Production and Operation Management - Essay Example

Production and operation management Name Course Tutor Date Introduction Hudson’s Alpine Furniture is a small company the designs and manufacturers both custom made and commercial furniture lines for the Australian market. The goal of the company was to provide high-quality timber furniture for both the two markets. This paper discuses the production and operational management of the company after moving to the new commercial furniture orders. Technical analysis Production system comprises of processes, inputs, outputs and feedback (Schniederjans & Cao, 2009). There exist different scales of furniture production that require different kinds of tools and equipments. Inputs include all the components that go into the system and include timber, leather, clothes, and nails just to mention a few. Hudson use quality raw materials to produce furniture that reflect the natural beauty of the area in which they operate. Most of the materials used by the firm in its production process are outsourced locally in order to maintain a harmonious relationship between the business and the environment that nurtured it. The firm’s furniture is made from wood selected by their customers. Production refers to the application of the process. The process involves the application of technology to the raw material to add the use and economic values in order to arrive at a desirable product and service that is most desirable method, without compromising the desired quality. The production of the firm is done through integration of components. In this type of production, various components of the product are assembled in order to come up with desirable products. During this process, chemical or physical properties of the materials may change. The company was set up with the aim of producing high quality custom-made timber furniture for a specific market. Materials used in the production process are acquired locally before being designed and made by qualified artisans. The company owns and operates one manufacturing facility located in Queanbeyan. The firm makes both customized and standardized commercial furniture pieces. The equipment used in the production process is mainly general purpose in nature and this provides the much-needed flexibility for producing the customized furniture. The equipments used in the factory are grouped together according to function. This enables easy access to tools used by artisans and saves time in the manufacturing process. Saws and other cutting equipments kept in the cutting department while lathes are grouped in a separate area and joining machines have their own section. The factory has a number of assembly stations strategically poisoned around the facility. Checks are carried out throughout the production processes to ensure that the quality of the finished product reflects the quality of the wood chosen and of artisanship of the individual workers. Feedback is a crucial part in the production process and system control checks highlights the need for improvement and alteration to the inputs or process (Jebrin, 2011). According to an informal review of the firm, there is considerable growth in the company’s operations. The demand for customized furniture has remained strong while the demand for the commercial line is on the rise. On the other hand, results from the accounts department indicate that the firm’s profits are not showing positive results. This is resulting from the cost associated with commercial furniture line. The firm does not have an efficient delivery system for the commercial line furniture. This result into a large amount of money tied up on the increasing levels of goods waiting for delivery. The large inventory volume demands for more expensive public warehouse to accommodate the large volume of finished goods waiting delivery. The company is also experiencing increased lead times for both custom and commercial orders, which has resulted into longer promised delivery times. The company has many orders, which is continuously clogging the work in progress since the company does not any space left for expansion in the near future. The company has suitable machinery and equipments to produce the desired products. However, Hudson is still weak in the estimation of demand and delivery dates to keep the production cost at minimum. Hudson does not have a timetable for various production activities, which indicates when to start and when to finish the required process. The production management department is not doing its best to conduct a thorough estimation of production times and production costs. Accurate estimation is beneficial in competitive situations as it helps the management to decide what must be done to arrest the costs at desirable levels (Horváthová, 2010). Problem definition Hudson was initially established as a small company that designs and manufacture custom made timber furniture. The aim of the firm was to set up and produce high quality custom-made timber furniture for a quite specific market. The initial market served by the company consisted of owners of private ski lodges and holiday cabins located around the high country and snowfields of the New South Wales Alps. Materials used in the production process are sourced locally. The company developed a positive reputation for its creative designs and high quality artisanship. Sales for the firm’s products spread to the entire Australian Alps bringing along additional opportunities. Hudson traditionally targeted the market for customized furniture, with the customer choosing the type of wood for making a piece. With the growth of the company’s reputation and increase in sales, the company started receiving demand from commercial ski lodge operators in the region. The new orders consisted of similar furniture for the ski resorts concerned. These new orders presented a change in the course of the firm’s business operations. This new segment of the market was more sensitive to pricing and delivery process. In order to achieve economies of scale, Hudson started producing products in batches. The company has only one manufacturing plant where manufacture of both custom and commercial furniture pieces takes place. The major concern to the firm is increasing demand from both custom and commercial furniture, which has resulted into longer promised time for delivery, which has pushed the firm’s capacity making the firm lack space for more production. The once more spacious facility has become clogged with work in progress, and to make it worse, the firm has no space left for expansion. Hudson has not been able to achieve operational efficiency and this is evident from the increasing costs associated with commercial furniture line. The company accountant reported that the profits are dwindling. This makes more money tied up in raw materials and work in progress. In addition, there is increasing level of finished goods waiting for delivery, which requires the company to spend more on public warehouse space to accommodate some of the inventory volume. There is also an increase in the time taken by the company to complete production of both custom and commercial orders, resulting to longer promised delivery times. The company initially focused on custom-made pieces of furniture, with customers deciding on the wood and design of furniture of their choice. The new orders from commercial furniture consisted of a number of similar furniture items. In order to achieve operational efficiency, the company started producing in batches in order to achieve economies of scale. Batch production involves the manufacture of a number of identical products either to meet the demand or to meet the specific order (Pettersen et al, 2010). In order to achieve operational efficiency, the company received orders from customers for the furniture of their specification even though the size of the order is greater than the capacity of the company. This requires the company to plan for the resources after taking the order. Due to the limited space for expansion, the company has not been able to cope up with the increasing demand since it has no space to expand its operations to ensure timely production and delivery (Wu et al, 2009. The new commercial furniture has given the company the challenge when scheduling trade-offs since the custom made furniture is always given priority because of higher profit margins and sales. This has resulted to scheduled lots of components for the commercial furniture left unfinished sitting around the plant in various stages of completion. This leaves the company with limited space to continue with the production process. Day-to-day operational issues The daily operational decisions that the operations manger need to make under the current operating conditions to maintain effective productions cover the daily operational issues that the company is currently facing. To start, the operations manager is responsible for the conversion of inputs into output, using the company resources in order to provide the desired utilities of place, form, state or possession or a combination of both to the customer while meeting the organizational effectiveness and objectives, adaptability and efficiency. The company currently depends on timber that is available locally. This indicates dependability on one source of raw materials for manufacturing furniture sold to customers. The operations manager needs to conduct research on timber in order to find alternative sources to satisfy the growing demand and the changing needs of the design in the product and availability of materials resumes. Hudson initially targeted the segment of custom-made furniture but with the increasing demand from consumer furniture line; there is a need for additional source of timber to meet the ever-increasing demand for the company’s furniture. Traditionally, the company depended entirely on customized furniture with the customers choosing the kind of wood they need in their furniture. With the expansion of the company’s market to include commercial customers, the operations manager must have sound knowledge of timber and their properties to enable him select the right materials for the commercial furniture. With the change in the market for the company’s products, the operations manager needs to find the best method for the production process. There is also dire need for production methods that suit the availability of resources and identify the sequence for the production process. The company initially depended on customers to give design for their furniture from specific types of wood. With increasing reputation of the firm, there has been growth in orders from the commercial ski lodge operators in the region. This requires the company to come up with new methods in the production process. Since the orders from the commercial customers consist of a number of similar furniture items, the company needs to consider batch production in the production of identical products to satisfy the customer demand and meet the targets of specific orders. Since the size of orders given by commercial ski lodge operators are usually greater than the company’s production capacity, the operations manager has to plan for resources in order to meet customer’s expectations (Brown et al, 2010). This involves sub-contracting or outsourcing some of the production units to other companies within its area of operation. Scheduling employees to work in shifts can also help in enhancing the production process. The product manager needs to conduct a thorough estimation of production times and production cost in order to meet the production targets and delivery dates, and minimize the production cost. This would help in solving the problem arising from commercial buyers who are more price-sensitive and strict on delivery requirement as compared to buyers of custom-made furniture. Adopting batch production requires the operations manager to select suitable machinery for the desired process, and design a maintenance policy and design appropriate layout of machines. In order to reduce inventory and warehouse expenses, the operations manager needs to draw a timetable for various production activities, with clear directions on when to start and finish the required process (Eliiyi & Azizoğlu, 2010). This includes scheduling of movement of materials and planning activities of the work force. The scheduling must take into consideration the increased workload resulting from the new commercial furniture orders and capacities for the facilities available since the firm has no space left for expansion. The operations manager needs to design a routing to fix the flow lines for raw materials and components to reduce the scheduled lots of components for the commercial furniture that occupy space in the plant in various stages of completion. There is competition for processing time on the same equipment by the same artisans from both custom and commercial furniture. Effective scheduling and routing can eliminate this and result into smooth flow of activities within the premise (Foster & Ogden, 2008). Broader organizational issues caused by operational problems The company’s move to produce commercial furniture has potential impacts to the company’s financial structure. Buyers for custom-made pieces of furniture are not price sensitive and this has enabled the company to earn more profit from this market segment. Much of the materials used for making customized furniture are locally available and this enables the firm to save on transportation of raw materials. The company has been able to satisfy the demand for this segment but with increased reputation, the company has extended its operation to include buyers of commercial furniture. The move to produce commercial furniture has forced the company to increase its operations to accommodate the increasing demand. This has however come with both benefits and shortfalls to the company. Additional orders from commercial buyers demand that the company increase its production unit and this requires additional resources. This has made the company adopt new production process in order to achieve economies of scale. Raw materials, which the firm initially obtained locally, are not able to meet the increasing demand and the company can source timber from other locations. This will make the company incur additional transportation costs. The commercial buyers are more price-sensitive and this puts pressure on the company’s pricing strategies. This can comprise the profitability of the firm in the short-term, but can improve as the company achieves economies of scale. Commercial buyers are also strict on delivery requirements than buyers of custom-made furniture. This requires that the firm implements new production and delivery processes to meet the demands of the new customer segment (Weeks et al, I2010). The challenging part is that the custom-designed furniture still dominates the company’s sales and accounts for approximately 60 percent by volume and 75 percent of revenue. Recently, the sales revenue from commercial furniture is on the rise forcing the firm to schedule more for this work. However, the company is forced to weigh options when scheduling since custom-made furniture accounts for a larger percentage of revenue and sales volume. This has resulted into clogging of lots of components for the commercial furniture that are abandoned around the facility in various stages of completion. The company has standardized equipments used in the production process for both segments. This has resulted into completion in processing time for both custom and commercial furniture pieces on the same equipment by the same artisans. Informal review of the company has indicated desirable growth with strong sales for custom furniture and increasing demand for commercial furniture. However, the profitability of the company is not favorable mainly due to rising costs associated with commercial furniture line. Money increasingly gets tied up to inventory due to increasing levels of finished goods waiting for delivery. There is need for more expensive public warehouse to accommodate some of the inventory volumes resulting from both custom and commercial. The increasing demand is causing delays in promised time of delivery for both custom and commercial orders. The capacity is put under pressure as the facility is increasingly being clogged with work in progress. This requires additional space, which the company does not presently have. References Brown, S, Squire, B & Lewis, M 2010, The impact of inclusive and fragmented operations strategy processes on operational performance. International Journal of Production Research, 48(14), 4179-4198. 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Pettersen, J, Segerstedt, A & Bang, B 2010, Three-dimensional performance surfaces-a tool for analyzing and estimation of production system performances, International Journal Of Production Research, 48(17), 4937-4948. Schniederjans, M. M & Cao, Q. Q 2009, Alignment of operations strategy, information strategic orientation, and performance: an empirical study, International Journal of Production Research, 47(10), 2535-2563. Weeks, K, Gao, H, Alidaeec, B& Rana, D. S 2010, An empirical study of impacts of production mix, product route efficiencies on operations performance and profitability: a reverse logistics approach, International Journal Of Production Research, 48(4), 1087-1104. Wu, M, Chen, C & Shih, C 2009, Route planning for two wafer fabs with capacity-sharing mechanisms, International Journal Of Production Research, 47(20), 5843-5856. Read More