Operation management is very much necessary for developing a technical understanding of operations of any enterprise (Battistoni, et al., 2013). The production system combines resources which flow in a defined system and transform them in a controlled manner to contribute value as per the policies set by management. The production system uses inputs such as men, machines, materials, capital, and information and turns them into outputs in the form of products and services (Malhotra, et al., 2014). This essay will discuss the current production systems and process used by Hawkesbury Cabinets. Also, the effects of the builders’ kitchen on the operations of Hawkesbury Cabinet will be explored. The essay will also identify the effect of the move to producing builders’ kitchen will have on the financial structure of the company.The essay will also explore the production system of Hawkeshbury which is going smooth but increasing cost marring the profit margin. Due to lack of proper inventory system, inventory is piled up in the warehouse so the company needs to install a good inventory system.
The Current Production Systems and Processes Used by Hawkesbury
Hawkesbury Cabinets runs a single manufacturing facility in Mulgrave, where both standard and custom kitchen cabinets are manufactured (Vickery, et al., 2015). High-quality general purpose machines are used for cabinet-making equipment to offer the required flexibility for producing a huge variety of custom designed cabinets. Hawkesbury Cabinets manufacture assemblies or discrete parts in a continuous process and therefore employs mass production system (Hitt, et al., 2016). As the company requires the large volume of production so mass production system is justified for the company. Various types of equipment are grouped together in the layout of the factory (Atasu & Subramanian, 2012). Saws and cutting tables are set in one section while routers and shapers are set in another section. Several assembly areas are located strategically in the entire factory. Painting and finishing are done in an environmentally controlled location (Hitt, et al., 2016). The quality of finished products is maintained in high esteem and demonstrates the quality of materials used and the craftsmanship of the each cabinetmaker. The production process ensures the shorter time of the cycle of production. Hawkesbury cabinet uses mass production system to ease production planning and control process (Battistoni, et al., 2013). The production system used in the company requires less skilled operators and low process inventory as a result manufacturing cost per unit is lesser.
The Effect of the New Builders’ Kitchen Line on Hawkesbury Cabinets’ Operations
With the introduction of builders' line of kitchen, work is done in regular scheduling. But custom kitchens were given priority to builders' line of the kitchen as they accounted for higher profit margins and sale (Adams, et al., 2016). As the production is done on regular scheduling, the scheduled lots of standard cabinet components are lying around the plant in several stages of completion (Frow, et al., 2015). Due to the large volume of work in process, the factory has turned up into congested unlike spacious manufacturing space of customs kitchens. The growth of the company is witnessing a positive line with builders' line of the kitchen (Vickery, et al., 2015). The increased volume of production leads larger sales in custom kitchen segment while builder’s line is also growing rapidly.
The company is operating single manufacturing system. With the large volume of production due to builders’ kitchen, the company has done major changes in line layout and product design (Malhotra, et al., 2014). Production facilities have been improved to accommodate more inputs for processing. Work in the process of the company has increased in manifold and operation has become slow due to high cycle time.
The Effect the Move to Producing Builders’ Kitchens Might have on the Company’s Financial Structure
The production of builder's kitchen has improved the production process with the mass production system. High investments were done in production facilities. The risk of the breakdown of one of the machinery increased and as it may stop the entire production line (Crowley-Henry, et al., 2016). Automatic material handling and perfectly balanced production line required the company to keep the system update. The work in progress of the company has increased and the profit margin is not as expected. The cost involved in producing builders' line of the kitchen is increasing (Frow, et al., 2015). More and more amount of work-in-capital is lying in raw material inventory, work in process and finished goods. As per Mohar, et al., the high volume of production has also increased lead times for both custom and standard builders’ line orders. As a result, promised delivery time is increasing (Mohar, et al., 2016). The company can set up an inventory management system so that time of keeping the inventory and quantity of inventory can be managed. The company can use ABC inventory, where inventory of priority items are kept in large quantity and low priority products are kept differently.
The present operation system of the company is taking manufacturing capacity to the limit, and the present layout is not leaving any space for expansion of the business (Crowley-Henry, et al., 2016). The current operation of the company is having a huge impact on the financial structure. Assets are increasing with the rise in work-in-capital. High lead time for production and subsequent late delivery is increased debtor turnover ratio (Adams, et al., 2016). Operating ratio is increasing with high operating expenses which are not favourable for the company. The high operating ratio will lead to less profitability ratio and long-term profit of the company(Vickery, et al., 2015). The financial structure how much equity and debt the company needs to finance its operations. The introduction of builders' line of the kitchen has increased the debt of the company as more and more money required to fund the operations (Frow, et al., 2015). High debt is not recommended for any company as it will lose the interest of investors in the company. As big companies try to maintain their debt ratio in such a manner that debt remains double of equity. According toAtasu & Subramanian, the high debt ratio is bad for financial structure of the company as it reflects that company has fewer funds to pay to finance its operations and when the profits are less the fixed interest are hard to pay (Atasu & Subramanian, 2012).
The essay describes the production systems of Hawkesbury Cabinets. The company has started designing and manufacturing of custom kitchen cabinets. With the growth in demand for products and the company has started standard builders' line of the kitchen. The company is manufacturing a limited range of kitchen cabinets in small batches. Batch size of the company also increased from the single kitchen up to five kitchens of same specifications. Under a single manufacturing system, the company is manufacturing both custom and standard builders' kitchen. The company is scheduling the production to cope with higher sales of builders' line of kitchens. Scheduling lots of standard cabinets are consuming space in various sections of the plant. To accommodate the piled inventory, more warehouses were rented and increasing the operational cost of the company. The cost of production of the company has increased. Though the company is growing but profit is less than the expectations.
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