Space Age Furniture Company Case Study

The struggle to satisfy customers while maintaining high levels of employee satisfaction and motivation remains an elusive aspect of corporate operations. The problem has become evident in Space Age Furniture, a company specializing in the manufacture of wears designed for holding into position microwave ovens and portable TVs. The problem in Space Age Furniture gets aggravated by the fact that the company has a solo machine operator whom it cannot fathom letting go. The single machine operator is the only one capable of being in control of the particular lathe machine that produces a distinctive part (3079) that is paramount in the manufacture of the two products (Genesis 425 and Saturn 257) that the company sells. It, therefore, means that Ed, the solo machine operator is somewhat indispensable since no one else can replace him anytime soon. If Ed works for regular shifts of 8 hours for a five-day working week, it follows that only 1200 pieces of component 3079 shall be produced in that week. Demand for products is not of that opinion, more of 3079 should be produced indicating that Ed should be engaged for more hours than he wants. It essentially means that getting another operator to work after Ed’s shift can solve the problem, but this is not as easy as it sounds; getting another operator has become increasingly difficult; almost impossible. Training another operator seems like the only alternative when looked at the surface, but this has to be confirmed statistically. 

Coral, the operations manager in Space Age Furniture, has been selected to do the heavy weight lifting and solve the current impasse between demand and supply; the business is bleeding when orders take forever to be met. To solve the problem, Coral must get to the core of the problem and work outwards. Coral, against all the odds, must achieve the delicate balance of keeping Ed happy with over the roof job satisfaction and at the same time have a healthy income statement. After conducting a detailed demand analysis, 2,000 individual parts of 3079 must be produced every week to make it possible to meet orders of both Genesis 435 and Saturn 257 which are needed in quantities of 1000 completed products each, every week. On the flip side, Ed operating at regular hours, which is what he prefers, can only generate 1,200 units in a week against the demand of 2,000 units of 3079. This leaves Coral with a gaping deficit of 800 units every week, something that the management of Space Age Furniture cannot come to terms with. An extra 26.6 hours are needed on the special lathe machine to meet the demand. 

To stabilize the production of goods, Coral needs to adopt an approach that is reminiscent of continuity. The smooth production scheduling format, as explained by Pan et al. (2010), is a strong possibility. It essentially means that the production unit of the difficult to make component, 3079, needs to be in full swing at all times. As a result, the production hiccups are smoothened out, and costs tamed. The problem with the plan is that it attracts charges associated with storage. It reduces costs accrued out of extra hours worked by employees but increases storage charges as it will be seen in the course of this paper. 

To determine the right economic choice for Space Age Furniture, Coral need to come up with more information from the analysis. Besides saying arbitrarily that costs will be cut after adopting the Stable Plan, figures is necessary as suggested by Wang and Fang (2001). Finished products cost the company $0.25 per unit per week. With this understanding, the company will part with $300 for the week the parts Ed will have finished will be in storage. To produce the 2,000 parts that are demanded by the orders, it means that Ed will receive from the company $877.8 in overtime pay for the 26.6 hours at a rate of $33 that he will go out of his way to fulfill the order. If the overtime factor is eliminated, the company will save $480 and incur $300 in storage costs since the hours worked will be rewarded using the standard rates. It is clear that by adopting the production smoothing plan, Coral will save the company extra costs, keep Ed happy, and retain the desired relationship with the customers. As enumerated by Swift (2001), it is often the manager’s task to decide whether the costs of storage are higher than that of losing out on orders and customer’s loyalty and then go for the strategy or dismiss it. In Corals situation, the choice is simple, keep the machines running. 

Coral has the option of hiring another skilled machine operator. If it happens, it follows that there would be no need for additional hours in overtime for Ed. The company would be in a position to hit the demand units without incurring extra costs in storage and handling costs. Even if the option is executed, Coral needs to go back to the drawing board and justify the need for another pair of hands. In a week, Ed produces 1200 units against expected demand of 2000 units. It, therefore, means that only 800 units are there for the extra employee. It, therefore, means that the extra employee will be idle for some considerable amount of time. In the long run, the additional employee will be added liability to the company meaning that the firm will not be achieving efficiency but wastage. 

Productivity in business is easily achieved if costs are kept to a minimum while the output is maintained at the same level or better if increased. Planning for cost-cutting is critical but sloppy. Arntzen et al. (1995), advised that this exercise can prove terminal for a business if haphazardly executed. Coral should, therefore, be careful with whatever exercise she is undertaking. She should ensure that the value the company derives from employee overtime, if it is chosen as a means to achieve production targets, is commensurate with the expenses incurred. One way of achieving the same is ensuring that overtimes are prearranged to ensure that the activities are within budget as well as ensuring that the employees go home excited and ready to report for work the next day. All this need to be incorporated into a master schedule for the avoidance of doubt. As such, the schedule needs to be flexible enough to accommodate changes without the need for an overhaul of the projects. When the smoothed production is adopted, it essentially means that storage charges need to be recognized. The costs might seem small but can be significant if accumulated if due regard is not given when incurring the expenses. Ensuring that all aspects of the problem are catered for is complex, but the Material Resource Planning concept can be of great assistance. 

The use of MRP as it has been proven by Toyota (Jacobs, 2007), is something that Space Age Furniture needs to bring on board.  The method ensures that negative costs such as storage and handling charges, overtime and poor delivery record with the customers are not experienced (Pegels, 1984). The system can control inventory and reorder levels to what is just needed hence achieving efficiency. The principle in the concept of MRP is ensuring every kind of stock is maintained at the bare minimum while at the same having sufficient finished goods to serve desiring customers (Monden, 2010). On another note, MRP ensures that waste, of materials, time and products, is maintained at the lowest possible (Monden, 2010). When it comes to manufacturing, MRP is capable of helping out on cutting wastage while at the same time ensuring that there is a consistent supply of products to the clients. This has been proved to work with Toyota. Increasing the levels of inventory as a means for providing insurance against demand can have its downsides. To begin with, besides holding costs, there are other problems that can invite employees to sort the problems, for instance, extra time might be needed to handle inventories as well documenting the inventory either manually or automatically. 

MRP if put into action, provides an efficient mechanism for reducing the time that is put in by employees by cutting back on product orders. The method watches over inventory costs as well as overtime accurately and places a tab on them thus resulting in great efficiency. Consequently, financial gains from the MRP intervention raise and such savings can be utilized by the business to invest in modern equipment or in other programs that increase the overall value of the firm. 

Going back to the mechanics of Space Age Furniture, we find that storage of every unit of part 3079 consumes $0.25 per week. The sub-assembled 435 and 257 require storage costs of $0.75 each per unit per week. When finished, Genesis will cost $1.25 in storage charges every week while Saturn will go slightly higher to $1.50 every week. A 6-week master schedule can be developed to this effect to assist Coral in the execution of a more appropriate strategy that will optimize returns by reducing wastage and stock outs. 

F igure 1

PARTICULARS	Week 1	Week 2	Week 3	Week 4	Week 5	Week 6
Gemini (Units)	600	400	700	500	400	600	3200
Storage @ $1.25/week		750	500	875	625	500	750
Saturn (Units)	300	400	400	600	300	300	2300
Storage @ $1.50/week		450	600	600	900	450	450
Total 3079 units	900	800	1100	1100	700	900	5500
Storage @ $0.25/week		225	200	275	275	175	225
Storage for Sub 435 and 257@ $0.75/unit/week		675	600	825	825	525	675

From the plan, three critical determinants of costs can be seen; storage costs for each time for each week, production costs for each of the six weeks and storage costs for 3079 subassemblies. It can be noticed that costs for week one are not shown. This cost for Week one was reflected in week 2 and so on. The reason for this reasoning is that the units produced in week one went for storage in week two and will be in store until the projected 1000 units are complete and then released for shipment. Each week require two batches of 1000 units of 3079 since Gemini will use 1000 units and Saturn another 1000 units. 

To be effective, it is evident that production of the constraint (part 3079) need to be smoothed. Gemini will require 3200 units of 3079 while Saturn will require 2300 units of the same. A smoothed production schedule for the two will be as follows. 

Figure 2

Particulars	Week 1	Week 2	Week 3	Week 4	Week 5	Week 6	Totals
Gemini	533	533	533	533	533	533	3198
Saturn	383	383	383	383	383	383	2298
Total of 3079	916	916	916	916	916	916	5496

From Figure 1, it can be deduced that storage of finished products is costlier than storage of subassemblies. To be precise, $4,000 will be forked out for storage of 1000 units of finished Gemini while Saturn will consume $3,450 in 1000 units for the entire six-week production period, bringing it to a total of $7,450. Storage costs for subassemblies for the same period totals to $4,125, a $3,325 difference. 

To complete a full analysis of the scenario, we must talk of overtime. If the route of overtime is chosen to produce the 2000 sub-assembled parts for both Gemini and Saturn, it means that an expenditure of $5,280 will be incurred. $5,280 is derived from the $880 overtime cost per week for six weeks. Comparing overtime costs, storage of sub-assemblies, and storage costs of completed units, Coral should conclude that storing sub-assemblies is more economical. 

Exploring more options for use by Coral is good. On this, another process can be adopted, the flow-shop scheduling (Ribas et al., 2010). The method requires meticulous planning and execution of such plans. The method requires that items for use in the next step be ready and available for the entire production period. The method, in this case, can be tricky because of the Ed factor since his production capabilities are limited. His equipment can only churn out a new 3079 components after every 2 minutes, and his presence is needed to handle the process. Production planning is seriously affected by interrupted flow-shop schedules as it has been demonstrated. To solve the problem, more machines that can carry out the same limiting job is paramount. The aim of increasing the limiting equipment or personnel is to minimize the process time. (Meyer, 2010)

A batch has been described as a production process with insufficient volumes to optimize the utilization of a facility in the production of a single product. The process of batching loses its significance as a mechanism for addressing problems when product volumes go below the expected levels. To counter this likely occurrence, the Job Shop Process is recommended. The job shop process assumes that a facility is general when it comes to manufacturing of products and components. As such, the concept is flexible in such a way that it can be used as a solution to numerous problems, unlike the more rigid batch process. To be more precise, the job shop process is kicked in to ensure that it would be possible to produce a few units of the required and necessary products to the very minute detail. Due to lack of economies of scale among other factors, job shops report higher costs other than the batch process for the same number of identical products. In the case of Space Age Furniture, I would prefer to have a job shop process since the same can meet production levels of all sorts without making demands on quantities.  

To ensure that proper discipline in production is maintained, the continuous flow process is a good consideration for Coral, the production manager. The method boasts of high volumes and mass production when the final product component is standardized. For instance, part 3079 is uniformly produced. The final products, Gemini and Saturn, are also standardized and can be produced in mass. Each of the products is similar to each other and as such, the product flow thus required for such a product is dominant. The limiting factor in this process is the Lathe machine which can produce a similar part 3079 every 2 minutes. The problem with the machine is that it needs an operator at all times. The objective of continuous flow process is to minimize the average processing time for a unit product. To ensure that a machine produces one product after the other without needing a break in the name of maintenance unless scheduled, the right quantity and quality of maintenance should be accorded such a machine.

For Coral, the stakes are high. Running a production line efficiently entails monitoring the activities and progress being made, troubleshooting, and fixing such problems within the shortest time possible. It means that for Coral, sticking strictly to the master schedule is not interchangeable with any other aspect. Foreseen sources of trouble, for instance, raw material stock-outs and lack of employee cooperation need to be evaluated and fixed before the problems arise. The production manager needs to have his/her eyes on the production schedule to ensure that at no single time will the system fail to deliver the results. The production manager need not work in isolation. The need to collaborate with other departments, for instance, finance, marketing, and procurement are critical as demonstrated by Brettel et al. (2011). The said departments can help out or stall the process completely. 

Coming up with a plan that will be shared across the departments is critical. With concerted efforts and sheer focus to the details of the flow of work, production will be geared towards meeting the demand in a more economic and efficient way. The kind of planning that incorporates various departments is what is known as an aggregate plan. An aggregate plan shows how production should be conducted in short foreseeable periods, for instance, one or two months. As such, inputs and outputs will be determined, and the necessary infrastructure readied to meet the set targets. As part of the plan, important considerations such as contracts with suppliers, employee absorption, and development, sorting and handling of production outputs need to be well thought out and executed. 

To ensure that there is a commitment on the part of the company, warrants and quality guarantee need to be issued to the end consumer as suggested by Albaum (2010), who established strong positive perceptions with regards to product guarantees. The net benefit of this approach is that it gives confidence to the buyers of such a product as well as instilling discipline to the producer. Employees and suppliers of raw materials need to be made aware of such commitments to the customers and be advised to work with the required ethos and standards that commensurate with such commitments. Failure to honor them often comes with consequences, for instance, product recalls and reduced consumer loyalty as enumerated by Kalaignanam et al. (2013). In the recent past, we have seen companies like VW, Toyota, and Samsung get into serious trouble for offering products with questionable quality to consumers. The trend was associated with deaths, something that no company would want on their doorstep. 

In conclusion, Space Age Furniture Company needs to be grateful for being bothered with how they will meet increased customer demand against limited resources. Many managers would rather be faced with the challenge presented to Coral rather than have products with no buyer. Coral needs to put numerous options on the table and evaluate each of the options with statistical reasoning and logic and come up with a more concrete solution, both in the long-run and in the short-run. On this note, the smoothed production scheduling, as well as the MRP, have been suggested and evaluated. Such solutions should have the interests of the company at the core with due regards to customer and employee satisfaction as well as the going concern of the company. It has been demonstrated that internal collaboration with various departments is critical for the manufacturing department. The unit depends on other units such as the procurement department as well as the finance department for inputs, the human resource for labor and the sales and marketing department for offloading of finished products. It is paramount that cohesion among these departments be worked on to ensure that no glitches are experienced. 

References

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Jacobs, F. R. (2007). Enterprise resource planning (ERP)—A brief history. Journal of Operations Management, 25(2), 357-363.

Kalaignanam, K., Kushwaha, T., & Eilert, M. (2013). The impact of product recalls on future product reliability and future accidents: Evidence from the automobile industry. Journal of Marketing, 77(2), 41-57.

Pan, E., Liao, W., & Xi, L. (2010). Single-machine-based production scheduling model integrated preventive maintenance planning. The International Journal of Advanced Manufacturing Technology, 50(1), 365-375.

Meyer, C. (2010). Fast Cycle Time: How to Align Purpose, Strategy, and Structure for Speed. Simon and Schuster.

Monden, Y. (2011). Toyota production system: an integrated approach to just-in-time. CRC Press.

Ribas, I., Leisten, R., & Framiñan, J. M. (2010). Review and classification of hybrid flow shop scheduling problems from a production system and a solutions procedure perspective. Computers & Operations Research, 37(8), 1439-1454.

Swift, R. S. (2001). Accelerating customer relationships: Using CRM and relationship technologies. Prentice Hall Professional.

Wang, R. C., & Fang, H. H. (2001). Aggregate production planning with multiple objectives in a fuzzy environment. European Journal of Operational Research, 133(3), 521-536.