Operations Management Report: MBA/MSC Assignment - Kuwait, 2018

This report provides an in-depth analysis of the operations management challenges faced by Chad's Creative Concepts, a wood furniture design and manufacturing company. The report begins by outlining both the short-term and long-term operational decisions that Chad Thomas, the company's owner, must address, including order prioritization, employee policies, resource allocation, and inventory levels. The report then explores decisions related to total inventory investment, equipment investment, skills development, and facility layout. The analysis further examines how Thomas could have avoided problems by implementing a controlled growth plan, focusing on custom-designed furniture, and designing requirements for each product line. The conclusion emphasizes the importance of division of labor and its benefits, such as improved quality, efficiency, and reduced costs. The report uses various references to support the analysis and provides valuable insights into effective operations management strategies.

Operations Management 1
OPERATIONS MANAGEMENT
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Operations Management 2
Introduction
Chad’s Creative Concepts is a company that focusses on the design and manufacture of
wood furniture. The company was founded by Chad Thomas. Chad’s company had initially been
focusing on custom-made pieces hence being able to grow its reputation. However, with the
introduction of the standard line furniture, the company began having some production
challenges such as increased lead times, delays in delivery and also capacity problems. This
means Chad Thomas, the owner of the business will need to make some important decisions
regarding operation, expansion, production, and other departments so as to allow the company to
maintain its reputation.
Question 1
The operating decisions that Chad Thomas faces are divided into both short-term and
long-term decisions. Beginning with the short-term decisions, we have; One, how to set both
priorities and schedule of different orders. Chad receives orders for standard pieces and custom-
made pieces, which may be in high-volume or low-volume orders. Besides, sales have
skyrocketed but the production capacity and amount of equipment necessary for production have
not increased. Different orders from custom to standard lines are competing for the same
production capacity hence the standard line is suffering. In addition, the stock is piling due to the
increased inventory not being used up.
Secondly, the type of work policies to be maintained for the employees in the company.
Employee policies are crucial for the great running of the company; however, they will depend
on the nature of the business or size (Employment policies, 2018). Decisions that might be
incorporated include the number of hours to work in a day, the number of employees to employ,
and also hours for working overtime. Thirdly, the allocation of equipment, resources, money, and
labor for each product line. Since the two product lines are competing over the same resources,
Chad will have to decide how he will allocate each product line the resources, and labor required
to ensure quality is still met. The company has gained a good reputation for its creative designs,
and it would be a shame to reduce on quality due to lack of the right labor, or other resources that
are key for the success of the product lines.

Operations Management 3
Lastly, the level of inventory to be maintained in the different stages of production. This
decision is also linked to the long-term decision however its impact is felt more on the short-
term. The inventory to be considered includes raw materials, work in progress and finished
goods. Excess inventory leads to greater needs for storage or maintenance hence increasing
holding costs (Srivastava, 2018). This further leads to increased expenditure in a company. Chad
will have to decide the inventory to be allowed for both of its product lines to ensure efficiency.
On the hand, the long-term decisions faced by Chad include; One, the total money to be
tied with total inventory investment. Since the company is growing, this means that inventory
will automatically grow. Besides, Chad might consider other product lines along the way.
Therefore, Chad has to consider the total investment on inventory he might need to have in order
to ensure the company meets the growing needs and demands of customers. This will be
important since he will also be able to forecast future demand and be able to meet the demand
without delay (Penn State Executive Programs, 2018).
Secondly, the investment to be made on equipment for the support of efficient
production. Due to the growth of the demand of Chad’s products, Chad might have to decide on
when it would be effective to purchase more specialized equipment for the manufacturing of
both standard and customized furniture. Besides, the equipment would be required to support the
production of high-volume of orders. Thirdly, the skills and capabilities to be maintained in the
company. According to Lindzon (2018), valuable leaders are those who are able to shape the
impacts on businesses rather than react to them. Chad’s creative concepts designs is growing
hence Chad will have to think and decide on the skills that will be incorporated for the long-term
operations of the company. Due to competition, Chad will have to develop new strategies and
train his employees in order to remain competitive.
Lastly, the layout/structure of the facility. Since the company is producing two product
lines, it will be significant for Chad to decide on how the company will be laid out. This will be
essential since, in the event that new product lines are introduced, there will be no shortage of
inventory or resources since the company will able to handle any shortage. Besides, the present
product lines will be produced without delay hence meeting the company’s policy in lead time.

Operations Management 4
Question 2
Thomas would have avoided different sets of problems in the company if he considered
some aspects. To begin with, Thomas would have established a plan for a more controlled
growth for the company. According to Swyers (2018), the uncontrolled prosperity of a business
affects the capability of the same business to maintaining its success. Therefore, Chad would
have focused on developing an appropriate infrastructure for controlling growth in terms of the
markets his business would capture, defining the manufacturing capabilities to maintain or
introduce and lastly, determining the products to develop.
For example, as most businesses enter new markets, they may be well received by the
customers. Besides, the businesses may decide even to diversify into different products so as to
acquire a greater market share since the business may be making money. However, when the
company gets to understand that some money is getting lost over time due to some flaws in
management, it can be a disaster for the company. This clearly outlines that consideration of
different aspects of a business is critical in ensuring a business prospers without having to
sacrifice something for the success (Swyers, 2018). Chad should have structured his business
properly before choosing to venture into the new product line. He would identify the business
requirements for ensuring his business performs under different market conditions. This is
important since Chad could be able to project the intensity of growth for the company and be
able to meet the demand. Secondly, he would be able to ensure resources needed would be
available so as to produce products effectively.
Secondly, Chad could have focused on producing the custom-designed furniture only.
The company enjoyed most of its success from designed the custom-made furniture. This is
because the business model was primarily for custom designs. Chad could have prevented the
move to enter the retail space since the business model was not ready to support many product
lines at the moment. Secondly, customers were mostly intrigued by the custom designs since
they would order in accordance with their tastes. The company operated a single manufacturing
facility whereby the same equipment used in developing the customized furniture was still used
for the standard furniture. This affected the production of the standard furniture since the custom
furniture was given priority.

Operations Management 5
The alternative issues caused by the diversifying into the standard product line presented
different challenges to the company. For example, the future growth of the company was
negatively impacted. However, by maintaining the custom product line, issues such as
scheduling conflicts and competitive priorities could have been prevented. Product extensions
can be beneficial if they meet the segment of the targeted market only by increasing the variety
of offerings (Shopperception, 2018). What companies should do is to question whether their
parent brand is strong such that it can share its reputation with new brand extensions. Chad’s
custom product line commands a large percentage of the profit margin for the company.
However, the product line is not yet self-sufficient to allow the standard line to grow
continuously. Even though standard line sales have improved, lots of its production was halted.
Therefore, Chad should primarily focus on the main custom line only for now.
Lastly, Chad could have focused on the manufacturing of the two product lines by
designing requirements for each product line. This would have allowed the needs of each product
line to be met. Prioritizing the custom line was a disaster for the company. The standard line had
just begun to grow, but since the main product line commanded the market, the other product
suffered the consequences. Besides, by using the general-purpose equipment, the focus on each
the product lines was not complete. Chad could have purchased equipment for each product line
hence ensuring efficiency. In addition, Chad could have separated the workforce such that each
product line is handled by a specific team. This could ensure each product grows exponentially.
Conclusion
Division of labor is important in organizations since it helps in achieving different
benefits (Singh, 2018). One, we have better quality of work. This is due to the improved quality
of production. In addition, the work structure and management could be much effective.
Secondly, greater efficiency. By dividing the workforce to handle the two product lines, the
company product lines could grow due to the efficiency in production. Chad could have enjoyed
such benefits hence ensuring his products perform well in the market. In conclusion, the costs
associated with increased inventory could be prevented hence reducing the expenses in the
company. The lead time could also be decreased hence ensuring customers are happy and
satisfied.

Operations Management 6
References
Employment policies, (2018). Employment policies: what types should I use? [online] Available
at: https://www.nibusinessinfo.co.uk/content/employment-policies-what-types-should-i-use
[Accessed 5 Oct. 2018].
Lindzon, J. (2018). Five Skills You’ll Need to Lead the Company of The Future. [online] Fast
Company. Available at: https://www.fastcompany.com/40420957/five-skills-youll-need-to-lead-
the-company-of-the-future [Accessed 5 Oct. 2018].
Penn State Executive Programs. (2018). Forecasting and Inventory Management. [online]
Available at: https://psep.smeal.psu.edu/supply-chain/forecasting-and-inventory-management
[Accessed 5 Oct. 2018].
Shopperception. (2018). Product Diversification: dangers and opportunities. [online] Available
at: http://www.shopperception.com/blog/product-diversification-dangers-and-opportunities/
[Accessed 6 Oct. 2018].
Singh, S. (2018). What are the Advantages of Division of Labor? [online] Preservearticles.com.
Available at: http://www.preservearticles.com/2012022323618/what-are-the-advantages-of-
division-of-labour.html [Accessed 6 Oct. 2018].
Srivastava, V. (2018). Why is Excess Inventory Bad for your Organization? Maintain an
Efficient Inventory Management System. [online] Buy or Sell Salvage, Idle Assets, Excess
Inventory, Rejected Stocks, Scrap. Available at: https://salvagespace.com/blog/why-is-excess-
inventory-bad-for-your-organization-maintain-an-efficient-inventory-management-system/
[Accessed 5 Oct. 2018].
Swyers, M. (2018). 4 Essential Steps to Managing Growth. [online] Inc.com. Available at:
https://www.inc.com/matthew-swyers/4-essential-steps-to-managing-growth.html [Accessed 5
Oct. 2018].