Stickley Furniture Yvonna Liang BUS 644 Operational Management Dr. Vanessa Washington June 4, 2012 Abstract Stickley Furniture started off in 1900 as a family owned furniture company, manufacturing fine cherry, white oak, and mahogany furniture. In the 1980s, the company reintroduced their line of mission oak furniture, which now accounts for almost 50% of their sales. Since, founding of L&J. G. , the company has grown to employ 1,350 employees and now has a total of five retail showrooms located in the states of New York, Connecticut, and North Carolina.
Like most companies facing growing competition, Stickley Furniture must design and offer better products and improve their overall operations. To achieve such a task, the company will need to first examine their current state of operations at their manufacturing facilities and then devise a plan that will allow for a leaner system. In the process of evaluating their current operations, Stickley Furniture will examine their current types of production processing methods, job status and location tracking methods, as well as how well suited their current production policy plan is for an increase in demand.
Once such factors are considered, and all benefits and problems are evaluated, recommendations will be provided for the devising of an action plan. Stickley Furniture Stickley Furniture was originally founded in 1900 by the Stickley brothers, and they specialize in the manufacturing of fine, high quality furniture. Currently the company employs 1,350 employees, has a total of five retail showrooms in New York State, Connecticut, and North Carolina, and distributes to 120 dealers nationwide.
To stay competitive, Stickley Furniture, like many other companies “facing today’s levels of unprecedented global competition must design and offer better products and services and improve their manufacturing operations (Taj & Morosan, 2011). ” To improve overall manufacturing performance, Stickley Furniture must first evaluate the current state of their operations at their manufacturing facility and then devise a plan that will create a leaner system of operation.
A leaner system will mean that the company will manufacture with a minimal amount waste, and waste more specifically, “is anything other than the minimum amount of equipment, materials, parts, and working time, which absolutely are vital to production (Taj & Morosan, 2011). ” Should Stickley implement a leaner system without sacrificing demand in the short term or the long term, they will be able to further improve operational efficiency and profitability through cost reducing efforts.
An important aspect of lean operations within manufacturing, in regards to eliminating waste, is the issue of system design within manufacturing facilities. “In order to identify and eliminate waste, every step and individual action involved in the processes for specific service is mapped; and the flow analyzed (Soriano-Meier, 2011). ” The main purpose of layout design is “aimed at improving the efficiency of movement of materials or parts through the process (Ubani, 2012). With that being said, process selection plays an important role in layout decisions. The five basic process types are job shop, batch, repetitive, continuous and project. Since Stickley has a process of simple or standardized tasks in their production, which includes many repetitive functions, the assembly line layout would be their most cost effective approach to manufacturing their products. The benefit of a repetitive function would be the allowance of lower skilled and lower cost employees coupled with limited equipment variation among other things.
Unfortunately, since Stickley’s offers more than a few product variations, they may have a need to focus on batch process to accommodate the differentiation associated with their products. Stickely’s offers many furniture products that range in size and shape, for example, they manufacture dressers, drawers, frames, etc. , all of which may require a different process that an assembly line cannot accommodate fully. Understanding that would justify why a batch process layout would be more appropriate since the employees out on the floor have some variation to what they are doing.
This may slow the output speed associated with that of an assembly line, but it is more appropriate considering the business Stickly is in. A less than high turnover industry is what makes the furniture industry what it is. Although they show a clear sign of a batch process to reflect their product variability their costs are more associated with that of a repetitive process. One of the best examples of why a fully repetitive process cannot be used in all of Stickley’s orders is their use of master wood workers that handle custom orders.
The need for this highly skilled craftsman to accommodate many customer based requests or to carpenter their high value items makes a fully repetitive process impossible. This idea of allowing for customization in the orders that come in, changes the layout into more of a job shop layout in which they can perform necessary mundane tasks that are repetitive and yet allow room for customization, albeit at a slower pace in comparison to the two other processes discussed earlier. When compared with batch processing, job shop processing has a higher level of job variety, job skill, process flexibility, unit costs lower volume of output. Stevenson, 2009) The allowance of customization will broaden the customer base of Stickley’s but keeping the customers unique interest in mind while also remaining marketable to the lower end customers who are looking for price rather than quality. Having both a low cost product and customizable high cost products will allow Sticklely to reach a larger audience and create more value for the company as a brand. As the level of complexity in product offering rises, management must appropriately keep track of all their products being manufactured and at which step they are in.
For tracking purposes, Stickley uses a product layout strategy to identify what step the product is in on the assembly line. This methodology is common for any repetitive process layouts as an efficient way to track goods from start to finish. Product layout also allows for labor specialization, low material handling cost, and a high utilization of labor and equipment. The advantages of the product layout scenario are seen in how they are established and used as a method for routing, accounting, purchasing and scheduling. Stevenson, 2009) Just as there are advantages, there are also disadvantages. This idea of a product layout process for tracking can be very mundane for floor workers who find themselves in repetitive and potentially ergonomically unsafe situations. Poorly skilled workers may not maintain equipment or quality of output; they are fairly inflexible changes to volume. Because the company is highly susceptible to shutdowns and require preventative maintenance, individual incentive plans are impractical with this scenario. Various furniture pieces can be tracked through a cellular layout as well.
This process allows for flexibility and process flow that essentially creates work stations that different parts are directed to depending on the product type and the step it is in. “Unlike the FL that groups functionally similar machines into separate departments, the CL clusters the machines required to manufacture each family of similar product types into independent cells (Jerbi, 2010). ” This concept of grouping like parts is similar to the group technology function utilized to allow similar items to flow to the same workstations since they will utilize the same technology to manufacture or design the product.
This follows the idea of how their lumber flows through mills and other how finished products are ultimately assembled which assists in the streamlining of their manufacturing process, similar to an assembly line function only a little more specific and less volume oriented. Aside from the process layout, they also utilize barcodes to identify which step that each job is currently in. “As each operation is completed, the operator removes a bar code sticker and delivers it to the scheduling office where it is scanned into the computer, thereby enabling production control to keep track of progress on a job, and to know its location in the shop. (Stevenson 2009, p. 690) This allows management to track the process of a given unit that is leading to a finished good or can be used to track parts as they are used for inventory management and accounting purposes. Not only does this improve efficiency for keeping costs down on inventory management, it can help management better estimates the necessary time to complete a job and deliver a finished product to their customers keeping satisfaction high and costs down at the same time.
It may also be able to assist in telling management how their employees are performing on the job. An excellent example of how this works in terms of what it takes that goes into a job, suppose an order is placed by a whole sale company or retail company for a large number of drawers. Management must plan the schedule from start to finish in order to meet the customer’s need in a timely manner. That schedule must contain the length of time each step will take. They must determine the amount of wood need, the amount of glue, etc.
After the basic materials are determined, they must then know how long each step will take until it reaches completion. Having a work schedule to track the process against allows for better judgment by management to ensure completion is not only time, but accurate and cost effective. Next, management must determine the sequence in which orders are filled or the job priority of the various component pieces. Once this has been determined, management must delegate the tasks to the necessary employees and make sure they are aware of what the schedule entails.
The additional operational tasks that supervisors should consider include: the time and cost associated with setting up, how to minimize lead time and work-in-progress inventory, and how to maximize machine and or labor utilization without affecting work flow. Suppose Stickley’s received a large order for 40 mission oak dining table sets, they must determine the best way to complete this order in a timely fashion that not only keeps possible cost overruns from happening, but completing it exactly to the needs of the customer, meeting time and value.
For the completion of larger’ bulk orders, they may have to transition to a process layout versus a standard product layout which contrasts the assembly line vs. the cellular layout. A product layout processing system uses a layout that uses standardized processing operations to achieve smooth, rapid, high-volume flow by assigning tasks to workstations in such a way that the workstations have approximately equal time requirements. (Stevenson, 2009) Stations will be broken out into timeframes to accommodate each of the steps required at those stations which can be called cycle times.
In an effort to maintain a constant workflow process, all downtime should be eliminated as much as possible by ensuring that each station is constantly working if possible by allocating each part to the proper steps through a balancing act of machining time at each station. A process layout processing system can handle a variety of processing requirements at one time. (Stevenson, 2009) This layout will therefore provide the most efficient means of producing a large quantity of complex items.
Some other advantages of process layouts are the system is much less vulnerable to to shutdown caused by mechanical failure or absenteeism because equipment is arranged by type rather than by processing sequence. (Stevenson, 2009) By reducing the physical distance of raw material to the manufacturing floor and keeping the flow organized in such a way that the machines can keep working increases the speed at which a finished good is reached while reducing manufacturing time and keeping waste to a minimum.
As is to be expected, there are some setbacks to selecting this process. Inventory costs have the potential to be high because they are moving at such a pace that they need to have everything in stock to avoid downtime during reorder periods. This pace also makes it difficult to route the necessary components as well without a solid tracking system that tracks as workers are in motion. Material handling is inefficient, equipment utilization rates can be low, and unit handling costs are generally higher than in product layouts. Stevenson, 2009) There can also be job complexities that may reduce the span of supervision and result in a higher supervisory costs, certain products may require special attention and there may be more accounting need and purchasing needs than product layouts. (Stevenson, 2009) It is safe to say that management may be able to keep these disadvantages in check since they have adequate labor as well as the machinery to handle the high workload. A level production policy is appropriate only when the product that you have is a high turnover product that is usually low cost.
It may not fit every situation. A level production policy may make certain employees very efficient in a single area that they are working in, but it is not necessarily going to keep them satisfied with their job, nor will it produce cost savings should inventory simply build to unsustainable levels. Although it will lead to increased levels of production, if these items do not turnover quickly enough, the cost is not worth the benefit. The largest setback of this policy is the burden placed on the employees.
With a repetitive or mundane environment, employees care less about the quality of their work and lose their interest in what they are doing. Repetition simply hurts productivity and poses a health risk just as well. Again, this can reduce the flexibility any company may want to consider, particularly if a product produced is reaching obsolescence, at times making this policy a bit of a burden if demand changes suddenly. A more unique problem associated with the products they are producing is also based on the industry they are in.
As mentioned before, inventory costs will skyrocket with a level production policy should they the products they are producing not have high turnover. It is pretty clear that furniture and the raw materials used to build it takes up a lot of space and therefore inventory costs are a large cost center for this type of production. Investors and other interested parties may believe there are better ways to spend money than keeping it swept up in inventory costs. Leaning out their system may require a more Just-In-Time approach to production, by carefully forecasting demand or by other means of planning.
In general it is safe to say that Stickley’s is doing well in terms of production, capacity, sales, etc. There is always ways to improve their production or facility in an effort to further efficiency or improve process flows over time if they are not afraid of some potentially costly implementations that will generate a return in the long run. One of the more common upgrades for example is a digital product manufacturing system that is used to better and more efficiently track products which is a step up from a barcode product tracking process.
This will allow for the best tracking that is less laborious when it comes to scanning barcodes. Rather than relying on barcodes that must be physically scanned, this will track the flow of inventory based on entered information used in the manufacturing process. Another decision they could make would be to fine tune their level production policy in an effort to drive down costs during cyclical upticks and downturns in demand. To be able to determine that they can cut production quickly to meet demand, they will have a better grapple on inventory costs as well as material costs.
Inventory costs can be a dangerous adversary when it comes to periods or poor economic conditions or transitions from obsolescence to new growth products. Minimizing these costs will create better working capital make the necessary investments in the company’s efficiency, keeping the door open to opportunities for improvement rather than maintaining the status quo. That additional cash flow freed up from storage costs can be used for improved marketing during down seasons or periods of slow demand. Advertising is a far better use for their money versus spending it on holding inventory that may or may not be sold in the near future.
Another cost cutting measure could also be the use of seasonal employees during times of slow periods among other measures that can be enacted to accommodate decreased or increased demand. Clearly, Stickley has challenges to face in its future to remain as an ongoing concern and they are working in the right direction to maintain operational relevance in this industry. The challenge of capitalism will continue to challenge Stickley in finding ways to improve operational efficiency, keep costs at a minimum, each a competitive level based on economies of scale, and continue to keep up with technological improvements as needed to be a step ahead of competition in this industry. “To be a part of an efficient system, a plant must offer relatively low processing costs and be located so as to minimize total cost of processing and transportation (Beireleing, 1992). ” Management must continue to improve process flows and keep employee skill sets relevant as well, while ensuring that they hire at competitive levels in the future.
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