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This papers is based on the following case study –
Case study: Craft shop or factory?
Classics Cabinets Pty Ltd designs and manufactures custom-built kitchen cabinetry. The company was founded in Springvale, Melbourne in 2001 by siblings Chinh and Anh Chu. Chinh is a master cabinetmaker and Anh is a qualified interior designer. The company had originally set out to service the needs of the growing Vietnamese community in the south-eastern suburbs of Melbourne. As the reputation of the company grew however, Chinh and Anh found that their client base became more and more diverse. Chinh’s duties had evolved over time, and he now fulfilled the role of production and operations manager.
Anh, on the other hand, had found an interest in the financial and overall management of the enterprise and so she had become the de facto general manager. So while there was no formal identification of roles for the two owners, there was a fairly comfortable distribution of managerial responsibilities. Traditionally, Classic Cabinets had focused entirely on custom-made kitchens, with the customer consulting with Anh to develop a unique kitchen designed specifically for the client’s needs. As the company’s reputation grew and sales increased however, several low volume contracts had been signed to supply small ‘spec’ builders1 with a range of high quality, but standardised kitchen cabinetry. These contracts required Classic Cabinets to manufacture a limited range of kitchen cabinets in small batches.
Batch sizes ranged from a single kitchen up to five kitchens or more. The client builders imposed more stringent delivery requirements and were far more price sensitive than custom-made kitchen buyers. Whilst the custom-designed cabinetry continued to account for the majority of the company’s sales, the builders’ kitchens were becoming increasingly important. Currently, custom designed kitchens accounted for 60 percent of factory volume and 75 percent of revenue.
Classic Cabinets operates a single manufacturing facility in Springvale, where both custom and standard kitchen cabinets are manufactured. The cabinet-making equipment consists mainly of general purpose machines in order to provide the flexibility needed for producing a wide variety of custom designed cabinets. The factory layout has various types of equipment grouped together. Saws and cutting tables are in one section, routers and shapers in another, whilst lathes and other less frequently used machines are kept away from the work area in their own section. There are also several assembly areas located strategically throughout the factory. The quality of Classic Cabinets’ finished products is held in high esteem, and reflects the quality of the materials chosen and the craftsmanship of the individual cabinetmakers. Both the custom and the standard cabinets had to compete for processing time on the same equipment by the same craftspeople.
During the past few months, sales of the builders’ line of kitchens had steadily increased, leading to more regular scheduling of this work. However, when scheduling trade-offs had to be made, the custom kitchens were always given priority because of the higher sales and profit margins. Thus scheduled lots of standard cabinet components were left sitting around the plant in various stages of completion. This increase in the volume of work in process had changed the previously spacious manufacturing area into a factory clogged up with partially completed work.
As she reviewed the progress of Classics Cabinets, Anh Chu was pleased to note that the company has grown. Sales of custom kitchens remained strong, and sales of the builders’ line were steadily increasing. However, the company accountant argued that profits were not what they should be. Costs associated with the standard builders’ line were rising. An increasing amount of capital was being tied up in raw materials inventory, work in process and finished product. To accommodate the increased volume of inventory, expensive public warehouse space was now being rented. Anh Chu was also concerned with increasing lead times for both custom and standard orders. This was resulting in longer promised delivery times. The current operations systems were pushing manufacturing capacity to the limit, and with the current layout, no space was left in the plant for expansion. Anh Chu decided that the time had come for her and her brother to take a careful look at the overall impact that the new line of standard builders’ kitchens was having on their operations.
This paper is based on the following questions on the case study – <br />After you have carefully read and analysed the case study, write an essay discussing the operational and strategic issues facing Classic Cabinets. The essay should identify and discuss the operational aspects that are affecting the organisation, paying attention to both strategic and day-to-day implications. Your argument should address the following four issues with responses integrated within the essay.<br />1. The current production systems and processes used by Classic Cabinets (a technical analysis).<br />2. The effect of the new builders’ kitchen line on Classic Cabinets’ operations (problem definition).<br />3. The daily operational decisions that Chinh Chu has to make under the current operating conditions to maintain effective production (day-to-day operational issues).<br />4. The effect the move to producing builders’ kitchens is having on the company’s financial structure2 (broader organisational issues caused by operational problems).<br />
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