1. Chair Manufacturing Operation

2.  Operation Strategy (Ankush Moham)  Process (Jae Won Yu)  Forecast & Production (Prab Sandhu)  Site & Equipment (Alvin Hoang)  Workforce & Layout (Marco Echandi)  Material Planning (Adil Almoshawuh)

3.  Objective ◦ To provide quality chairs to cost sensitive middle class customers  Priority ◦ Minimize upfront capital investment ◦ Maximum equipment utilization ◦ Reduce material and product transportation cost

4.  Operation Strategy (Ankush Moham)  Process (Jae Won Yu)  Forecast & Production (Prab Sandhu)  Site & Equipment (Alvin Hoang)  Workforce & Layout (Marco Echandi)  Material Planning (Adil Almoshawuh)

5.  Process Choice: Batch ◦ Minimal equipment purchase ◦ Maximum equipment utilization ◦ Reduced overhead (4 sub- group) ◦ Great cost saving process for simple assembly product

6.  Operation Strategy (Ankush Moham)  Process (Jae Won Yu)  Forecast & Production (Prab Sandhu)  Site & Equipment (Alvin Hoang)  Workforce & Layout (Marco Echandi)  Material Planning (Adil Almoshawuh)

7.  Why use casual judgment method? ◦ It’s a long term project – longer than two years ◦ Linear regression  Functional relationship between two or more correlative variables  Useful for long-term forecasting of major occurrences and aggregate planning  y = a + bx

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9.  Chase strategy ◦ Match the production rate to the order rate by hiring and laying off employees as the order rate varies  Stable workforce ◦ Variable work hours – Vary the output by varying the number of hours worked through flexible work schedules or overtime  Level Strategy ◦ Maintain a stable workforce working at a constant output rate. Shortages and surpluses are absorbed by order backlogs and/or lost sales

10. Aggregate Production Planning Requirements Year 1Year 2Year 3 QTR 1QTR 2QTR 3QTR 4QTR 1QTR 2QTR 3QTR 4QTR 1QTR 2QTR 3QTR 4 Beg inventory 013751275157516501699179118831975206721592251 Demand forecast (From linear regression) 550051006300660067957164753279008268863690049373 Safety stock (.25 * demand forecast) 137512751575165016991791188319752067215922512343 Production requirement (Demand forecast + safety stock - beginning inventory) 687550006600667568447256762479928360872890979465 Ending inventory (Beg inventory + production req - demand forecast) 137512751575165016991791188319752067215922512343

11. Production Plan 4: Constant Workforce + Overtime Year 1Year 2Year 3 QTR 1QTR 2QTR 3QTR 4QTR 1QTR 2QTR 3QTR 4QTR 1QTR 2QTR 3QTR 4Total Beginning inventory013751275157516501699179118831975206721592251 Working days per month60 Production hours available (working days * 8 hr/day * 20 workers) 3180 regular shift production (production hours/5 hrs per unit) 636 Demand forecast550051006300660067957164753279008268863690049373 Units before overtime (beg inv + regular shift production - demand forecast) -4864-3089-4389 -4509-4829-5105-5381-5657-5933-6209-6486 Units overtime486430894389 45094829510553815657593362096486 Overtime cost (units overtime * 5hr/unit * 6hr) $145,920$92,670$131,670 $135,281$144,861$153,146$161,430$169,714$177,998$186,282$194,566$1,825,207 Safety stock137512751575165016991791188319752067215922512343 Units excess (units before overtime - safety) only if positive amount 000000000000 Inventory cost (units excessive * 1.50)000000000000 Straight - time cost (production hours available * 4) $44,160$44,896$45,632$46,368$47,104$47,840$48,576$49,312$50,048$50,784$51,520$52,256$578,496 TOTAL$2,403,703

12. Cost Constant Workforce Vary Inventory Exact Production Vary Workforce Low Workforce Subcontract Constant Workforce Overtime Hiring $63,692 Layoff Excess inventory$8,517 Shortage Subcontract $1,184,946 Overtime $1,825,207 Straight Time$578,496 $587,013$642,188$1,763,442$2,403,703

13.  Operation Strategy (Ankush Moham)  Process (Jae Won Yu)  Forecast & Production (Prab Sandhu)  Site & Equipment (Alvin Hoang)  Workforce & Layout (Marco Echandi)  Material Planning (Adil Almoshawuh)

14. Winner Medford, OR Other Candidates China India South East Asia

15. CategoriesCost 1Land CostApprox. $4.50/sq-ft 2Cost to Construct, or Lease$0.30-$0.60/sq-ft. New construction $35-$45/sq-ft 3Corporate Income Tax6.6% Net Income 4Sale TaxNone 5Property Tax$14.41/1000 6Inventory TaxNone 7 Worker ’ s Compensation $0.16-$0.47/100 salary 8Unemployment Insurance3% first $23k salary Thereafter is the 1.6% state Avg. 9Business License Fees$100/yr 10Electricity RatesOregon: $0.0745/Kilowatt hr National average: 0.1040/ Kilowatt hr 11WagesLatest Minimum Wage: $8.40/hr 12Unemployment rate10%-13%

16. Equipment Type CostMaintenanceUnitNote Straight Cutter $20002hr/wk PM 95% uptime 2Fast process time, reliable Flex Cutter $28003hr/wk PM 90% uptime 2Fast process time, but lowest reliability Lathe $80003hr/wk PM 95% uptime 3Long process time, require more units Drill $10001hr/wk PM 98% uptime 2Fast process time, minimal PM, reliable

17.  Operation Strategy (Ankush Moham)  Process (Jae Won Yu)  Forecast & Production (Prab Sandhu)  Site & Equipment (Alvin Hoang)  Workforce & Layout (Marco Echandi)  Material Planning (Adil Almoshawuh)

18.  4 small and experienced work groups ◦ Required for batch process methodology  High quality standards  Work as a team in designated area to build skills  Cut team  Lathe team  Drill team  Assembly team  Local workers ◦ Help benefit our local economy

19.  Simple ◦ Batch process  Minimal tool changeover time  Low overhead  Cost Effective ◦ Shared tools ◦ Smaller facility Raw Materials Straight/Flex Cutter Lathe Drill WIP holding area Assembly Area Shipping Receiving

20.  Operation Strategy (Ankush Moham)  Process (Jae Won Yu)  Forecast & Production (Prab Sandhu)  Site & Equipment (Alvin Hoang)  Workforce & Layout (Marco Echandi)  Material Planning (Adil Almoshawuh)

21.  Objective ◦ The calculate cost of the needed raw materials.  Assumptions ◦ Fixed price for each raw material ◦ Every piece of raw materials is inspected prior to delivery ◦ Cost of delivering the raw material to the factory is included in the price of the raw materials

22.  Cost of raw material needed to manufacture one chair

23.  Example (cost of 2,000 chairs) Raw Material Needed Cost/Unit Quantity (R)Cost Rod for Set of Back\Front legs $1.50 4000$6,000 Rod for Leg Supports $1.50 2668$4,002 Thin Board $2.00 1334$2,668 Thick Board $2.50 800$2,000 Seat Cushion $5.00 2000$10,000 Total cost of raw materials$24,670

24.  Initial Capital Investment ◦ Equipment = $35,000  Monthly Cost (Avg. 2000 chairs) ◦ Labor = Approx. $15,000 ◦ Material = Approx. $25,000 ◦ Logistics = Approx. $10,000 ◦ Building = Approx. $7,000  Total Cost ◦ $92,000  Revenue / Month ◦ Sales price = $59.99 ◦ Revenue = $120,000 ◦ Profit = $63,000  Breakeven Point ◦ 3 months

25.  Hug a tree everyday!