Production and Operations Management - Classic Cabinets Pty Ltd - Case Study Example

Production and operations management Production and operations management is that part of the organization that transforms the various organizational inputs and raw materials into the required products and services that meet the quality levels set by the organization (Chary 29). The function of production and operations management in an organization ensures that quality goods and services are produced at a reasonable price and of good quality and delivered to the customer at the place and time that he desires. Meeting these qualities gives a company the competitive edge, which enables it stay ahead of competition (Chary 39). Production management therefore is the managerial activities involved in the process of production of goods while operations management make up the managerial activities involved in service delivery (Chary 18). Classic Cabinets Pty Ltd, which a family owned company, is involved in the manufacture of custom-built kitchen cabinetry. They produce and design custom-made kitchens that specifically meet the needs of the clients. This makes the company to both a product and a service company based in Springvale in Melbourne. The production systems and processes used by Classic Cabinets Pty Ltd is the manufacture of standard and custom-made kitchen cabinets and this constitutes the largest revenues for the company. The company uses general-purpose machines for making these cabinets, which are flexible and can be used for producing a wide variety of custom designed cabinets. The factory is such that the layout accommodates various equipment to be grouped together with several assembly areas located strategically throughout the factory. The use of similar equipment for the manufacture of custom made and standard cabinets makes them compete for processing time on this equipment and for the crafts people. The quality of the finished products that Classic Cabinets produces reflects the high quality of the materials chosen as well as the craftsmanship of the individual cabinetmakers. The scheduling trade-offs necessitated by the increase in the builders line of kitchens gave priority to the custom kitchens mainly due to their profitability generated by their high sales. The lots of standard cabinet components left after the various stages of completion have led to the manufacturing area being clogged up with partially completed work and this increase the volume of work in progress. The production and operations function works with other functional areas of the organization due the various support that it provides to these functional areas (Chary 19). The marketing function is supported by the production and operations function by ensuring that customer needs are met by the products and services manufactured (Chary 77. The human resource function has to ensure that people working within the firm have the required skills needed to produce the goods and services the company is involved in. The supply and logistics department have to react quickly to the needs of the operating system by ensuring timely supply of raw materials and timely delivery of finished products (Chary 89). The integration of these management functions ensures that the role performed by the production and operations management remains central in the organization’s functions thus making it more intense. For firms involved in the production of goods and services their aim is to sell them in the market and this requires the employment of the various factors of production. The theory of production is concerned with the combination of various inputs to produce a certain level of output (Narasimhan and Talluri 115). This theory provides a base for the analysis of the relationship between cost and output and helps in determining the profit maximizing output. The action of production transforms resources and inputs into goods and services (Narasimhan and Talluri 117). Sometimes the final product can be used in the manufacture and production of other products. Production cannot be limited to the physical transformation of goods but it also involves rendering of services. The inputs that are used in production can be classified into natural resources such as land, capital, labor, and entrepreneurship and can be classified as variable and fixed inputs. The production function describes the ways the factors of production are combined to produce different levels of output. From this function, the maximum level volume of physical output can be determined given a set of inputs (Narasimhan and Talluri 116). This function comprises of a technical relation between the inputs and output. The production function is determined by a given state of technology and when the technology improves, the production function changes to yield greater output from the given inputs. This function determines the technically efficient method of producing a given level of output. The theory of constraints in production and operations management by Eliyahu Goldrat epitomizes practical thinking in understanding constraints in systems (Wagner et al. 3070). Every operations management professional desires to break down a complex system thereby understanding its functioning and constraints. This theory helps in the understanding of the way a system functions by identifying the elements that constrain it from achieving its goals (Wagner et al. 3071).This theory helps to optimize resource deployment to the right areas to achieve its goals with minimum inputs (Wagner et al. 3083). The application of this theory to production and operations management is widespread because the constraints are easily definable and identifiable. This theory stresses on the relevance of the quantifiable elements of management (Wagner et al. 3069).The theory of constraints techniques form powerful resources in the determination of deployment of resources, costing and growth. The theory’s influence on costing is largely responsible for opening new models on which costs are estimated and prices determined (Wagner et al. 3069). Since every system consists of different characteristics, each element would have different efficiency levels as well as different capacities to perform specific functions and goals. Therefore, to achieve the goals all elements in the system would need to work in a coordinated manner to produce optimum results. However, the presence of a few elements that acts as a constraint towards the achievement of the goal will determine how efficient the system would be (Wagner et al. 3084). The steps involved in identifying, managing, and exploiting system constraints are: Identification of the system constraints Decision making on how to exploit the constraints Linking everything based on the decisions made above Elevating the constraints If any of the steps above the constraint has been broken then the steps are repeated from step one. Though the process appears to be simple TOC takes more than just pure concepts but hard-pressed applications of right measures as well as concepts that evaluate their effectiveness. These measures form the axis of TOC implementation. The goal of any company is to make money, which they do by selling products and services to customers (Wagner et al. 3079). The effect of the new builders’ kitchen line on Classic Cabinets operations is that with the increased sales steadily rising regular scheduling of work has had to be done leading to scheduling trade-offs. This has given priority to the custom kitchens, which are a major revenue earner for the company. This though has presented a new problem for the company, which is factory space, which has been clogged up by partially completed work. Classic Cabinets face the problem of capacity management issues, plant layout and design, production planning and scheduling and inventory management. The critical path theory and PERT analysis help in scheduling and planning complex projects (Schroeder et al. 354). The critical path analysis helps in planning all the tasks that must be completed as part of a project and act as a basis for the preparation for resource planning and preparation of schedules (Schroeder 354). This theory helps to monitor the achievement of project goals by charting out a plan of action for getting the project back on course (Gupta 433). Using CPA in the planning process helps in identifying which tasks ought to be completed on time so that time delays can be avoided in the completion of the whole project (Craighead and Meredith 711). By identifying, the tasks that need to be completed in time resources will be allocated to ensure that the overrunning tasks catch up (Gupta 440). It also helps in identifying the minimum length of time that will be needed in order to complete a project. CPA is useful for making managerial decisions because it prioritizes work and processes and so enables mangers to focus on critical activities at the same time coordinating more efficiently the application of resources (Gupta 439). PERT (Program Evaluation and Review Technique) is a variation on the critical path analysis that takes a cynical view of the time estimates made for each project (Gupta 442). It does so by estimating the shortest possible time that an activity takes and the longest time that might be taken should the activity take a longer time than expected. This evaluation provides a bias to time estimates away from the time scales that are normally assumed (Gupta 446). The daily operational decisions that Chinh Chu of Classic Cabinets has to make under the current operating conditions to maintain effective production considering the costs of maintaining inventory, work in progress and finished products as well as the steady rise in the costs associated with the standard builders line (Wagner 3069). The company rented an expensive public warehouse to accommodate the increased volume of inventory. Anh Chu increased the lead times for both orders, the standard and custom orders that resulted in longer promised delivery times. The current operating system pushed the manufacturing capacity to the limit and which the current factory layout there was hardly any space for expansion. The capacity of a production unit is its ability to produce what the customer requires. In production and operations management, capacity is referred to from 3 perspectives, which are: Immediate capacity - which refers to the amount of production capacity that can be made available in the short term. It is the maximum potential capacity if it is used productively. Effective capacity- it is the achievable production capacity because not all productive capacity is useable or is used actually. Potential capacity- it refers to the capacity that can be made available to influence planning by management. Capacity is measured by the units of work produced and is constrained by capacity and time. Time is a constraint when a customer requires delivery by a particular date. This situation causes a situation of planning backwards (Stratman 276). This is done by allocating the final stage of operation to the period that the delivery is required (Stratman 286). This process helps in identifying whether there will be sufficient time to meet the demands of production and whether there is need to increase capacity or not. Product scheduling represents the time that is necessary to carry out a particular task (Stratman 281). A job schedule shows the plan for the manufacture of a particular job which is done using work-study reviews which help in determining the times and method required for specific tasks. Preparation of work schedules requires that keen attention be placed on: Job schedules Capacities Delivery dates Availability of raw materials The efficiency of the production sections Rate of absenteeism The effect of the move to producing builders’ kitchen have on the company’s manufacturing structures is that there have been increasing amounts of capital tied up in raw materials, inventory, work in progress and finished product. The company also rents an expensive public warehouse to accommodate the increased volume of inventory. The increase in lead-time resulting to longer delivery times has pushed the manufacturing capacity to the limit and with the current factory layout there is no space for expansion and will hurt the company in the end. The operations management of any organization involves the design, improvement, and operation of the systems that create and deliver primary products and services of the organization (Hayes 570). Operations management relies on operations research to come up with mathematical models as well as statistical tools that enable managers come up problem solving devices to solve production and operational problems (Hayes 571). Manufacturing organizations employ a variety of resources in the process of manufacturing goods and services and offering them at competitive levels to their customers (Hayes 568). Manufacturing organizations also have problems with respect to managing their operations and offering products and services competitively and this can be attributed to market dynamics (Hayes 571). All manufacturing organizations are different from each other especially in the manner in which they operate. The differences such as process and product complexities, market, competition, technology choices, and product volume are some of the dimensions on which differences exist. However, every organization has five layers that make up its value chain (Hayes 569). These are: Customer layer Manufacturing layer; these are machines assembly and testing areas Manufacturing support layer - these are marketing, planning, costing, and materials. Innovation layer; these are areas that the organization engages in to keep abreast of all relevant technologies to ensure that it remains profitable. Layer of suppliers. The structure of the organization determines how well these five layers are linked in the organization because all of them are important. Conclusion Classic Cabinets Company has established itself as a custom as well as standard kitchen manufacturer in Melbourne and with the complexities that arise because of scheduling trade-offs. Though two siblings own the company one of the owners does the administration while the other owner does the manufacturing. The company has been able to enjoy profits due to their custom-made kitchen line while their standard lines have not had that much success. For the company to survive it has to strike a balance between how many standard kitchens they will produce compared to the custom-made ones. References Chary. Production and operations management. London: Tata McGraw-Hill Education, 2009. Craighead, Christopher, and Meredith, Jack. Operations management research: evolution and alternative future paths. International Journal of Operations and Production Management 28.8 (2008): 710-726. Gupta Sushil, Verma Rohit, and Liana Victorino. Empirical research published in production and operations management (1992-2005): Trends and future research directions. Production and Operations Management, 15.3 (2006): 432-448. Hayes, R.H. Pom forum: Operation’s management next source of galvanizing energy? Production and Operations Management, 17.6 (2008): 567-572. Narasimhan Ram, and Talluri, Srinivas. Perspectives on risk management in supply chains. Journal of Operations Management, 27.2 (2009): 114-118. Schroeder, Roger. Introduction to the special issue on theory development in operations management. Production and Operations Management, 17.3 (2008): 354-356. Schroeder, R.G. et al., Six sigma: definition and underlying theory. Journal of Operations Management, 26.4 (2008): 536-554. Stratman, Jeff. Facilitating off shoring with enterprise technologies: reducing operational friction in the governance and production of services. Journal of Operations Management, 26.2 (2008): 275-287. Wagner, Helen, Morton Susan, Dainty Andrew, and Burns Neil. Path dependent constraints on innovation programmes in production and operations management. International journal of production research 49.11 (2010): 3069-3085. Read More