Table of Contents

Table of Contents

List of Tables.. 3List of Figures. 31.0 CASE SUMMARY...4 2.0 STATEMENT OF PROLEMS..62.1 Low Quality of Operation Management in Production Process....62.2 Inefficient Job Shop Layout...72.3 Raw Material Inventory.82.4 Loss on Returned Orders due to Poor Quality...93.0 ANALYSIS ...94.0 RECOMMENDATION...144.1 Separate to Two Line Production....144.2 Rearrange Job Shop Layout.154.3 Stock Raw Material Inventory.165.0 CONCLUSION... 176.0 REFERENCES... 19

List of TablesTable 3.1 Financial Data and Forecasted Material Cost for Year 2009-2011...10Table 3.2 Distributed Forecast Raw Material Usages for Year 2012........11Table 3.3 Sales and Order Number for March 201212-13Table 4.1 Total Backorder Sales for March 2012..........15List of FiguresFigure 1.1 Order Entry Flow5Figure 2.1 Current One Line Production.7Figure 2.2 Original Job Shop Layout..8Figure 4.1 Propose Two Line Production..14Figure 4.2 Propose Job Shop Layout.16

1.0 CASE SUMMARY Bennett Auto Sales and Services (BASS) consists of three car dealerships that sell and service several makes of American and Japanese cars, two auto part stores, a large body shop and car painting business, and an auto salvage yard. Bennett does aware that publics are interested in the restoration of vintage automobiles. He also thinking of expending into the vintage car restoration business and needs help in accessing the feasibility of such a move. Bennett do believes that many people want the thrill of restoring an old car themselves, but they do not have time to run down all the old parts. Others just want to own a vintage auto because it is different and many of them have plenty of money to pay someone to restore an auto for them. BASS could assemble a library of parts and body manuals for old cars to serve as information resource for do-it-yourself restores. The do-it-yourselfers could come to BASS for help in compiling parts lists, and BASS could acquire the parts for them. For others, BASS would take charge of the entire restoration. Bennett asked the director of service operations to take good look at her Mustang and determine what needs to be done to restore it to the condition it was in when it came from the factory more than 40 years ago. He wants to restore this car in time to exhibit it at the Detroit Auto Show. If the car gets a lot of press, it will be real public relations coup for BASS, especially if Bennett decides to enter this new venture. Even if he does not, the car will be a showpiece for the rest of the business.

2.0 USING THE INFORMATION PROVIDED prepare the report that David Bennett requested, assuming that the project will begin immediately. Assume 45 days are available to complete the project, including transporting the car to Detroit before the auto show begins. Your report should briefly discuss the aspects of the proposed new business, such as the competitive priorities that Bennett asked about.David Bennet interested to venture into vintage car restoration aligned with his interest and passion with high performance car. Utilizing his current businesses and facilities, he will be able to execute most activities required for the car restoration project. He strategy is going to use this restored Shelby Mustang 1965 as an advertisement at Detroid Motor Show for BASS and his new business segment.

David asked for a report from his Director of operation. This report included car restoration project for 1965 Shelby Mustang GT 350, the additional works are repair, order, installation and replacing parts and material such as upholstery, windshield, carburetor, and oil pump.

David has limited budget for this restroration which are listed as $50,000 for the car, $20,000 for restoration cost and expenses of $3,600 per week. Restoration has to be completed within 45 days , this is to allow him to get his Mustang for Detroit Auto Show.

Bennet Auto Sales (BASS)

Owner : David Bennet

Car dealership

Acquire new car restoration projects.

Purchasing used/ vintage cars to be refurbished or salvaged for parts.

Sales and promotion of restoration service.

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Auto Parts store and salvage yard

Identifying and sourcing of old parts that are required for the restoration project.

Database of parts identification and supplier for different type of refurbished cars.

Vintage Car

Restoration

Bodywork and painting workshop

Providing consultation service for customization of refurbished cars.

Executing physical restoration of cars.

Producing replica of parts that are not available.

Basic restoration

Customized restoration

Parts library for DIY

Replicate parts

Quality Parts

SUB: PROPOSAL ANALYSIS OF VINTAGE CAR RESTORATION BUSINESS

Operation department

1. Service Design BASS consists of 3 car dealerships that sell & services American and Japanese model, 2 auto part stores, 1 body shop & painting business and 1 auto salvage yard that designed to cater various type of customer in the automobile business. It offers a line of supply chain business of automobile industry that can gave good price to customer.

2. Flexibility BASS respond to the customer wants and needs in restoring an old cars. Mr. Bennett believes customer dont have time to help themselves up in restoring their vintage car. Hence, BASS will consider venturing in this new line of business to cater 2 type of customer. First type is find the right parts/customized parts for customer and second type is do-it-yourself section that BASS play a facilitator role to assist customer to restore their old cars.

Marketing department

1. Promotion BASS willing to spend money to restore an old Mustang Shelby and participate in the Detroit Auto Show within 45 Days. This action reflex on to inform customer regarding a new line of business that BASS will venture in the near future. To attract more vintage cars owner or collector, BASS decided to restore the Mustang into a mint condition without customization. The idea was to show customer, BASS have capabilities to gain original old parts for their cars and restore them as good as new.

Target Market:

1. People who would like to do the restoration on their own and come to BASS for car parts and body manuals, which BASS will eventually acquire for them.

2. People who come to BASS for the entire restoration of their vintage cars.

The new business venture is a great way to make BASS as a one-stop shop for all car enthusiasts needs. Not only that, with the knowledge and experience that BASS has in the car business, if the new venture succeeds, than BASS could also be the market leader for its industry. However, before making a commitment, this might also depend on how well BASS is able to pull off the mint restoration of the Mustang. If they are able to pull it off well, then they certainly have the skills and capabilities to enter into the restoration market.

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Business Recommendation for Vintage Restroration

Refering to the Corporate Strategy for Vintage Restoration, its carrying a different competitive priority which is for low demand environment with high quality product. As to balance the constrains triangle, it will require longer period to produce the product. As per this project, the constrains is the limitation of the resources. If BASS fully utilise all the other resources for Car Restoration Project, it will jeopardize the rest of the business segment. It is not recommended for BASS to venture into Vintage Restoration as all the current business model is quick respond for high volume demand.

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2.3 Raw Material InventoryCustomer Gear Inc. did not keep raw materials inventory on hand. The controller will place purchase order for raw materials required upon received customer orders. These materials often take from 1 to 2 weeks to arrive depends on the supplier and the type of material ordered. The delivery time of the raw material has cause the delay to the production.

2.4 Loss on Returned Orders due to poor qualityCustom Gear Inc. experienced about 6 % return rate on orders due to poor quality. In 75% of the cases of return order, most returned order was found failed to undergo one or more operations or the operations was not properly done. This could be due to the inefficient of job shop layout, jumbled flow of products through the shop. This would result in a huge chunk of unnecessary costs as compensation products are processed followed by other product orders to prevent any loss transpired in a company. Unnecessary costs range from cost needed to transport, repack, reprocess, and reschedule the production and etc. compensation products are processed followed by other product orders to prevent any loss transpired in a company. Unnecessary costs range from cost needed to transport, repack, reprocess, reschedule the production and etc.

3.0 ANALYSIS Financial data and forecasted material cost for year 2009-2011 of Customer Gear Inc. as shown in Table 3.1. Sales are rapidly increasing and it has a direct relationship with several other manufacturing costs such as material, labor and overhead as indicated by near to 1 R-square value. Period expenses such as sales expenses and general & administration expenses are correlated to sales as well. Hence, Custom Gear Inc. is able to prepare budgeted expenses from its sales forecast to plan for its operation for year 2012. However, the figure which is our concern is the material cost as inventory plays a very crucial role in reducing total lead time to deliver customers product.200920102011R2Forecast 2012

Sales 560 1,500 3,100 5,000

Manufacturing Cost

Material 63 273 522 0.9901 870

Labor 136 587 1,063 0.9823

Overhead 70 216 412 0.9958

Depreciation 172 398 422 0.6947

Total Manufacturing Cost 441 1,474 2,419

Sales Expenses 70 130 263 0.9956

G&A Expenses 75 110 297 0.9491

Total Cost 586 1,714 2,979

Profit from operation (26) (214) 121

Table 3.1 Financial Data and Forecasted Material Cost for Year 2009-2011

By having a forecasted value of material cost, Custom Gear Inc. is able to store up their inventories on few of the most common material to reduce waiting time for the material to arrive before production could start their fabrication work. Table 3.2 shown forecasted raw material usage for year 2012 some of the most common materials are E, H and J.Type of Material2011 usage $ '000Forecast 2012 usage $ '000

A3660

B1017

C1525

D4372

E110183

F1830

G3253

H75125

I4067

J60100

K3050

Others5388

Total522870

Table 3.2 Distributed Forecast Raw Material Usages for Year 2012

While the sales figure in March 2012 shown that the sales of Custom Mold Inc. order size from 1 to 50 is considered small order size, on the other hand 100 and above is categorized as large order which Mr. Roger Rhodes is currently receiving to pay for their overhead at a cheaper price. OrderOrder SizeNumber of OrderTotal OrderTotal $ Value of Orders Sales $ per Unit of Order

A 1 80 80 3,200 40.00

B 2 53 106 4,250 40.09

C 3 69 207 8,163 39.43

D 4 32 128 4,800 37.50

E 5 82 410 16,392 39.98

F 8 47 376 15,987 42.52

G 10 64 640 26,871 41.99

H 15 22 330 13,172 39.92

I 20 42 840 31,555 37.57

J 25 27 675 23,682 35.08

K 30 18 540 21,600 40.00

L 40 22 880 32,000 36.36

M 50 10 500 18,693 37.39

Total 5,712 220,365

OrderOrder SizeNumber of OrderTotal OrderTotal $ Value of Orders Sales $ per Unit of Order

N 100 4 400 12,500 31.25

O 200 2 400 14,068 35.17

P 400 1 400 9,652 24.13

Q 700 2 1,400 35,600 25.43

R 1,000 1 1,000 20,000 20.00

Total 3,600 91,820

GRAN TOTAL 9,312 312,185

Table 3.3 Sales and Order Number for March 2012

Table 3.3 Sales and Order Number shown that in March 2012 Custom Gear Inc. has a total of 9,312 units of gear to be produced. 61.34% of total number of gears to be produced is from small order size while 38.66% is contributed from large order size. Nonetheless the revenue of Custom Gear for small size order is 70.58% from a total of $312,185. These shown that Custom Gear Inc. main product had yet to depend on large size order. The sales per unit of order further indicate that Custom Gear Inc. smaller unit order had a higher profit margin as compare to large size order.

4.0 RECOMMENDATIONS4.1 Separate to two line production

Figure 4.1 Proposed Two Line Productions

We proposed to separate to two production lines and apply chase demand strategy to maximize production output. With two line production, Custom Gear Inc. can produce large size order and small size order concurrently. By apply two line productions; Custom Gear may minimize the back order sales variance of $14,377 as shown in Table. 4.1.One Line ProductionTwo Line Production

Order SizeQuantity DelayAverage Sales $ per Unit of OrderTotal Sales $ per Unit Of OrderOrder SizeQuantity DelayAverage Sales $ per Unit of OrderTotal Sales $ per Unit Of Order

Small Order 4,312 38.58 166,356.96 Large Order 1,100 25.51 28,061.00

Small Order 3,212 38.58 123,918.96

TOTAL 166,356.96 TOTAL 151,979.96

Table 4.1 Total Backorder Sales for March 20124.2 Rearrange Job Shop LayoutWe proposed job shop layout should be rearranged according to the work process flow as shown in Figure 4.2. By swapping drilling center and heat treating center, the production process will be more organized and employees will be able to complete their task smoothly without causing any confusion or loss of item. We also recommended setting up another shop for inspection for finished product to ensure its quality before sending for shipping.Besides, minor rearrange job shop layout will takes within 3 to 5 days to complete which will not have a major impact to force the entire production line to shut down. These will have a significant drop of lead time taken to transport the products from one center to another and also lead to increase of process efficiency.

Figure 4.2 Propose Job Shop Layout

4.3 Stock Raw Material InventoryCustom Gear Inc. may consider to source supplier who be able to provide more variety of raw materials at lower prices with shorter delivery time rather than rely on many different supplier to provide different type of raw materials. Besides that, Custom Gear Inc. may keep some stock for those common used raw materials for production as shown in Table 3.2 Distributed Forecast Raw Material Usages for Year 2012 to reduce production lead time.

5.0 CONCLUSIONBased on the case study, Custom Gear Inc. is one of the companies which manufacture custom-made gears for its clients. Within the company, certain process control characteristics exist to provide operational support to the company. The management of the company should be implementing an efficient operational strategy in order to avoid any unwanted circumstances in production line. Current business conditions, all companies compete in terms of volume of the gear purchase, speed of product delivery, and customization. Besides that, the job shop is organized by process, where assembly lines or continuous flow operations are organized in a product layout. In the latter layout, equipment or work processes are arranged according to the exact steps in which the product is made and the path for each part resembles a straight line. Thus the company should have to improvise to the new layout and redesigning their production flow due to produce the gear to avoid bottleneck in the production process. In other hand, this will lead the productivity increase.

This we can conclude that Custom Gears Inc. should adopt a well-structured layout as proposed to serve as the first step to contend with the issue of production process flow. In terms of management, due-diligence and ability to schedule and forecast future materials to be sourced from suppliers should be exerted to avoid unnecessary expenses due to wastage of resources.

6.0 REFERENCESReference BookPutra Business School. 2014. Operating Management. Singapore: McGraw-Hill Education.WebpageGraham Winfrey, 2015.Facility Layout and Design. http://www.inc.com/graham-winfrey/the-5-most-profitable-industries-in-the-us.html. Accessed on 14th March 2015.