Hierarchical Production Planning Hawkesbury Cabinets Pty Ltd.

Question: Discuss about the Hierarchical Production Planning for Hawkesbury Cabinets Pty Ltd. Answer: Introduction: This essay is a detailed analysis of the current operations of Hawkesbury Cabinets Pty Ltd. The analysis aims to understand the operations and find the operational issues that resulted due to the steady increase in sales of custom cabinets and the low volume contracts with spec builders. A significant amount of capital is invested into the inventory at various stages of production and the space to store the same is limited. The lead time for each delivery has increased and priority was given to custom cabinets. Craftsmen and machinery are operating at their highest production capacity. In short the company is currently facing issues with space and resources. The Current System Currently the company has a single manufacturing facility for both custom cabinets and standardized cabinets. The facility has separate sections for the various equipment and assembly areas strategically placed in the facility. Both the custom and standardized cabinets are produced in these same sections. The company technically is using a job production system for the custom cabinets and a batch production system for the standardized cabinet (Krajewski, 2013). However, since the custom cabinets generate 75% of the revenue and contribute to 60% of the orders whenever there is a delivery lag, the standard cabinets are pulled off and the custom cabinet manufacturing prioritized. The spec builders are price sensitive and since they usually sell their work post completion the delivery time in their case is equally important (Tookey, 2012). The delivery time is constantly increasing especially in case of spec builders due to the above process. The Scheduling process of the company is taking a big hit. Ideally they are using a backward scheduling method through which they determine the start date based on the delivery date (Heizer, 2016). This is because most of the clients would provide the company a deadline by which they require the cabinets. The scheduling however is not in sync with the production. The scheduling algorithms used for production of standard cabinets are not taking into picture the possibility of delay due to prioritizing the custom cabinets. Also, due to the same the chances of bottlenecks is high. A shifting bottleneck Heuristic algorithm can be helpful in this case however, no such algorithm is in place (Liu, 2012). The space in the manufacturing facility is limited and a warehouse has been rented as a temporary solution due to the increasing inventory of work in progress products and raw materials. Inventory management is restricted due to space constraint and no clear difference in the manufacturing processes of the two cabinets (Jacobs, 2013). Also, the craftsmen have to shift between custom and standard cabinets to make up for the delivery time. This switch not only effects the quality of the product but also effects the craftsmen as the same person has to work on both the products. Effects of new builders kitchen The new builders kitchen contributes to 40% of the orders and 25% of the revenue and has hence become an important division for the company. The production of the cabinets are standardized and are manufactured in batches of one to five. The production is done on the same equipment as the custom cabinets and the same craftsmen are used to ensure quality of the products. However, the increasing sales of the standardized cabinets have had a significant effect on the production system at the company. The first issue is that the batch production attracted significant raw material requirements, when the company has low space (John, 2015). In case of the custom cabinets the need to store work in progress products is less and the products is general delivered as soon as the production and assembly is done. However, in case of standardized cabinets, the production cycle has to be repeated resulting in high volume WIP products, that have to be stored within the limited space. The products use the same machinery as the custom cabinets and hence the chances of bottle neck are high especially that there is only one manufacturing facility (Hax, 2013). In case the scheduling was done in the most appropriate manner the machinery can be used effectively. However, given the increase in sales the machinery in question is overworking to fulfil the growing demand. The craftsmen have to come up with designs for each spec builder and have to produce the same in batches while making sure that the custom cabinet production is not in hold. The bulk cabinet production is not standardized and hence does not have a separate work flow. It usually interrupts with the custom cabinet production that have a higher revenue generation. The spec builders have tight deadlines and are economically conscious and hence expect their product to be delivered in time (Qian, 2014). However, the increasing demand and restricted resources would usually cause a delay in delivery. This in turn is effecting the delivery time of custom products even after the same is prioritized. Since the sales of both the cabinet varieties is constantly increasing into is only a matter of time before inventory overflow and large delivery lags occur (Meredith, 2009). Effect of builders kitchen on financial structure On a wider scope the contract with the builders kitchen effects the finances of the company, however with appropriate investments these effects can be a revenue generator for the company. There is significant scope of increase in sales which would mean that there is a requirement for the company to expand. The expansion would require acquiring a new manufacturing facility with machinery to produce standard cabinets which is a significant investment. Separate craftsmen have to be hired to work for the new facility. This can be a low investment as the craftsmen would have to remake an available design rather than the come up with a new design. Hence craftsmen with medium skill can be hired but there cannot be a compromise in quality. This would also attract training costs. Purchase of a warehouse to store both the cabinet varieties at various stages of production is required. This would ensure that the manufacturing facilities are not clogged. Also an effective inventory management and a manger for the same are required to make sure that the transfer of goods happen smoothly (Johnson, 2014). The company would be beneficial by updating to a computer based production and delivery system to keep track of their various functions in both the sections. This would help them understand the position, placement and progress on a product (Ellram, 2013). The calculation of delivery times would be easier. There are several companies that gain reputation over time and have a spike in their sales without realizing that their current production system may not be equipped to fulfil the demands. The companies that identify this issue in time can make significant revenue by making appropriate changes. Whenever a new division is added to a company it is crucial to analyse its effects both technically and financially and find way to change these effects into revenue. Scaling of machinery and resources is crucial to boost sales of any company. References Ellram, L. M., La Londe, B. J., Weber, M. M. (2013). Retail logistics. International Journal of Physical Distribution Logistics Management. Hax, A. C. (2013). Hierarchical production planning (pp. 708-712). Springer US. Heizer, J., Render, B., Munson, C. (2016). 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