Discuss about the Operational Analysis and Effectiveness.
The Operation Management of an organization plays an important role in the organizational success. Any organization, in order to perform commendably well, must have a high level of efficiency so that the annual revenue of the year can be remarkably enhanced. While an organization focuses too much on the process of adopting innovative strategy for increasing its sales, it often misses out the importance of design and control of operations, responsible for the conversion of the raw materials into the final goods (Slack 2015). Apart from Finance and Marketing being the two important functions of an organization, the proper and efficient management of the operational activities of an organization, is equally important. According to the industry experts, it is not only sufficient to sell the goods and service of an organization, but it is equally important to know how to manage the process of manufacture as well. The resources necessary in an organization must be well-integrated, so that in the manufacturing process, the right product can be used by the employees at the right time, making the entire process effective (Tano et al. 2013).
Hawkesbury being a medium scale organization should also adopt the most effective operation management. However, for a medium scale industry, various challenging issues may also crop up, as there may be a lack of specialized tasks for the employees, or there may be a scarcity of space. As a result the decision-making process may be confusing as well. Keeping these facts into serious consideration, the following report aims to analyze and critically evaluate the operation management of Hawkesbury Cabinets Pty Ltd. As it can be understood from the prescribed case study, Hawkesbury Cabinets Pty Ltd is an organization responsible for manufacturing as well as designing the custom built kitchen cabinetry (Cummings and Worley 2014). The organization, established in Sydney, founded in the year 2008, had two founders- the one being Fung, the other being Mei Chen. The organization has been manufacturing and selling both customized as well as standard kitchen cabinets but however there is a single manufacturing facility. It is also evident from the case study that though there has been an increasing growth in the sale of the custom-made kitchens, at present the organization was not seen to make a huge profit out of it. Hawkesbury Cabinets Pty Ltd had also got a contract whereby it would be required to manufacture standard kitchen cabinets in small batches. This essay intends to analyze the effectiveness of the production process as employed by Hawkesbury Cabinets Pty Ltd, the effect of the new builder’s kitchen on the operation management of the organization, as well as the impact of the management’s decision to move to produce builder’s kitchen, on the daily operational activities of the organization (Hill and Hill 2012).
It should be remembered that the factory layout of an organization plays an unquestionably important role in the day-to-day operation of an organization. Although the fact is less acknowledged, the organizational layout is an important component in any business organization that facilitates greater efficiency of the workers, thereby improving the effectiveness of the operational activities of the organization. From the case study, it can be understood that Hawkesbury Cabinets Pty Ltd does have a proper and well-integrated factory layout, and hence it is capable of minimizing its operational cost (Canen and Williamsen 2013). As it is suggested, Hawkesbury Cabinets Pty Ltd has a single manufacturing facility, and the organization manufactures customized as well as standard kitchen cabinets in one place only. The layout of the organization does help remarkably in the smooth flow of material of information in a systematic way. The business operations can be operation in a smooth and flexible manner. In addition to that, the equipments and the machineries necessary for the production of both standard as well as custom-made kitchens, are readily available and can be used from one place only (Gomez et al. 2014). This helps in the smooth and easy process flow, thereby saving time as well as energy of the workers. Again, the assemblies of the organization are also kept in a well-arranged way, so that the employees can gain easy access to them as and when needed. On the one hand, it can be seen that the cutting table and the saw are kept in one place. On the other hand, other equipments needed for the production, such as routers and shapers are neatly arranged in another section of the work area. This facility layout is a very convenient one, as it helps the employees handle the materials, such as the equipments or the products, in an efficient way. This orderly and simple mode of arrangement helps in increasing the efficiency and productivity of the employees. From the case study, the reason behind the timely delivery of the products by Hawkesbury Cabinets Pty Ltd can be understood (Hasan et al. 2012). Again, the furnishing as well as the painting activities of Hawkesbury Cabinets Pty Ltd are all performed in the environmentally controlled area, located at the rear of the rear of the facility area. Hence, it is analyzed and understood that the area of production reflects the organization’s sustainability efforts, and the products are designed in a manner, so that its production process does not lead to environmental degradation. However, the layout no matter how much favorable for smooth and effective operation of business activities, it should be remembered that the space utilization aspect of the layout has not been taken into account. It has been understood from the case study that the standard and the custom cabinets are manufactured in the same place, and as a result, the same space, as well as machinery and equipment are required for the production of both the kinds of products. Consequently, the craftsmen have hard time, in operating the manufacturing activities. This leads to delay in the manufacturing process, because the processing time is delayed. Hence, it can be concluded that the organization is in need of good production control system, if it wants to operate its business activities in a smooth way( Sharma and Singhal 2014).
The operational activities of an organization play an integral role in determining the success or the failure of the organization. Because of the stiff competition in the market, Hawkesbury Cabinets Pty Ltd has resolved to focus on its capacity of generating revenue and maximizing its earnings. From the case study, it has been understood that the standardized kitchen cabinets produced by Hawkesbury Cabinets Pty Ltd contribute to only 25% of its revenue, and further it generates 40% of the total factory revenue (Su et al. 2013). Again, as a result, the remaining amount of revenue of the factory is contributed by the custom kitchen cabinets, Hence, for the sake of enhancing its profitability, the organization decided to focus on the production of custom kitchens, as it was found to be much beneficial. The custom made kitchen cabinets generates as much as 75% of the revenue, and hence the organization focused primarily on the production of the same. As the organization started enjoying greater reputation, followed by higher sales growth, different low volume contracts were signed by the organization. As a result, the organization started supplying the standardized kitchen cabinets to the small “spec” builders. In accordance with the contracts, the organization started manufacturing a very specific range of kitchen cabinets ranging from single to five kitchen specifications. Beside this, Hawkesbury Cabinets Pty Ltd has started laying more rigid regulations on the time of delivery. Again, the consumers of the standardized kitchen cabinets were also much price sensitive as compared with the customized kitchen cabinet buyers (Bae et al. 2012). In the last few years, it has been observed that there has been a remarkable growth in the sale of the builder’s line of kitchens. As a result of greater profit-making capacity, this line of kitchens has been largely prioritized by Hawkesbury Cabinets Pty Ltd. However, it should be noted here that according to the accountant of the organization, the sale of these products are not generating as much profit as it is expected to. The main reason behind this has been accounted to the rising cost of standard builders. It was being observed that the lead time meant for the production of standardized as well as custom made kitchen has been largely increasing. The problem actually lay in the fact that the craftsmen, machinery as well as the equipment for the production of both the types of the kitchen cabinets are the same, and as a result the processing time remarkably increases. Because of the pile ups, the delivery system was terribly affected. It can be understood that the location chosen by the organization for the purpose of manufacture is not capable to fulfill the demands and the requirements of the buyers. It should be understood that if the organization aspires to sustain itself in future, it must be able to address as well as find a solution to the bottlenecks of the operation system of the factory (Heizer et al. 2013).
An organization, for the smooth operation of its business activities, depends largely on a strong and effective financial structure. By the term financial structure is implied the mixture of the long-term debt as well as the equity that an organization uses in order to finance its operations. As a result, the importance of the role of a financial manager cannot be overstated, as he is solely responsible for deciding the total amount of money to be borrowed, as well as to evaluate the most effective way of managing the capital structure of the organization (Fan et al. 2012). In case Hawkesbury Cabinets Pty Ltd intends to sustain itself in future, it must be able to introduce an effective financial structure. In the case of Hawkesbury Cabinets Pty Ltd, it is evident from the case study that the organization’s decision to produce builder’s kitchen is largely affecting the profitability and the financial structure of the organization. The move to manufacture the builder’s structure is badly affecting the operational activities of the organization, and hence, it is also affecting the financial structure of the organization. Since the cost of the standard builders has been increasing, the organization will be required to invest an enormous amount of money for the raw materials inventory, finished products as well as work in progress. Because of the increasing amount of production coast and labor cost, the total operational cost of the organization will also remarkably increase, that in turn will reducing the amount of net profit. With the ever-increasing demand of the standardized kitchen cabinets in the consumer market, the requirement of the raw material inventory is also increasing. In case the stock will increase, there will be a remarkable decline in the gross profit of the organization (Oakland 2014). Again, similarly in case there is a greater demand of inventory, the need for space in the warehouse will also increase. Now, no gain in stating the fact that the rent of a warehouse is charged monthly and hence this would imply an increase in the total operational cost of the organization. Consequently, the net profit of the organization will be remarkably reduced. As a result of the sudden decrease in the amount of gross profit and net profit, the financial position of the organization as indicated in the Profit and Loss Account as well as the Balance Sheet, of the organization will also not be attractive enough to draw the attention of the stakeholders (Arnold 2014).
It has been observed from the case study that the organization is suffering from a variety of operational deficiencies, and as a result the operational activities of the organization are getting largely affected. Although there has been a rising demand as the sale growth of the customized kitchen cabinets is increasing fast, yet the profitability of the organization is not remarkably increasing. Although the factory layout is suiting the present business needs of the organization, Fung Chen must ensure that the existing manufacturing capacity of the organization is not pushed beyond the limits. He must ensure that there is a possibility of future expansion. In addition to these, Fung Chen should also make sure that the organization does not make the late deliveries, as they definitely dissatisfy the consumers. Further, Fung Chen also must undertake a variety of steps so as to reduce the rising cost of production.
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