Fold rite furniture v1.7

ForldRite Furniture Co :

PLANNING TO MEET A SURGE IN DEMAND

magister management 2012

Operational Management Presentation

Presented by Group 2:Aftina – Alfin – Ali – Azhar

Dame – Frisca – Gita – Iman – Indri

1 2 3 4Company

Profile

and

Synopsis

Problem

Identification

& Constrain

5Theoretical Analysis

Solutions

ConclusionRecommendation

Lesson

Learned

Outline

1PART 1Company Profile &

Synopsis

19871990s

20062007

• Revenue increase from $47.5 M to $60.3 M

• Agregate growth 3.5%

• Financial turmoil

• New investor took over

• Continued innovation in both products & processes.

• Customer responsiveness

• Lean maufacturing

• Retention of a well-trained,stable & productive workforce with reduced turnover

Part 1 | Company’s Profile & Synopsis

Product Categories Product Name High Demand in Season

Folding Table Folding AlStrong Holiday season

Washable & Stackable Chair Green Comfort Holiday season

Folding Chair Cloud Chair Summer


Product Competitive Advantages

High Quality

Stylist Innovative

Customized

Environmentally Friendly

Not Easily Imitated


60%29%

9%

2%

SalesHospitality

Government, Corporate, School, Colleges

Individual Customer

Others

2

PART 2Problem Identification

Part 2 | Problems Identification

0

20000

40000

60000

80000

100000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2009 Production

2010 Demand

Cloud Chair

0

10000

20000

30000

40000


2009 Production

2010 Demand

AlStrong

0

5000

10000

15000

20000

25000

30000


2009 Production

2010 Demand

Green Comfort

Product CloudChair AlStrong GreenComfortAverage Market Price 30,00 90,00 88,00

Raw Material 11,73 49,70 50,24

39,10% 55,22% 57,09%

Required LaborSkilled 2,00 12,80 13,00

Unskilled 9,00 28,00 31,00

Labor CostSkilled 0,84 5,39 5,48

Unskilled 1,49 4,62 5,12

Total 2,33 10,01 10,60

7,77% 11,12% 12,05%

Total Cost 14,06 59,71 60,84 Margin 15,94 30,29 27,16

53,13% 33,66% 30,86%

CloudChair has the highest Contribution Margin and lowest market pricemore profitable likely to produce more than others to benefit economic of scale


Parameters

Category Parameters Values

Labor Cost Skilled Worker $19 + 33% benefit = $25.27

Unskilled Worker $10 + 10% benefit = $10.90

Hiring $1,500

Layoff $8,000 (assumption)

Production Operation hours 10 hours / day

Operation days 200 day / year

Working day 4 day / week

Overtime day Friday

Inventory Beginning balanced 0 (at January 2010)

Excess cost Interest Rate x Product Cost

Stock out cost Opportunity cost of Margin

Parameters


Parameters FormulaDemand forcast per month (1) Based on marketing data

Beginning inventory (2) Ending inventory from previous period

Safety stock requirement (3) Half month (two week) of forecasted demand

Production requirement (4) Demand forecasted (1) + Safety Stock (3) –(Beginning Inventory (2) X 100/95 (yield)

Defect loss (5) 5% X Production Requirement (4)

Finished goods (6) 95% X Production Requirement (4)

Ending inventory (7) Beginning Inventory (2) + Production Requirement (4) - Demand forecasted (1)


Parameters

Subcontract

• Add extra 20% to cost of labor

• Not need pay set-up fee or commit to minimum order

Design Change

• Cost $15,000 one time charge & take 1 month to implement

• Only applicable to CloudChair Product


Considerations

Overtime

• Overtime wages were 1.5 time s the normal fully loaded rates

• Introduced fatigue, leading declines in quality

Constant Worker Vary Inventory

High inventory or Shortage of product

Hiring & Layoff

Doesn’t Compatible with Company’s Goals

3PART 3The Theories

Sales and Operations Planning

Process should help firms to provide:• Better customer service• Lower inventory • Shorten customers lead times • Stabilize production rates • Give top management a handle on the business.

Part 3 | The Theories

Aggregate Operation PlanThe main purpose of the aggregate plan is to specify the optimal combination of: • Production rate• Work forces level• Inventory on hand

PURE STRATEGIESChase Strategy:

Hiring and laying off employees as the order rate varies

Stable workforce-variable work hours:Vary the output by varying the number of work hours worked through flexible work schedules or overtime

Level Strategy:Maintain a stable workforce working at a constant output rate

MIXED STRATEGYIf two or more strategies used in combination


AGGREGAT RELEVANT COST

1. Hiring / Lay Off Cost2. Overtime Cost3. Inventory Carrying Cost4. Subcontracting Incremental Cost5. Part Time Labor Cost6. Back Order Cost7. Stock Out Cost


4PART 4Analysis Solutions

AGGREGATE PRODUCTION REQUIREMENT PLANNING

Product Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Demand forcast per month:

CloudChair 4.480 15.000 45.000 73.800 65.250 79.200 86.400 67.150 34.000 27.000 14.400 12.600

AlStrong 18.816 17.850 27.000 29.700 28.500 36.000 32.400 29.750 25.500 25.200 20.800 15.400

GreenComfort 16.960 16.530 22.680 25.200 22.500 27.900 25.200 21.250 21.250 22.500 17.600 14.000

Beginning inventory CloudChair - 7.756 22.940 38.158 34.587 41.318 45.307 35.826 18.693 14.341 7.885 6.659

AlStrong - 9.939 13.952 15.576 15.031 18.756 17.150 15.717 13.522 13.264 11.056 8.233

GreenComfort - 9.179 11.757 13.208 11.911 14.544 13.336 11.277 11.178 11.810 9.386 7.451

Safety stock requirement

CloudChair 7.500 22.500 36.900 32.625 39.600 43.200 33.575 17.000 13.500 7.200 6.300 6.300

AlStrong 8.925 13.500 14.850 14.250 18.000 16.200 14.875 12.750 12.600 10.400 7.700 7.700

GreenComfort 8.265 11.340 12.600 11.250 13.950 12.600 10.625 10.625 11.250 8.800 7.000 7.000

Production requirement

CloudChair 12.611 31.310 62.063 71.860 73.961 85.349 78.597 50.867 30.323 20.904 13.489 12.885

AlStrong 29.201 22.538 29.366 29.868 33.125 35.204 31.710 28.193 25.871 23.512 18.363 15.649

GreenComfort 26.553 19.674 24.761 24.465 25.831 27.322 23.673 21.682 22.444 20.516 16.015 14.262

Defect loss (5%) CloudChair 375 1.125 1.845 1.631 1.980 2.160 1.679 850 675 360 315 315

AlStrong 446 675 743 713 900 810 744 638 630 520 385 385

GreenComfort 413 567 630 563 698 630 531 531 563 440 350 350

Finished goods (95% yield)

CloudChair 12.236 30.185 60.218 70.229 71.981 83.189 76.919 50.017 29.648 20.544 13.174 12.570

AlStrong 28.755 21.863 28.624 29.155 32.225 34.394 30.967 27.555 25.241 22.992 17.978 15.264

GreenComfort 26.139 19.107 24.131 23.903 25.133 26.692 23.141 21.150 21.882 20.076 15.665 13.912

Ending inventory CloudChair 7.756 22.940 38.158 34.587 41.318 45.307 35.826 18.693 14.341 7.885 6.659 6.629

AlStrong 9.939 13.952 15.576 15.031 18.756 17.150 15.717 13.522 13.264 11.056 8.233 8.097

GreenComfort 9.179 11.757 13.208 11.911 14.544 13.336 11.277 11.178 11.810 9.386 7.451 7.363

Jan Feb Mar Apr May Jun Jul

CloudChair - 37.067 64.817 71.117 48.617 26.117 (1.783)

AlStrong - 5.938 11.295 12.144 10.293 5.000 (3.152)

GreenComfort - 3.385 5.928 6.135 3.823 396 (4.616)

Working Hours in Month 160 150 180 180 150 180 180

CloudChair 12.611 31.310 62.063 71.860 73.961 85.349 78.597

AlStrong 29.201 22.538 29.366 29.868 33.125 35.204 31.710

GreenComfort 26.553 19.674 24.761 24.465 25.831 27.322 23.673

Production total CloudChair 544.219

AlStrong 322.601

GreenComfort 267.198

Production hours required

Skilled CloudChair 18.141

AlStrong 68.822

` GreenComfort 57.893

Unskilled CloudChair 81.633

AlStrong 150.547

` GreenComfort 138.052

Worker required

Skilled CloudChair 10 10 7

AlStrong 35 35 28

` GreenComfort 29 29 25

Unskilled CloudChair 41 41 30

AlStrong 76 76 60

` GreenComfort 70 70 59

Beginning inventory


Calculating Required Worker

PLAN 1

Hiring & Training Workers

PLAN 1 : Exact Production, Hiring & Training Workers

Product Jan Feb Mar Apr May Jun Jul

CloudChair 12.611 31.310 62.063 71.860 73.961 85.349 78.597 544.219

AlStrong 29.201 22.538 29.366 29.868 33.125 35.204 31.710 322.601

GreenComfort 26.553 19.674 24.761 24.465 25.831 27.322 23.673 267.198

Production hours required

CloudChair 420 1.044 2.069 2.395 2.465 2.845 2.620

AlStrong 6.230 4.808 6.265 6.372 7.067 7.510 6.765

GreenComfort 5.753 4.263 5.365 5.301 5.597 5.920 5.129

CloudChair 1.892 4.696 9.309 10.779 11.094 12.802 11.790

AlStrong 13.627 10.518 13.704 13.938 15.459 16.428 14.798

GreenComfort 13.719 10.165 12.793 12.640 13.346 14.116 12.231

Working Hours in Month 160 150 180 180 150 180 180 2.000

Workers required per month (Production Hours Required / Working Hours in Month)

CloudChair 3 7 12 14 17 16 15 9

AlStrong 39 33 35 36 48 42 38

GreenComfort 36 29 30 30 38 33 29

CloudChair 12 32 52 60 74 72 66

AlStrong 86 71 77 78 104 92 83

GreenComfort 86 68 72 71 89 79 68

New workers required per month - 30 38 12 95 - -

Layoff worker per month - 46 - 1 - 36 35

Keep a skilled worker with full wage - 13 13 8 - - -

Training unskilled worker to be a skilled per month - 12 - - - - -

Cost fo hiring new workers required per month - 9.163 2.527 798 36.421 - - 58.441

Cost of layoff worker per month - 92.000 - 2.000 - 72.000 70.000 508.000

Straight time cost 201.474 157.788 207.592 210.578 227.110 242.561 215.326 2.227.429

Total Labor Cost 201.474 258.950 210.119 213.376 263.531 314.561 285.326 2.793.870

Material Cost 2.933.218 2.475.848 3.431.516 3.556.465 3.811.637 4.123.444 3.687.258 35.841.006

Total Cost 3.134.692 2.734.798 3.641.635 3.769.841 4.075.168 4.438.005 3.972.584 38.634.875

Sales revenue 3.320.320 3.511.140 5.775.840 7.104.600 6.502.500 8.071.200 7.725.600 65.665.000

Margin 185.628 776.342 2.134.205 3.334.759 2.427.332 3.633.195 3.753.016 27.030.125

Unskilled workers


Skilled workers

Unskilled workers

Skilled workers

Problem Analysis Hiring & Training New Labors

PRO CONS

1. Cost. It is profitable

2. Sustainability; can meet demand if the demand continuous to increase

3. No need to train; the workers can perform well from the start

1. Demoralization; future lay off of superfluous labors may demoralize other workers

1. Sustainability; can meet the demand if demand continous to increase

1. Cost; management and supervisor resources

2. Subsequent result; layoff these new workface and cost the company in added unemployment insurance

3. Time; training unskliled workers to skliled position takes four weeks

Full time regular direct workers

Training unskilled workers

PLAN 2

Constant Worker, Vary

Inventory

PLAN 2 : Constan Worker, Vary InventoryJan Feb Mar Apr May Jun Jul

Actual production

Finished Goods (95% yield) CloudChair 41.547 42.750 51.300 51.300 42.750 51.300 51.300 565.947

AlStrong 24.754 23.207 27.849 27.849 23.207 27.849 27.849 309.429

GreenComfort 20.345 19.073 22.888 22.888 19.073 22.888 22.888 254.308

CloudChair 4.480 15.000 45.000 73.800 65.250 79.200 86.400 524.280

AlStrong 18.816 17.850 27.000 29.700 28.500 36.000 32.400 306.916

GreenComfort 16.960 16.530 22.680 25.200 22.500 27.900 25.200 253.570

CloudChair 37.067 64.817 71.117 48.617 26.117 (1.783) (36.883) 151.550

AlStrong 5.938 11.295 12.144 10.293 5.000 (3.152) (7.703) 3.377

GreenComfort 3.385 5.928 6.135 3.823 396 (4.616) (6.928) (12.771)

CloudChair 7.500 22.500 36.900 32.625 39.600 43.200 33.575 266.200

AlStrong 8.925 13.500 14.850 14.250 18.000 16.200 14.875 151.750

GreenComfort 8.265 11.340 12.600 11.250 13.950 12.600 10.625 125.305

CloudChair 29.567 42.317 34.217 15.992 (13.483) (44.983) (70.458)

AlStrong (2.987) (2.205) (2.706) (3.957) (13.000) (19.352) (22.578)

GreenComfort (4.880) (5.412) (6.465) (7.427) (13.554) (17.216) (17.553)

CloudChair 62.356 89.246 72.163 33.726 - - - 349.092

AlStrong - - - - - - - -

GreenComfort - - - - - - - -

62.356 89.246 72.163 33.726 - - - 349.092

CloudChair - - - - 32.239 107.555 168.466 669.898

AlStrong 13.570 10.016 12.295 17.981 59.067 87.925 102.584 674.135

GreenComfort 19.883 22.050 26.337 30.257 55.218 70.139 71.513 562.521

33.453 32.066 38.632 48.238 146.524 265.618 342.562 1.906.554

Straight time cost (Production Hours Required x Labor Cost) 2.567.280

CloudChair 1.344 1.260 1.512 1.512 1.260 1.512 1.512 16.800

AlStrong 30.184 28.298 33.957 33.957 28.298 33.957 33.957 377.300

GreenComfort 25.427 23.838 28.606 28.606 23.838 28.606 28.606 317.840

CloudChair 9.774 32.576 42.650 43.441 48.016 51.247 46.140 436.300

AlStrong 56.179 52.668 63.202 63.202 52.668 63.202 63.202 702.240

GreenComfort 57.344 53.760 64.512 64.512 53.760 64.512 64.512 716.800

Total Material 2.739.744 2.613.084 3.135.701 3.135.701 2.613.084 3.135.701 3.135.701 34.793.573

Total Cost 2.982.353 2.894.729 3.442.301 3.404.656 2.820.923 3.378.736 3.373.629 37.709.945

Total Sales 3.320.320 3.511.140 5.775.840 7.104.600 6.502.500 8.071.200 7.725.600 65.665.000

Margin 337.967 616.411 2.333.539 3.699.944 3.681.577 4.692.464 4.351.971 27.955.055

Cost of shortage of inventory

Skilled workers

Unskilled workers


Ending inventories

Safety stock

Excess (shortage) of inventory

Cost of excess of inventory

Problem Analysis Constant Level of Production

1. producing above the demand may result in high inventory level

2. There are cost of carrying inventory

3. When demand was very high but production constant may result in shortage of product

PROS1. Labour work in a constant time,

produce the same amount per day makes labour on high productivity and avoid fatigue

2. Utility of machine easily measure3. Furniture design likely to change in

long period4. Keeping inventory in some level help

Foldrite for fast delivery

Recomendation :By calculating existing labour based on December 2009 data, Foldrite must add labour to produce constant level of product without overtime to fulfill demand forecast for the year of 2010. Cost of additional labour and do constant level of production, although result in vary of inventory level still below the cost of do nothing (not add worker, no overtime, no training, no subcontracting and no change in design)

CONS

PLAN 3

Subcontracting

PLAN 3: Constant Low Workforce, SubcontractJan Feb Mar Apr May Jun Jul


CloudChair 12.611 31.310 62.063 71.860 73.961 85.349 78.597 544.219

AlStrong 29.201 22.538 29.366 29.868 33.125 35.204 31.710 322.601

GreenComfort 26.553 19.674 24.761 24.465 25.831 27.322 23.673 267.198

Production hours available

Skilled CloudChair 480 450 540 540 450 540 540 20.000

AlStrong 6.240 5.850 7.020 7.020 5.850 7.020 7.020 70.000

` GreenComfort 5.760 5.400 6.480 6.480 5.400 6.480 6.480 58.000

Unskilled CloudChair 1.920 1.800 2.160 2.160 1.800 2.160 2.160 24.000

AlStrong 13.760 12.900 15.480 15.480 12.900 15.480 15.480 152.000

` GreenComfort 13.760 12.900 15.480 15.480 12.900 15.480 15.480 140.000

Actual production


AlStrong 27.788 26.051 31.261 31.261 26.051 31.261 31.261 347.344

GreenComfort 25.255 23.677 28.412 28.412 23.677 28.412 28.412 315.692

CloudChair 29.567 42.317 34.217 15.992 - - - 165.525

AlStrong - - - - - - - -

GreenComfort - - - - - - - -

29.567 42.317 34.217 15.992 - - - 165.525

CloudChair 1.260 55.668 135.278 162.671 174.921 200.388 181.509 1.096.645

AlStrong 16.980 - - - 84.980 47.363 5.398 154.721

GreenComfort 16.501 - - - 27.397 - - 43.898

34.740 55.668 135.278 162.671 287.299 247.751 186.907 1.295.264

Straight time cost (Production Hours Required x Labor Cost)202.485 189.830 227.795 227.795 189.830 227.795 227.795 2.531.060

Total Material 2.792.506 2.617.974 3.141.569 3.141.569 2.617.974 3.141.569 3.141.569 34.906.326

Total Cost 3.029.731 2.863.472 3.504.643 3.532.036 3.095.103 3.617.116 3.556.272 38.732.650

Total Sales 254.893 4.770.140 5.724.167 5.724.167 4.770.140 5.724.167 5.724.167 58.768.605

Margin (2.774.838) 1.906.667 2.219.525 2.192.132 1.675.037 2.107.052 2.167.896 20.035.955


Unit subcontract per month:

Cost of excess subcontracting

Problem Analysis Subcontracting

1. Get the job done right and on time

2. Don’t need to spend money on recruitment and training

3. Can have relatively flexible change according to the demand

1. Inventory cost and extra to the cost of labor for the product.

2. Finding the right subcontractor can be difficult

3. Communication can be problematic

4. Difficult to maintain the quality of product

PROS CONS

PLAN 4

Overtime

PLAN 4 : Constant Workforce, OvertimeJan Feb Mar Apr May Jun Jul

CloudChair - 37.067 61.017 62.757 35.697 9.397 - 302.990

AlStrong - 5.938 11.295 12.144 10.293 5.000 - 56.326

GreenComfort - 3.385 5.928 6.135 3.823 396 - 25.750


CloudChair 12.611 31.310 62.063 71.860 73.961 85.349 78.597 544.219

AlStrong 29.201 22.538 29.366 29.868 33.125 35.204 31.710 322.601

GreenComfort 26.553 19.674 24.761 24.465 25.831 27.322 23.673 267.198

Actual production


AlStrong 24.754 23.207 27.849 27.849 23.207 27.849 27.849 309.429

GreenComfort 20.345 19.073 22.888 22.888 19.073 22.888 22.888 254.308

CloudChair 4.480 15.000 45.000 73.800 65.250 79.200 86.400 524.280

AlStrong 18.816 17.850 27.000 29.700 28.500 36.000 32.400 306.916

GreenComfort 16.960 16.530 22.680 25.200 22.500 27.900 25.200 253.570

CloudChair 37.067 61.017 62.757 35.697 9.397 (23.063) (39.660) 298.043

AlStrong 5.938 11.295 12.144 10.293 5.000 (3.152) (4.551) 58.838

GreenComfort 3.385 5.928 6.135 3.823 396 (4.616) (2.312) 26.488

CloudChair - - - - - 23.063 39.660 85.730

AlStrong - - - - - 3.152 4.551 11.152

GreenComfort - - - - - 4.616 2.312 6.928

Overtime hours

Skilled CloudChair - - - - - 769 1.322 2.858

AlStrong - - - - - 672 971 2.379

` GreenComfort - - - - - 1.000 501 1.501

Unskilled CloudChair - - - - - 3.460 5.949 12.860

AlStrong - - - - - 1.471 2.124 5.204

` GreenComfort - - - - - 2.385 1.195 3.580

Overtime cost

Skilled CloudChair - - - - - 29.141 50.110 108.320

AlStrong - - - - - 25.486 36.805 90.177

` GreenComfort - - - - - 37.911 18.990 56.902


AlStrong - - - - - 21.841 31.541 77.281

` GreenComfort - - - - - 35.417 17.741 53.159


Total Material 2.739.744 2.568.510 3.082.212 3.082.212 2.568.510 3.082.212 3.082.212 34.246.798

Total Cost 3.015.806 2.850.795 3.378.160 3.339.712 2.923.998 3.802.665 3.844.602 39.016.748

Total Sales 3.320.320 3.511.140 5.775.840 7.104.600 6.502.500 8.071.200 7.725.600 65.665.000

Margin 304.514 660.345 2.397.680 3.764.888 3.578.502 4.268.535 3.880.998 26.648.252


Unit available before overtime

Overtime unit

Beginning inventory


Problem Analysis Overtime

1. No need to lay off the superfluous labors and thus suffer from the demoralization and high unemployment insurance after the surge in demand

2. Flexibility: can make change according to the change of the demand

PROS

1. High cost: overtime wages were 1.5 times the normal fully loaded rates.

2. Decline in quality and yield: overtime may lead to labors’ fatigue

3. Potential risk: may not able to meet the demand if the demand continues to increase

4. Negative effect on potential labors: the long-lasting overtime may discourage other labor join in the company

CONS

PLAN 5

Design Change

PLAN 5 : Design ChangeJan Feb Mar Apr May Jun Jul

CloudChair - 37.067 61.017 62.757 35.697 9.397 - 302.990

AlStrong - 5.938 11.295 12.144 10.293 5.000 - 56.326

GreenComfort - 3.385 5.928 6.135 3.823 396 - 25.750


CloudChair 12.611 31.310 62.063 71.860 73.961 85.349 78.597 544.219

AlStrong 29.201 22.538 29.366 29.868 33.125 35.204 31.710 322.601

GreenComfort 26.553 19.674 24.761 24.465 25.831 27.322 23.673 267.198

Production hours available

Skilled CloudChair 1.600 1.500 1.800 1.800 1.500 1.800 1.800 20.000

AlStrong 5.600 5.250 6.300 6.300 5.250 6.300 6.300 70.000

` GreenComfort 4.640 4.350 5.220 5.220 4.350 5.220 5.220 58.000

Unskilled CloudChair 6.560 6.150 7.380 7.380 6.150 7.380 7.380 82.000

AlStrong 12.160 11.400 13.680 13.680 11.400 13.680 13.680 152.000

` GreenComfort 11.200 10.500 12.600 12.600 10.500 12.600 12.600 140.000

Actual production


AlStrong 24.754 23.207 27.849 27.849 23.207 27.849 27.849 309.429

GreenComfort 20.345 19.073 22.888 22.888 19.073 22.888 22.888 254.308

CloudChair 4.480 15.000 45.000 73.800 65.250 79.200 86.400 524.280

AlStrong 18.816 17.850 27.000 29.700 28.500 36.000 32.400 306.916

GreenComfort 16.960 16.530 22.680 25.200 22.500 27.900 25.200 253.570

CloudChair 37.067 61.017 62.757 35.697 9.397 (23.063) (39.660) 298.043

AlStrong 5.938 11.295 12.144 10.293 5.000 (3.152) (4.551) 58.838

GreenComfort 3.385 5.928 6.135 3.823 396 (4.616) (2.312) 26.488

Overtime cost

Skilled CloudChair - - - - - 29.141 50.110 108.320

AlStrong - - - - - 25.486 36.805 90.177

` GreenComfort - - - - - 37.911 18.990 56.902


AlStrong - - - - - 21.841 31.541 77.281

` GreenComfort - - - - - 35.417 17.741 53.159

Cost of excess of inventory 62.356 81.232 54.532 6.478 - - - 576.010

Cost of shortage of inventory 33.453 32.066 38.632 48.238 186.501 316.499 316.075 1.363.977

Design change setup cost 15.000


Total Material 2.739.744 2.568.510 3.082.212 3.082.212 2.568.510 3.082.212 3.082.212 34.246.798

Total Cost 3.015.806 2.850.795 3.378.160 3.339.712 2.923.998 3.802.665 3.844.602 39.031.748

Total Sales 3.320.320 3.511.140 5.775.840 7.104.600 6.502.500 8.071.200 7.725.600 65.665.000

Margin 304.514 660.345 2.397.680 3.764.888 3.578.502 4.268.535 3.880.998 26.633.252

Beginning inventory



Unit available before overtime

Problem Analysis Change Design

1. Once for all: increase the productivity

1. High cost

2. Long time: it takes one month to change

3. Little effect: the change may not have too great influence on the whole productivity

PROS CONS

5PART 5Conclusions

Recommendations

Lesson Learned

Conclusions

Plan 1 : Exact Production, Vary WorkforcePlan 2 : Constant Workforce, Vary Inventory and Stock outPlan 3 : Constant Low Workforce, SubcontractPlan 4 : Constant Workforce, OvertimePlan 5 : Design Change

Cost Plan 1 Plan 2 Plan 3 Plan 4 Plan 5

Hiring 58.441

Layoff 2.032.000

Excess Inventory 349.092 576.010 576.010

Shortage 1.906.554

Subcontract 1.295.264

Overtime 576.802 576.802

Design change 15.000

Straight time 2.227.429 2.567.280 2.531.060 2.253.160 2.239.220

Total 4.317.870 4.822.926 3.826.324 3.405.972 3.407.032

Conclusions

• FoldRite goal to reduced turnover of work force aligned with stable workforce strategy. To be a lean manufacturer which has flexibility to response specific customer requirement, the company could adopt level strategy.

• Demand variations are high for CloudChair product, so the planning system must include sufficient flexibility to cope with, that can achieved by cross-training worker to handle a wide variety of orders, developing alternative source of supply, and engaging in more frequent replanning during high-demand periods.

• Chasing strategy at Plan 1 with target production to fullfilldemand requirement using flexible workforce by hiring, training, and layoff labors seems to be suffer with layoff cost and this also doesn’t compatible with FoldRite goals. Design change did not siginificant lowering cost (only 1 minutes improvement for CloudChair product). Other alternative planning are more suitablewith FoldRite strategy to achieve 4 goals.

• Relationship with among various functional unit, including marketing is a key of success to manage production planning.

Recommendations

• More production for CloudChair since it has greater contribution margin and lower cost of production and cheaper product line.

• Keep planning strategy aligned with company goals by choosing stable workforce and level strategy. For seasonal product, it’s more efficient to have constant of labor and subcontracting the rest of demand. This could affect to lower employee turnover also, managing quality of product and lowering inventory fluctuation.

• By calculating existing labour based on December 2009 data, FoldRitemust add labour to produce constant level of product without overtime to fulfill demand forecast for the year of 2010. Cost of additional labour and do constant level of production, although result in vary of inventory level still below the cost of do nothing (not add worker, no overtime, no training, no subcontracting and no change in design).

• The usage of MRP, ERP, SCM, and other IT related system to improve production planning quality.

Lessons Learned

• Cost reduction initiative for labor cost will not give significant effect if the labor portion only small amount of overall cost structure. Reduction of material cost has more impact on cost reduction since it’s has 6 time larger than labor cost.

• Seasonal effect of CloudChair should compensate with other product that has opposite seasonal effect to reduce risk of materialized demand.

ThankYou

Documents

Fold rite furniture v1.7