Analysis of kitchen cabinet company and the industry

2986 words (12 pages) Essay

1st Jan 1970 Marketing Reference this

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Recently, the kitchen cabinet industry has shown significant growth, with expanding residential markets, new cabinet styles, and larger kitchens. From 2004 to 2005, annual kitchen cabinet revenue increased 13.3 percent, and by spring 2006, the kitchen cabinet industry reported its 118th consecutive month of sales growth (Jenkins 2006). These trends are expected to continue, with U.S. demand for kitchen cabinets projected to increase 6 percent per year through 2008, reaching a total of $16 billion (AKTRIN Wood Information Center 2004). Further, the kitchen remodeling market remains strong even as new home construction has seen recent declines. Adding to this demand for cabinets is the trend for houses having multiple kitchens, including outdoor kitchens, and kitchen-style cabinets integrated into other living areas (Baker 2006).

The case under study is also related to this industry and it talks about the Classic Cabinets Pvt. Ltd founded in Springvale, Melbourne by siblings Chinh and Anh Chu which is a manufacturing firm that designs and manufactures custom built kitchen cabinetry. They started off their operations in 2001 and initially targeted one specific consumer segment i.e. Vietnamese community living in the suburbs of Melbourne. The operations took off aiming an average or lower class segment as represented by the suburban location of the city but over the time the product design by the firm became popular triggering huge sales all across. The enhanced sales volume also attracted variety of customers and finally clientage base of the firm got diversified expanding the operations of the firm. The responsibilities on the management naturally increase when the operations step in to large scale from a small scale. The real job is to handle and manage those operations in an effective and efficient manner through properly planned management processes. This is actually a turning point for the companies where you should be ready for any kind of consequences in the form of negative impact turning company upside down at the expense of poor management of operations or a positive impact on the business gaining growth and expansions through planned and carefully thought out decision making. So the role of both the siblings also turned in to more responsible and mature behavior to put up. Chinh who had an expertise in cabinet making assumed the responsibilities of Manager Operations and productions and Anh Chu took up the charge of a General Manager.

It is important to have a review of the pertinent literature of the under discussion topic to relate it to the existent work done or potential work in the field in any part of the world. Similar or different kinds of work and measurement approaches initiated by researchers, academician & practitioners help build relational factors to the study undertaken by you and provide rationale support to the study. The Kitchen Cabinet Manufacturers Association recognizes the need for ongoing research and development to stay current with consumer demands and changing preferences (Jenkins, 2006). Because kitchens are becoming the “focal point of many U.S. households” (Frank, 2006), consumers are trying to find ways to distinguish their kitchens. Shifting preferences and increasing demand in kitchen cabinets may create new opportunities for wood species that were not previously popular, specifically rustic appearances that could contain character markings and other lumber defects. Over here let’s refer to an example of ‘Sunrise Kitchens Ltd’ which specializes in custom kitchen cabinetry for luxury homes. It provides a wide array of services, including on-site measurement and meeting, dimensioned plans and elevations, professional installation and after-sales service. The company employs over 60 employees and all of them are well experienced and skilled in their responsibilities. It has recently equipped its factory with state-of-the-art automated cabinet making machinery. It is with this automated machinery and with efficient processes from estimation, to installation, to after-sales service, that enables it to proudly announce that it can fully supply and support multi-family home builders. Equipping the operations with this automated system, company over came all kind of problems faced across different functional and operations areas of the company like, inventory control, supply chain, costing and also reduced order entry cycle and made the operations more efficient and effective.

The certification programs offered by KCMA (Kitchen Cabinet Manufacturing Association) reflects the growth and popularity level of the industry as preference is given to technical expertise of this field which actually is explicit in the motives of KCMA while launching programs of such nature. In general, there are three types of cabinets that can be distinguished as: custom cabinets, semicustom cabinets, and stock cabinets. Custom cabinets are made according to customer specification based on individual orders. Stock cabinets are produced in larger quantities and are only available in standard sizes. Semi-custom cabinets are a combination of the two other categories, allowing more sizes than stock cabinets but not offering the total customization of the product (Olah, 2000).

The kitchen cabinet industry has evolved over the time and currently exists in a pretty good shape compared to a look at the past in the 19th century and the early era of 20th century with the change in architectural approach of the people due to an exposure to new advanced ways of architect structural designs shaping the consumer preferences which started reflecting in their modern living patterns. Cabinetry also became a crucial part of an organized and well managed kitchen, and Mary Anne Beecher’s account of manufactured cabinetry, (“Promoting the Unit Idea: Manufactured Kitchen Cabinets 1900-1950”, 2001), compares kitchen furniture and office furniture, with the emphasis on organization prevalent in early 20th-century kitchen design theory. As kitchens became smaller, the need for storage to maximize efficiency resulted in cabinetry becoming a crucial part of the kitchen environment.

Compartmentalized cabinets and desks were items viewed as necessary for the well-run kitchen, similar to the offices roll top desk, thus reflecting the professionalization of the housewife. As noted by other resources, the decline in servants forced women to take on more work in the household, and the need for organization and consolidation of space were key elements to productivity. Cabinetry played a major role in the new designs of progressive households, as well as apartment kitchens, where space could be even more limited. Cabinetry was also seen as a means of establishing cleanliness in the food preparation area. Sanitary conditions were a prevalent aspect of turn-of-the-century kitchen design and products such as steel, latched cabinets were seen as a critical component for maintaining sterility. Whether in the kitchen or the office, cabinets played a major role in promoting clean and efficient environments and maximizing space. Primary resources have provided the greatest insight to how 20th-century kitchens were designed. Abbot McClure and Harold Donaldson Eberlein cover not only furnishing and decoration, but also discuss design arrangements and layouts in their book, ‘House Furnishing and Decoration’ (1916). There are notes of particular importance on kitchen design, furnishings and utensils such as a small table for an extra work surface as well as sliding bread boards and racks for pots and pans, and material selections. The kitchen is taken as a one room in a house that is essential and thus treated with considerable respect. As with many guidebooks on the topic of the kitchen environment during the late 19th and early 20th centuries, cleanliness is deemed the most influential factor in creating an ideal cooking room.

An over view of the nature of tasks done in the kitchen cabinet manufacturing industry is reflected in the following in the context of Operations Management:

Manufacturing kitchen cabinets is a complex process that consists of many operations and requires many skills. Among the various operations we selected three as the most representative:

Shaping: representative of tasks involving the operation of machinery.

Sanding: repetitive tasks involving excessive bodily motions.

Assembling: tasks involving the use of different tools in a variety of work positions.

Staring with shaping operation which consists of modeling pieces of wood with a shaper according to the style of kitchen cabinet being made, all the above three steps will be discussed one by one as follow:

To complete a task a worker has to:

Pick up pieces of wood

Place wood on the shaper

Press and push the wood sideways on the shaper

Pile pieces of wood for further processing

The task lasts approximately three seconds. The task is done while standing on a concrete floor.

The sanding operation consists of smoothing the surface of wooden sheets by using a hand-operated power sander. The worker uses both hands to carry out this task. The dominant hand is used to operate the sander while the other hand is used to hold the sheet of wood. To complete a task a worker has to:

Pick up wooden sheets

Place the sheets on work bench

Sand the sheets

Pile the sheets for further processing

In sanding are required excessive movements such as bending and reaching while keeping the elbow above the shoulder level. Forceful movements are used to hold both the sander and the sheet of wood. Sanding is done in a standing position.

Assembling all the components that will form a kitchen cabinet involves the use of various tools such as staplers, screwdrivers and hammers. Assembling kitchen cabinets is a manual operation requiring many steps and many skills. While assembling, workers use a variety of body positions such as bending, twisting and reaching. They also have to stoop and crouch while working.

The classic cabinet operations show that currently it is dealing with the standardized and customized kitchen cabinets manufacturing. Only one operational unit cited in Springvale is being used for the manufacturing of both kinds of products offered by the firm. A substantial portion of the revenues up till 75 % of the firm is driven by the customized cabinets manufactured by the firm and standardized cabinets contribute a small fraction of 25%towards the overall revenues. The 60 % & 40 % volume of the customized and standardized cabinets respectively, clearly reflects that the profit margins earned on the made to order cabinets are far more than the standardized cabinets when the comparison is drawn between their production volume and revenue generation. The figures present a clear picture that where the organization management focus should have been in order to sustain the current situation in the long run and also efforts required to further improve upon the situation. The firm is in the growing stage and this phase is very crucial to handle in terms of its sensitivity and importance to business processes, reason being, if not properly coped up then it could have the potential to revert the situation or any kind of repercussions could surface backfiring the whole situation. A very cautious approach has to be adopted during this phase a sheer focus on the so far built up competitive advantage of the firm is essential required in letter and spirit. Here in this case it is observed that both the products offered by the firm have to compete the processing time on the same equipment by the same craftspeople.

The processes in terms of operations management reflect to be very cost effective as the machinery is same for the production of both kind of products with a flexibility incorporated to support the design of customized product and also the labour employment is same requiring no extra labour with special expertise and skills for made to order kitchen cabinets. Things are going fine, processes running smooth in the favour of the company and a point comes where a drift is observed in the situation when the firm signs a contract with the ‘Spec’ builders to supply low volumes of standardized cabinets in the form of batches with limited range of one to five kitchens. It was a good opportunity for the firm to take up and cash the standardized line but with proper management. A proportionate approach was required to deal with the new developed situation and especially when it is considered important for harnessing growth. The contract has had to be carefully chalked out in the favour of both the parties but the actual terms and conditions set by the customer were very stern in terms of delivery requirements and also showed price consciousness compared to the customized product customer. The firm could have negotiated better terms and conditions than actually done, being in a good shape in terms of its credibility and fame earned due to the high quality finished product offerings made by the firm. Had it been a contract of a customized line, terms and conditions laid down by the ‘Spec’ builder could have been digestible as understood by the importance of the product realized through the revenue contributions made by it but in case of standardized product line it was really not a reasonable approach taken by the management of the firm to say yes to it.

Any ways, ball was still in the managements’ court as long as this new line sale kept increasing reflecting a positive output in the short run enhancing order volume more and more and the problem of managing the manufacturing of high volume orders didn’t arise. The sales increased over the time but profits didn’t increase proportionate to sales as reported by the accountants. This is a serious issue to dig out and find the reasons that why the profits are not increasing compared to increased sales. In the short run the impact of the builder’s line wasn’t felt but over the time the problems started rising to surface in the form of increased associated costs. The cost increment was observed at the expense of huge capital tied to work in progress. Delayed work in progress and increased lead time of both the products disrupted the product delivery cycle. All this happened because the whole operational priority shifted towards the builders’ line instead of a focus on the customized line which is the real cash cow for the firm. The standardized line was a part of ‘Make to stock’ strategy adopted by the firm and it always takes the shortest delivery time and the ‘Assemble to order’ strategy was in place for the customized line with a longer time.

The layout analysis of the firm portrays a picture which support the ‘Repetitive Operations’ which are mostly carried out for standardized production. In this case we see that both the product lines had to compete the processing on the same equipment and by the same craftspeople, which reflects a clash between the repetitive operations and the intermittent operations specifically used for customized line. Though the clash is not of a high magnitude because the same machinery had inbuilt flexibility for customization of the product and the difference between the manufacturing of both the kind is not very high, yet customized products were always preferred while scheduling tradeoffs between the both. It resulted in piling up of work in progress and unfinished work for the standardized cabinets. Now it was a time to balance the strategic approach while making the scheduling tradeoffs because the order volume for standardized product by the ‘spec’ builder increased and accordingly its preference level has had to be magnified but in actuality it did not happen maintaining the status quo in terms of management preferences. The business dynamics were changing but no change in management approach was observed to deal with day to day operations and their long term impact on the businesses processes of the firm. The costs were increasing day by day and instead of reordering or balancing the scheduling approach to synthesize proper inventory management technique, a ware house at very expensive rates was rented to stock the excessive inventory and raw material which further augmented the firms’ expenditures. No proper home work was done on behalf of management in order to cope up with different kind of potential situations that could arise during the march past of the firm through a sensitive growth stage. Neither the cautious moves were taken by the management nor any back up plan put in place to support in case of back firing by any probable business scenario developed. The whole chaos took shape at the expense of poor managerial approach. This whole built up business scenario would have severe negative effects on the firm’s financial structure. The cash out flow increased due to the increased costs of running the operations and the cash inflow decreased due to the increased lead cycle also disturbing the delivery cycle of the product. Cash inflows will also get disturbed due to the maximum focus shift towards standardized products ignoring the cash cow of the company i.e. customized products. So the cash flow cycle was affected in this way and this issue has a potential to turn the company upside down in the long run if proper measures are not taken to curb this main problem as the increased costs and disrupted delivery cycle will eat up the revenues, profit margins and hinder cash inflows substantially.

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