed to perform. For example the cutting department houses equipments such as saws and other related equipments, jointing machines and lathes are also grouped in other different categories based on the function they are supposed to perform this enables ease of access to the required equipments which in one way eradicates confusion and enable quicker completion of work within the organization. The custom made and commercial furniture pieces compete for the processing time on the same equipment and the same craftsmen. Problem definition This section will cover and demonstrate the effect the new commercial furniture orders on Hudson’s alphine furniture’s operations. It will cover aspects related to capacity constraints, operational efficiency and overall effectiveness of the plant. Capacity constraints One of the major issues affecting the company is capacity constraints. Capacity of an organization is termed as the company’s ability to produce or do that which the customer requires (Slack, Chambers & Johnston, 2009). In relation to Hudson alphine Furniture Company, the company is affected by two constraints namely time constraints and capacity constraints. The time constraint is termed as a constraint where a certain customers had ordered a commodity and have specified the time the commodity is supposed to be delivered and the company is supposed to make sure that the ordered item is delivered on time to the customer. Hudson alphine Furniture Company is greatly affected by this type of constraint in that the customers increased the lead time for both the custom and commercial orders which with time they are causing longer promised delivery times thus most items stay in the premises for a longer period than expected. With increased lead the customer may tend to move to other furniture companies who will be able to deliver products with the specified lead time thus customer satisfaction this will greatly affect the earnings of the company. The company ought to identify instances that make the company not to meet the production demands and where capacity ought to be increased, albeit temporarily so as to reduce the lead time and to be able to deliver the ordered products within the required time limit this will solve the time constraint been experienced by the furniture company. The other constraint is the capacity constraints. This constraint is related to the company’s inability to produce the required products within a specified time. Hudson alpine furniture company is affected by this type of constraint. Capacity of the company is been pushed, this is evident when the company facility is clogged with a lot of work in progress thus the number of finished goods is minimal, and also there is not space in the manufacturing plant to enable expansion of the factory and during certain times the company is forced to rent warehouse space so as to cater for the additional space needed to store the products which in this case is the furniture. Operational efficiency Operational efficiency is another issue that is prevalent in Hudson’s Alpine Furniture Company. Operational efficiency is termed as the firm’s ability to deliver products and services to its customers in the most cost effective manner possible while at the same time ensuring the high quality of its products, services and support. The company is affected by this issue in that they contain a lot of unfinished work which is in progress and at times they have to pay for additional warehouse space this is mainly attributed to the increased levels of finished goods awaiting to be delivered to the customer most of these furniture’s are the custom based furniture’s since the company have adopted a scheduling technique where the commercial furniture’s are given more priority over the custom based furniture’s. This has in one way reduced the operational efficiency of Hudson’s Alpine furniture company thus making the profits level not be as expected. In order to attain operational efficiency the company needs to minimize redundancy and waste while leveraging the resources that will ultimately contribute most in its success and in utilizing its workforce and business processes. The reduced internal cost that results from operational efficiency will enable the company to achieve higher profit margins and be more successful in highly competitive markets. Overall efficiency Another issue that is affecting the company is the overall effectiveness of the company. Effectiveness of a company is measured by the amount of products produced, number of employees and the profits margins attained by a company at that particular period (Elliot and Bicheno, 1997). Despite the review depicting that the company has grown, the sales of custom furniture remain strong and demand for the commercial line is steadily increasing, the company profits are not what they are supposed to be based on the growth, strength of the sales of custom furniture, the augmented demand of the commercial line furniture. Day to day operational issues Operations managers in Hudson need to make certain decisions under the current operating conditions so as to maintain effective production in the company. Most organizations in the current day business world are faced by certain issues that in one way hinder the achievement of the organizational goals or the expected profits levels. Managers of organization ought to implement certain measures so as to handle these issues this will in one way lead to the effectiveness of the company in delivering its products to the target customers in this been the custom. With the correct decision been made by the operational managers the company can maintain effective production in the manufacturing plant so the company will gain more in terms of profits (Slack, Chambers & Johnston, 2009). One major decision that needs to be made by the management is the correct mode of scheduling of work. Scheduling will help the organization in ensuring that the number of produced products is regulated so that to reduce the cost associated with renting additional warehouse to house these products. Another decision that the organization should make is related priority. The operations mangers in the company should prioritize commodities which will be delivered first to the customers this will in one way lead to a reduction in the number of uncompleted items in the warehouse. Thus no extra cost will be incurred in renting more warehouse space to store the products. Another sector that needs to prioritized is the custom made furniture since this set of furniture tend to have greater returns for the company in that they contribute to almost sixty percent of the company’s profits thus majoring on this set of furniture’s will be of benefit to the organization since they will be able to make greater amounts of profits thus the company will achieve and maintain effective production and thus sustainability of the business (Stevenson, 2002). Another decision that the management should take is the increase the number of workers in the manufacturing plant. With a greater number of workers in the organization, the products will be delivered to the customers within the required time limit and it will also decrease the quantity of unfinished products thus there will be no need to rent more warehouse space. This will ensure the effective production of the company. With a greater number of workers some will be dealing with the commercial line furniture’s while others will be dealing with the custom made furniture’s thus easier flow of work within the company. Equipments seem to be vital in enhancing the effectiveness of the production unit in an organization (Johnston, Chambers & Slack, 2004). Another decision that the operation manager ought to make is the implementation of more specialized equipments which will aid in the production of commercial line furniture’s. with the sue of more specialized equipments in the company the furniture’s will be developed within a short period of time a reduction in lead time and this will be of benefit to the company in achieving effective production (Kamauff, 2009). Another decision that the operations managers can make is to apply the chase capacity strategy this strategy will assist the manger in varying the production of the company to meet the demand in that the resources will be either added or removed based on the what is required at the moment. By the use of this strategy the company will have effective production since no unnecessary resources will be used or will be available at the required time thus there will be no wastage of resources hence when the resources are used in moderations and as required thus the company will tends to have effective production (Siegel & Shim, 1999). The operations managers also needs to make decisions in regard to the price in their products. The company needs to make change to their pricing by in adjusting the prices of their commodities. Due to the increased cost of raw materials and other commodities used in the manufacturing of furniture’s in the company the company will need to adjust their prices so as to cater for the increased cost of raw materials, this will enable the company to achieve effective production (Stevenson, 2008). Broader organizational issues caused by the operational problems Hudson’s move toward the production of commercial furniture will have an effect in the financial structure of the company. One of the broader organizational issue caused by the operational Hudson’s move towards the production of commercial furniture is low level fop rifts for the company. An organization with high level of output is expected to gain higher profits after the sale of unit’s products as compared to a company with a low level of output. Hudson Company has over time expanded and also introduced a new line of production that is the commercial line furniture’s and it is manufacturing a large number of furniture for the commercial furniture and custom made furniture. With these high levels the company is supposed to be making high profits and this is not the case with Hudson since the company’s accountants says that even though the company’s seems to be making profits, the company’s profits are not what they should be (Clark and Johnston, 2008). Another broader issue caused by the operational problem is need for more warehouses space, since the operational issues led to the need for more warehouse space for the company, the company is forced to incur additional costs by renting more additional space to store the unfinished products waiting to be completed and be delivered to the customer. The renting of more warehouse space will have an effect on the financial structure of the company. Another factor that has an influence on the company financial structure is the rise in cost associated with commercial line futures. Companies are greatly affected by the cost of the raw materials they use to make their products thus making an influence to a company’s financial structure. With the rise in the cost, the Hudson Alphine Furniture Company will ultimately achieve lower level of profits since the raw materials and commodities which are used in making the commercial line furniture has been rising steadily thus this will have an effect on the company’s financial structure (Sanders & Reid, 2009). Conclusion The company is affected by various factors such as capacity constraint (time constraint and capacity constraint), operational efficiency and overall effectiveness of the plant. These factors have eventually led to lesser level of profits for the company compared to growth the company has achieved over time and the introduction of a new line of production in the company (Brennan, 2010). When the three issues are solved the company will achieve more in terms of profits generated form their operations. With new decisions been made by the operational managers in the company, the companies will be able to achieve effective production and thus the company will achieve more in terms of profits generated by the company. Also there is a need to solve the broader organizational issues that arise from the companies move into the new line of manufacturing that is the commercial line furniture. When these issues are solved the company will achieve the required amounts of profits. References Brennan, L (2010). The McGraw-Hill 36-Hour Course: Operations Management (McGraw-Hill 36-Hour Courses). New York: McGraw-Hill. Burtonshaw-Gunn, S. (2010). Essential tools for operations management: tools, models and approaches for mangers and consultants. New York: John Wiley & sons. Clark, G., and Johnston, R (2008). Service operations management: improving service delivery 3rd edition. New York: Prentice hall. Elliot, B., and Bicheno, J (1997). Operations management: an active learning approach. New York: John Wiley & sons. Johnston, R., Chambers, S., & Slack, N (2004). Operations management. New Jersey: Prentice hall. Kamauff, J. (2009). Managers guide to operations management Mcgraw-hill, 2009. Sanders, N., and Reid, R (2009). Operations management. New York: Wiley. Siegel, G., & Shim, J. (1999). Operations Management. New York: Barron's Educational Series. Slack, N., Chambers, S. and Johnston, R. (2009). Operations and process management: principles and practice for strategic impact. New York: Prentice hall. Slack, N., Chambers, S., and Johnston, J. (2009). Operations management: AND MyOMLab. New Jersey: prentice hall. Stevenson, W (2008). Operations management. New York: McGraw-hill. Stevenson, W. (2002). Operations Management. New York: McGraw-Hill. Read More