Production Systems and Processes Used by Hudsons - Case Study Example

Heading: Production and Operation Management Your name: Course name: Professors’ name: Date Introduction Hudson’s Alpine Furniture is a small company that was established in 1998 by Della and Ralph Hudson in NSW’s Queanbeyan. The company deals in the manufacture of specially made timber furniture. The main aim of the founders was to combine two passions that include skiing and woodworking, in order to create a feasible, profitable business. This market comprises of the holiday cabins and private ski lodges situated around high country and snowfields in NSW Alps. Therefore, the essay attempts to examine the current present production processes and systems of the company; the effect of its new commercial furniture orders in terms of operation efficiency, capacity constraints, and its general effectiveness. It also analyses the day-to-day decisions made by the company’s operation manager under the present operating circumstances in order to uphold successful production. Lastly, the essay tries to illuminate on the probable effects of commercial furniture orders on the firm; general effects of the existing problems on the company (Semal 2005, pp. 1-17). The current production systems and processes used by Hudson’s (a technical analysis) Kumar (2006, pp. 1-20) notes that production system refers to the section of a firm that produces products for the company. It concerns the activity whereby resources that flow in a defined system are blended and changed in controlled way so as to add value according to the policies provided by the management. In a production system, there are inputs that include materials, men, machines, capital, and information; transformed processes that entails product design, production control, maintenance, and process planning; outputs that include services and products; and continuous response information, in terms of cost, inventory, and quality (Suresh & Kumar 2008, pp. 1-50). In the case of Hudson’s business, the kind of operation that is done is the job shop production. Job shop production entails the manufacturing of little amount of products that are designed and manufactured in accordance with the client’s specifications within a predetermined cost and time. The unique factor in such a production is the high variety and low volume of products. A job shop consists of general purpose machinery that is arranged into distinct departments, every job demands distinguishing technological needs, demands processing on equipments in a particular order (Fleischmann, Bloemhof-Ruwaard & Van Wassenhove 2001, pp. 156–173). Some of the features of a job shop production system include high variety, and low volume of products; employment of general facilities and machines, highly competent operators that can view each job as a challenge due to uniqueness; large inventory of parts, tools and materials; detailed planning is indispensable for ordering the needs of every product, abilities for every order priorities and work centers. When a company, like Hudson’s, engages in job shop production, it enjoys certain benefits. According to Suresh and Kumar (2008, pp. 1-50), job shop production leads to production of variety of goods because of utilization of general facilities and machines. It also makes the operators more competent and skilled, since each job provides them with learning opportunities. Additionally, Sroufe (2003, pp. 416-435) asserts that the company operating such production ensures that total capacities of the operators are used. The production also offers an opportunity for innovative ideas and creative methods. Nonetheless, job shop production that Hudson’s employs has its share of drawbacks to the business. These limitations include high costs incurred because of regular set up alterations; high inventory level at every sector leads to skyrocketing inventory costs. Such production in the firm also makes production planning complicated. It also renders the company to require larger space than it is currently using. Explicitly, Hudson’s firm is presently one manufacturing facility that is situated in Queanbeyan, near Canberra. Here, both standardized commercial and custom furniture are produced. The company also largely uses general purpose equipment, and this is beneficial in that it allows it to achieve flexibility that is necessary in the production of specially-made furniture pieces. In terms of its layout, the company has different groups for its equipments according to their varied functions. For example, the company has its cutting department housing its saws and other cutting tools, while all the lathes are put together in their section. Moreover, the jointing equipment in the company is kept in a different department. In addition, the company has a variety of assembly stations that are strategically located around it. In terms of its inputs, the firm uses raw materials sourced from local supplies. It also has competent personnel in its various departments. It also has numerous machines required in every stage of production; hence its successful operation (Sroufe 2003, pp. 416-435). Apart from the job shop production, the company operates batch production, in attempt to attain certain economies of scale. According to the American Production and Inventory Control Society (APICS), batch production is a type of manufacturing whereby a job goes through the functional departments in batches or lots and each batch can have a distinct routing. In such a form of production, there is restricted number of products manufactured at standard intervals and stocked as they await sales (Suresh & Kumar 2008, pp. 1-50). It is also characterized by short production runs and flexible plant machinery and plant. It also used when machinery and plant are designed for the production of items in batches and alteration of the design is needed for the next batches’ processing. Additionally, it is necessary when manufacturing cost and lead time are lower than to the job order manufacturing. There are certain advantages accrued when such a production form is used in a firm (Fleischmann, Bloemhof-Ruwaard & Van Wassenhove 2001, pp. 156–173). These include better use of machinery and plant; promotion of functional specialization; low cost per unit in comparison with job order production; flexibility that accommodates and processes many products; and job satisfaction for operators (Hill 2012, pp. 50-65). However, this form of production is disadvantageous in a number of ways. First, there is a complex material handling due to batch production. Second, the company using it like Hudson’s, finds its production control and planning complex. There is also higher work in the process inventory as compared to continuous production. Batch production has higher costs because of regular changes in the design. Therefore, Hudson’s operate this kind of operation so as to obtain some economies of scale. The effect of the new commercial furniture orders on Hudson’s operations, including capacity constraints, operational efficiency and overall effectiveness of the plant (problem definition). In the case study provided, Hudson’s firm had traditionally dealt in the production of custom-made furniture pieces. Here, the clients would specify the types of wood that would be used in making them. Because of the company’s enhanced reputation, the number of sales increased, with the little sales department obtaining orders from commercial ski lodge business people in that region. These orders commonly comprised of many similar furniture products that are used in ski lodge involved. Consequently, the orders demonstrated a deviation from the normal business course in the firm. these new course of operations in Hudson’s had negative effects in that the new commercial purchasers were more price sensitive as compared to the others one in the custom category. These buyers forced more stringent delivery needs in the firm than the custom-made private purchasers. Despite the fact that this new line of operation promises the company huge profits and growth, the custom-designed and manufactured products remain the most dominant products in the company’s sales, and they account for about 60% of the volume and 75% revenue in the firm. Nevertheless, in the last few months, the company has experienced a gradual increase in the commercial furniture sales. As a result, the company has been forced to have regular work scheduling. Besides, in the process of scheduling trade-offs, the company is compelled to give priority to the custom products since they have higher volumes of sales and profit margin (Sroufe 2003, pp. 416-435). Hence, the firm is also forced to leave scheduled components of commercial products around the firm in different completion stages (Kleindorfer, Singhal & Van Wassenhove 2005, pp. 482–492). According to the informal firm’s performance review, Hudson’s are happy to note that the business has grown. Custom products sales continue to be strong, and there is a steady increase in the demand for commercial business line. Nevertheless, the company accountant has shown that the profits are lower than the expected. This is probably because of the rising costs of commercial production in the company. Additionally, there is a lot of money that is held by firm’s inventory. This does not only happen in both raw materials and work in process, but also in high levels of finished products that await delivery. Consequently, the company is compelled to rent a spacious, public warehouse, which is quite expensive so as to house some volumes of inventory. The company is also apprehensive about the increased lead times for commercial and custom orders that are resulting in longer promised times of delivery. What is more, the company capacity is being stretched, as the present spacious store has become congested with work in process, and thus, there is not adequate space remaining in the company for expansion. Furthermore, it is clear that the custom and commercial products in the firm are competing for the same machinery and working time by the same craftsmen in the firm. As a result, these conditions are negatively affecting the production of the custom products that are more profitable in the firm. Therefore, the firm has noticed the problem and is trying to identify some of the effects of commercial furniture course on its entire operations. The daily operational decisions that the operations manager needs to make under the current operating conditions to maintain effective production (day-to-day operational issues). In order to uphold an effective production in the company, Hudson’s operation manager ought to make routine decisions under the present circumstances as regards its operations. To start with, the operation manager should decide on the design of the services and products that are being produced in the firm. This implies that the operation manager will ensure that the products in the firm are designed as per the clients’ instructions, and should be related to human resources and quality. Secondly, Kumar (2006, pp. 1-20) asserts that the operation manager needs to make decisions regarding the quality of both commercial and custom-designed and manufactured products in the company. He should also ensure that the products’ quality is maintained during the manufacture process of the furniture products. Thirdly, Hudson’s project manager ought to make decisions regarding the capacity and design process in the plant. Here, the operation manager must ensure that the capacities and design processes are associated with the human resources, quality, maintenance, inventory, and scheduling. Fourthly, Barnes (2008, pp. 159-162) says that the plant’s operation manager has a responsibility of deciding on the selection of location of the firm. In Hudson’s case, the operation manager has to make a decision on where to obtain more, adequate space for its inventory and the firm’s expansion. The site selected by the operation manager must be related to the supply chain management. Fifthly, Kumar (2006, pp. 1-20) argues that operation manager in Hudson’s is charged with a responsibility of making decisions in relation to design layout. Besides, the manager ought to decide on inventory of the firm, and this is affected by capacity, design process, human resources, and design layout. Furthermore, the firm’s operation manager has to make decisions regarding effective delivery systems and prices of its products. The manager also decides on the firm’s supply chain management. He or she also makes decisions concerning scheduling of the firm’s processes, as well as the maintenance of products’ qualities. In terms of scheduling, the manager must ensure that all orders are worked on in time and delivered in the predetermined time. On the other hand, Greasley (2008, pp. 1-20) says that the manager should ensure that there is proper maintenance and timely servicing of the machines so as to ensure that they function effectively; that is producing defect-free and quality products. The company operation manager is also required to decide on the human resources management to ensure that the firm is employing appropriate skills in its operations (Kleindorfer, Singhal & Van Wassenhove 2005, pp. 482–492). All the aforementioned decisions by the operation manager are highly indispensable in the successful running of the firm. The effect the move to producing commercial furniture might have on the company’s financial structure (broader organizational issues caused by operational problems). Clearly, there are numerous problems that Hudson’s company faces in its operations, particularly when it decides to run the commercial business line. According to the company accountant, the firm is not making the expected amount of profits as compared to when it was only dealing in custom made products. These problems are likely to affect its financial structure in a number of ways. To begin with, the firm will experience a financial strain since it has to reschedule its activities so as to meet all the clients’ orders in time. Consequently, the firm will be required to employ more human resources so as to ensure that all the work processes are carried out (Greasley 2008, pp. 1-20). Furthermore, the company’s move to carry out the commercial business course will affect its financial structure. This is because if the business runs the commercial manufacture of furniture will cause congestion in the only available facility. In order to overcome this problem and maintain its customer base, in terms of acquisition and retention, the operation manager ought to make decisions regarding its expansion (Hill 2012, pp. 50-65). Explicitly, one of such decisions that have been implemented in the firm is renting a public, spacious warehouse that will contain all the products in the firm. Renting the warehouse will cost the firm a lot of money since such warehouses are quite expensive. This also implies that the firm needs to readjust its budget so as to cater for all the new expenses (Pil & Rothenberg 2003, pp. 404-415). The decision to undertake the commercial business course alongside the custom-made products will have adverse effects on the firm’s financial structure because of the need to increase its resources. This is in terms of the equipment that is necessary in the production process. In the case study, the Hudson’s firm has both lines of business clashing in terms of time, machinery, and human resources. They are competing for the same craftsmen who are working at similar time using the same equipment. The decision to acquire more resources in terms of time, personnel and machinery is certain to affect the firm’s financial position since a lot of money will be spent. In addition, as per the unofficial review of Hudson’s performance, there are many costs in relation to commercial line business. This is because a lot of money that is held by huge inventory, both ongoing processes and raw materials, as well as large amount of finished items that waiting for delivery. Therefore, it is hard for the company to make profits because a lot of expenses incurred in commercial business operation. Conclusion Hudson’s business is a small firm that handles the manufacture of both custom-made and commercial furniture products. The most dominant line of business in the firm is the custom production, but the commercial business is also gradually growing fast. It carries out batch production and job shop production that have both negative and positive effects on its business. Additionally, the firm has various sections for its operations, as well as for its different equipment. Some of the problems that the firm faces include inadequate staff, machinery, space, poor delivery system, and high costs of producing the commercial products. Its operation management has to make decisions relating to the design, work processes, quality, maintenance, scheduling, layout, location, and prices, so as to maintain the firm’s performance. Nevertheless, the introduction of the commercial business course in the firm is likely to adversely affect its financial structure in terms of employment of enough resources and expansion of the firm. References Barnes, D. (2008). Operations management: an international perspective, Thomson, London. Pp. 159-162. Fleischmann, M, Bloemhof-Ruwaard, PBJ & Van Wassenhove, LN 2001, ‘The impact of product recovery on logistics network design’, Production and Operations Management, vol. 10, no.2, pp. 156–173. Greasley, A 2008, Operations management, SAGE, Los Angeles London. Pp. 1-20. Hill, A 2012, The encyclopedia of operations management: a field manual and glossary of operations management terms and concepts, FT Press, Upper Saddle River, N.J. Pp. 50- 65. Kleindorfer, PR, Singhal, K & Van Wassenhove, LN 2005, ‘Sustainable Operations Management; Production and Operations Management’, Production and Operations Management Society, vol. 14, no. 4, pp. 482–492. Kumar, A 2006, Production and operations management, New Age International (P) Ltd. Publishers, New Delhi. Pp. 1-20. Pil, FK & Rothenberg, S 2003, ‘Environmental performance as a driver of superior quality’, Production and Operations Management, vol.12, no. 3, pp. 404–415. Semal, P, 2005, Production and Operations Management, pp. 1-17. http://www.poms.ucl.ac.be/etudes/notes/prod2100/cours/Part%201-Intro.pdf Sroufe, RS 2003, ‘Effects of environmental management systems on environmental management practices and operations’, Production and Operations Management, vol. 12, no.3, pp. 416–431. Suresh, N & Kumar, SA 2008, Production and Operation Management (with skill development, caselets and cases), New Age International (P) Ltd. Publishers. Pp. 1-50. http://tn.upi.edu/pdf/Production_and_Operations_Management.pdf Read More