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Hawkesbury Cabinets was founded by Fung & Chen to provide custom and standard kitchen cabinets. The initial focus was to provide custom solutions only due to the high profitability in that section. But overall, the industry had a huge potential in terms of expected customer base and it was evident that the demand for such solutions will be huge. The standard cabinets on the other hand had a huge potential too although the profit margins were not as high as custom cabinet solutions. Hence the company also started providing standard cabinet solutions to tap the already increasing demand.
With such increasing demand and only a single manufacturing facility at Mulgrave, Hawkesbury Cabinets soon found themselves under pressure to meet the supply. Although the initial plan of installing flexible machines to cater to both custom and standard solutions proved right, soon the costs for standard solutions line started to rise. This was followed by a higher inventory, WIP and overhead cost and hence the final margins were reduced with the final product (Beamon, 1999). This essay focuses on the present operations and manufacturing systems and the new builders’ kitchen line impact. The essay would also cover the financial aspects in addition to the operational aspects and the overall impact that the new builders’ line would have on the financial structure of the company.
It is a very general phenomenon where a small manufacturing company fails to foresee the demand in the best way and later on fails to meet the demand. The same happened with Hawkesbury Cabinets Pty LTD. It started as a small manufacturing company with just one factory. But the substantially high demand caused a problem as the manufacturing scale could not be increased to that extent and eventually led to increase in the lead times for both the standard and custom cabinet solutions (Braglia, Frosolini, & Zammori, 2009). This was certainly due to lack of manufacturing facility balance between the two product lines.
In terms of the manufacturing facility’s capability, Hawkesbury Cabinets is well on track as the machines are capable of producing both custom and standard kitchen cabinets. The simplicity of the manufacturing unit and the capability of it being a single facility at Mulgrave is a huge achievement. This is possible due to a very thoughtful grouping of the machinery within the facility. The facility is divided in two sections; frequently used machinery and less used machinery. Saws, cutting tables, routers, shapers etc. are in the more frequently used section and lathes are in the other section. Also the craftsmen are the same for both cabinets; standard and custom. The scheduling is done keeping both product lines into consideration but the customs solutions are given priority, as the profitability is higher in that line. This eventually results in a biased lead-time and standard solutions face the most problem in terms of lead-time (Dues, Tan, & Lim, 2013).
Although the company was doing extremely well in the custom cabinet solutions, there was a huge market to tap in the standard cabinet solutions and Fung and Chen had already foreseen this. They never realized the fact that a single facility and a simple tasks scheduling by giving priority to custom kitchen solutions would eventually led to a problem of increased lead time for both the product lines (Williams, 2011). In addition to the facility shifted their onus towards the new builders’ line that actually started the problem. Fund and Chen never realized that in order to run both the product lines smoothly and to accommodate new builders’ line, the manufacturing facility needed to be modified and the tasks scheduling and facility layout needed tweaks. The company proceeded with a short term goal of higher profitability and hence focused on custom solutions with an increased lead time in standard and eventually disrupting the whole operational effectiveness of the facility.
At this point in time, the production facility is running at its full capacity with a delay in the standard cabinets’ solution delivery. Hence, adding a new product line i.e. the builders’ kitchen cabinet is surely a matter of concern. A deep analysis of whether to add a third product line to the current facility requires a good study of the connected risks and barriers (Shang, 2012). The current facility can be hampered in terms of the delivery, lead-time, quality and raw material costs and eventually the whole financial structure if a proper analysis is not done. Thus, the initial assumption for Fung and Chen should be to make additional investment, as without that, the facility is not in a position to accommodate the third product line. Even if the initial investment were made, the facility would definitely be below the breakeven in the short term (Nachiappan & Anantharaman, 2006). But the long-term vision would require this risk and investment and it should turn out to be profitable in the long term. In addition to the financial investment, a fair amount of investment in terms of human resources is also required. The craftsman and workers must be highly skilled and experienced. Since the delivery target would increase a lot in terms of numbers and also it will be crucial to maintain the optimum quality, craftsman experience and skills are definitely required (Kennedy, 2014). This change could raise certain problems in terms of organizational behavior where the human resources behavior resists to the change that is brought upon and might lead to a negative quality and overall employee satisfaction. Thus, a proper SWOT analysis is required before bringing this facility change as in addition to the operational change, the organization change is also an area of concern that should be considered by Fung and Chen before making such investment.
An overall understanding of the impact on the financial structure of Hawkesbury Cabinets is done if the company considers to open a new builders’ kitchen product line. The decision will be tricky since the facility is already running on its full capacity and facing problems with the lead-time of one of its products line. But, in order to stay in the industry and grow, these situations should be dealt with bravely (Yang & Huang, 2011). But, at the same time, a proper analysis of the situation and adopting a new strategy should be done before doing an investment and change an already tight and challenged process. In terms of industry expansion, the company should definitely consider the expansion to include builders’ kitchen line. But to be successful in that expansion, a substantial tweak in scheduling algorithm, human resource management and operational effectiveness is required (Melnyk, Cooper & Hartley, 2011). For this, it would be best if they could separate their production lines for standard and custom solutions which would incur a substantial investment. But from a long-term perspective and good industry trends, this expansion and investment can be worthwhile. It is important that the company should also explore the area of using Information Technology to manage its supply chain management and operation process, especially when the company would have to manage both customized cabinets and standard cabinets. It would enable to company to have a integrated supply chain across the organization.
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