chapter 1

Presented by:

1.FildaRahmiati

2.Akmal Abdul Manap

3.Ahmad Hidayat bin Ahmad Ridzuan

Chad’s Creative Concepts designs and manufactures wood furniture. Founded by Chad Thomas on the banks of Lake Erie in Sandusky, Ohio, the company began by producing custom-made wooden furniture for vacation cabins located along the coast of Lake Erie and on nearby Kelly’s Island Bass Island.

Chad’s Creative Concepts developed a solid reputation (as they competitive advantage) for creative designs and high-quality workmanship.

Traditionally, the company focused entirely on custom made furniture, with the customer specifying the kind of wood from which the piece would be made. As the company’s reputation grew and sales increased, led Chad’s Creative Concepts into the production of a more standard of furniture.

Currently, the company operates a single manufacturing process in Sandusky, where both custom furniture and standard furniture are manufactured. The equipment is mainly general purpose in nature to provide the flexibility needed for producing custom pieces of furniture.

The quality of the finished product reflects the quality of the wood chosen and the craftsmanship of individual workers. Both custom and standard furniture compete for processing time on the same equipment by the same craftspeople.

Chad Thomas noted that the company has grown. Sales of custom furniture remain strong , and the sales of standard pieces are steadily increasing.

Hence, company realize that problems occurred on the company:Costs associated with the standard line is

risingExpensive public warehouse space has to be

rented to accommodate the inventory volumeIncreased lead time for both custom and

standard ordersLonger promise delivery timesCapacity is being pushed, and no space is left

in the plant for expansion

• Thomas begins a careful assessment of the overall impact that the new standard line is having on his manufacturing process.

What types of decision must Chad Thomas make daily for his company’s operations to run effectively? Over the long run?

Decision making is an essential aspects for all management activity, including operation management. There are two types of decision making: strategic and practical.

Strategic decision are less structured and have long-term consequences. At this type, operation managers are: Involve in the development of new capabilities and

the maintenance of existing capabilities to best serve the firm’s external customers.

Design new process that have strategic implicationsDeeply involve in the development and organization

of value chainsResponsible for the key performance measures such

as cost and quality

Tactical decision are more structured, routine, and repetitive and have short-term consequences.

At this type, operation managers are:Involve in process improvement and

performance measurementManaging and planning projectsGenerating production and staffing plansManaging inventories Scheduling resources

How did sales and marketing affect operations when they began to sell standard pieces to retails outlets?

As sales increase, more regular scheduling is needed.

Costs associated with the standard line is rising, both in raw materials and work in process

Expenses of rent public warehouse to accommodate the inventory has increased.

Increased lead timeLonger promise delivery timesCapacity is being pushed, and no space

is left in the plant for expansion

Various stage of completion became unstructured as the company given more priority to the higher sales and profit margin (custom furniture)

Equipment life time become shorter as it use for both production and not specialize for standard furniture.

Compete in processing time with the same equipment as well as by the same craftspeople.

How was the move to producing standard furniture affected the company’s financial structure?

Positive Impacts:The sales of standard furniture steadily increased.Market region became larger (entire Great Lakes)More choices available for customers

• Negative Impacts: Higher costs occurred for the production costs as well

as non production costs The equipment will be less life time, maintenance cost

will be higher Possibility of craftspeople ask for more salary or benefits

which is payable to what they do

What might Thomas have done differently to avoid some of the problems he now faces?

In production process:Equipped more specialize machinery to process

standard furniture as well as custom made furniture

Expand the inventory spaces, either by renting more warehouse or by buying land for their assets

Hiring more craftspeople for differentiating production of standard and custom made furniture

Re-manage of value chain in the company

In non-production process: – Create more marketing aids: internet

advertisement, brochures, etc.– Do marketing research before implementing

standard furniture– Hire more employees for sales and marketing

department

As a conclusion, the company should create a nested process which is broken down the process production into sub processes. This process is helpful to separate one part in the process from another for several reason:

Skill needed for producing custom made and standard furniture is different

Marketing strategy used is different