1. ForldRite Furniture Co :
PLANNING TO MEET A SURGE IN DEMAND
magister management 2012
Operational Management Presentation
Presented by Group 2:
Aftina – Alfin – Ali – Azhar
Dame – Frisca – Gita – Iman – Indri

2. 1 2 3 4
Company
Profile
and
Synopsis
Problem
Identification
& Constrain
5
Theoretical Analysis
Solutions
Conclusion
Recommendation
Lesson
Learned
Outline

3. 1
PART 1
Company Profile &
Synopsis

4. 1987
1990s
2006
2007
• Revenue
increase from
$47.5 M
to $60.3 M
• Agregate
growth 3.5%
• Financial
turmoil
• New investor
took over
• Continued
innovation in
both products &
processes.
• Customer
responsiveness
• Lean
maufacturing
• Retention of a
well-
trained,stable &
productive
workforce with
reduced turnover
Part 1 | Company’s Profile & Synopsis

5. Product Categories Product Name High Demand in Season
Folding Table Folding AlStrong Holiday season
Washable & Stackable Chair Green Comfort Holiday season
Folding Chair Cloud Chair Summer
Part 1 | Company’s Profile & Synopsis
Product Competitive Advantages
High Quality
Stylist Innovative
Customized
Environmentally
Friendly
Not Easily
Imitated

6. Part 1 | Company’s Profile & Synopsis
60%29%
9%
2%
Sales
Hospitality
Government, Corporate, School, Colleges
Individual Customer
Others

7. 2
PART 2
Problem Identification

8. Part 2 | Problems Identification
0
20000
40000
60000
80000
100000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2009 Production
2010 Demand
Cloud Chair
0
10000
20000
30000
40000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2009 Production
2010 Demand
AlStrong
0
5000
10000
15000
20000
25000
30000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2009 Production
2010 Demand
Green Comfort

9. Product CloudChair AlStrong GreenComfort
Average Market Price 30,00 90,00 88,00
Raw Material 11,73 49,70 50,24
39,10% 55,22% 57,09%
Required Labor
Skilled 2,00 12,80 13,00
Unskilled 9,00 28,00 31,00
Labor Cost
Skilled 0,84 5,39 5,48
Unskilled 1,49 4,62 5,12
Total 2,33 10,01 10,60
7,77% 11,12% 12,05%
Total Cost 14,06 59,71 60,84
Margin 15,94 30,29 27,16
53,13% 33,66% 30,86%
CloudChair has the highest Contribution Margin and lowest market price
 more profitable
 likely to produce more than others to benefit economic of scale
Part 2 | Problems Identification
Parameters

10. Category Parameters Values
Labor Cost Skilled Worker $19 + 33% benefit = $25.27
Unskilled Worker $10 + 10% benefit = $10.90
Hiring $1,500
Layoff $8,000 (assumption)
Production Operation hours 10 hours / day
Operation days 200 day / year
Working day 4 day / week
Overtime day Friday
Inventory Beginning balanced 0 (at January 2010)
Excess cost Interest Rate x Product Cost
Stock out cost Opportunity cost of Margin
Parameters
Part 2 | Problems Identification

11. Parameters Formula
Demand forcast per month (1) Based on marketing data
Beginning inventory (2) Ending inventory from previous period
Safety stock requirement (3) Half month (two week) of forecasted demand
Production requirement (4) Demand forecasted (1) + Safety Stock (3) –
(Beginning Inventory (2) X 100/95 (yield)
Defect loss (5) 5% X Production Requirement (4)
Finished goods (6) 95% X Production Requirement (4)
Ending inventory (7) Beginning Inventory (2) + Production
Requirement (4) - Demand forecasted (1)
Part 2 | Problems Identification
Parameters

12. Subcontract
• Add extra 20% to cost of labor
• Not need pay set-up fee or commit to minimum order
Design Change
• Cost $15,000 one time charge & take 1 month to implement
• Only applicable to CloudChair Product
Part 2 | Problems Identification
Considerations
Overtime
• Overtime wages were 1.5 time s the normal fully loaded rates
• Introduced fatigue, leading declines in quality
Constant Worker Vary Inventory
High inventory or Shortage of product
Hiring & Layoff
Doesn’t Compatible with Company’s Goals

13. 3
PART 3
The Theories

14. Sales and Operations Planning
Process should help firms to provide:
• Better customer service
• Lower inventory
• Shorten customers lead times
• Stabilize production rates
• Give top management a handle on the business.
Part 3 | The Theories
Aggregate Operation Plan
The main purpose of the aggregate plan is to specify the
optimal combination of:
• Production rate
• Work forces level
• Inventory on hand

15. PURE STRATEGIES
Chase Strategy:
Hiring and laying off employees as the order rate varies
Stable workforce-variable work hours:
Vary the output by varying the number of work hours worked
through flexible work schedules or overtime
Level Strategy:
Maintain a stable workforce working at a constant output rate
MIXED STRATEGY
If two or more strategies used in combination
Part 3 | The Theories

16. AGGREGAT RELEVANT COST
1. Hiring / Lay Off Cost
2. Overtime Cost
3. Inventory Carrying Cost
4. Subcontracting Incremental Cost
5. Part Time Labor Cost
6. Back Order Cost
7. Stock Out Cost
Part 3 | The Theories

17. 4
PART 4
Analysis Solutions

18. AGGREGATE PRODUCTION REQUIREMENT PLANNING
Product Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Demand forcast per
month:
CloudChair 4.480 15.000 45.000 73.800 65.250 79.200 86.400 67.150 34.000 27.000 14.400 12.600
AlStrong 18.816 17.850 27.000 29.700 28.500 36.000 32.400 29.750 25.500 25.200 20.800 15.400
GreenComfort 16.960 16.530 22.680 25.200 22.500 27.900 25.200 21.250 21.250 22.500 17.600 14.000
Beginning inventory CloudChair - 7.756 22.940 38.158 34.587 41.318 45.307 35.826 18.693 14.341 7.885 6.659
AlStrong - 9.939 13.952 15.576 15.031 18.756 17.150 15.717 13.522 13.264 11.056 8.233
GreenComfort - 9.179 11.757 13.208 11.911 14.544 13.336 11.277 11.178 11.810 9.386 7.451
Safety stock
requirement
CloudChair 7.500 22.500 36.900 32.625 39.600 43.200 33.575 17.000 13.500 7.200 6.300 6.300
AlStrong 8.925 13.500 14.850 14.250 18.000 16.200 14.875 12.750 12.600 10.400 7.700 7.700
GreenComfort 8.265 11.340 12.600 11.250 13.950 12.600 10.625 10.625 11.250 8.800 7.000 7.000
Production
requirement
CloudChair 12.611 31.310 62.063 71.860 73.961 85.349 78.597 50.867 30.323 20.904 13.489 12.885
AlStrong 29.201 22.538 29.366 29.868 33.125 35.204 31.710 28.193 25.871 23.512 18.363 15.649
GreenComfort 26.553 19.674 24.761 24.465 25.831 27.322 23.673 21.682 22.444 20.516 16.015 14.262
Defect loss (5%) CloudChair 375 1.125 1.845 1.631 1.980 2.160 1.679 850 675 360 315 315
AlStrong 446 675 743 713 900 810 744 638 630 520 385 385
GreenComfort 413 567 630 563 698 630 531 531 563 440 350 350
Finished goods (95%
yield)
CloudChair 12.236 30.185 60.218 70.229 71.981 83.189 76.919 50.017 29.648 20.544 13.174 12.570
AlStrong 28.755 21.863 28.624 29.155 32.225 34.394 30.967 27.555 25.241 22.992 17.978 15.264
GreenComfort 26.139 19.107 24.131 23.903 25.133 26.692 23.141 21.150 21.882 20.076 15.665 13.912
Ending inventory CloudChair 7.756 22.940 38.158 34.587 41.318 45.307 35.826 18.693 14.341 7.885 6.659 6.629
AlStrong 9.939 13.952 15.576 15.031 18.756 17.150 15.717 13.522 13.264 11.056 8.233 8.097
GreenComfort 9.179 11.757 13.208 11.911 14.544 13.336 11.277 11.178 11.810 9.386 7.451 7.363

19. Jan Feb Mar Apr May Jun Jul
CloudChair - 37.067 64.817 71.117 48.617 26.117 (1.783)
AlStrong - 5.938 11.295 12.144 10.293 5.000 (3.152)
GreenComfort - 3.385 5.928 6.135 3.823 396 (4.616)
Working Hours in Month 160 150 180 180 150 180 180
CloudChair 12.611 31.310 62.063 71.860 73.961 85.349 78.597
AlStrong 29.201 22.538 29.366 29.868 33.125 35.204 31.710
GreenComfort 26.553 19.674 24.761 24.465 25.831 27.322 23.673
Production total CloudChair 544.219
AlStrong 322.601
GreenComfort 267.198
Production hours required
Skilled CloudChair 18.141
AlStrong 68.822
` GreenComfort 57.893
Unskilled CloudChair 81.633
AlStrong 150.547
` GreenComfort 138.052
Worker required
Skilled CloudChair 10 10 7
AlStrong 35 35 28
` GreenComfort 29 29 25
Unskilled CloudChair 41 41 30
AlStrong 76 76 60
` GreenComfort 70 70 59
Beginning inventory
Production requirement
Calculating Required Worker

20. PLAN 1
Hiring & Training Workers

21. PLAN 1 : Exact Production, Hiring & Training Workers
Product Jan Feb Mar Apr May Jun Jul
CloudChair 12.611 31.310 62.063 71.860 73.961 85.349 78.597 544.219
AlStrong 29.201 22.538 29.366 29.868 33.125 35.204 31.710 322.601
GreenComfort 26.553 19.674 24.761 24.465 25.831 27.322 23.673 267.198
Production hours required
CloudChair 420 1.044 2.069 2.395 2.465 2.845 2.620
AlStrong 6.230 4.808 6.265 6.372 7.067 7.510 6.765
GreenComfort 5.753 4.263 5.365 5.301 5.597 5.920 5.129
CloudChair 1.892 4.696 9.309 10.779 11.094 12.802 11.790
AlStrong 13.627 10.518 13.704 13.938 15.459 16.428 14.798
GreenComfort 13.719 10.165 12.793 12.640 13.346 14.116 12.231
Working Hours in Month 160 150 180 180 150 180 180 2.000
Workers required per month (Production Hours Required / Working Hours in Month)
CloudChair 3 7 12 14 17 16 15 9
AlStrong 39 33 35 36 48 42 38
GreenComfort 36 29 30 30 38 33 29
CloudChair 12 32 52 60 74 72 66
AlStrong 86 71 77 78 104 92 83
GreenComfort 86 68 72 71 89 79 68
New workers required per month - 30 38 12 95 - -
Layoff worker per month - 46 - 1 - 36 35
Keep a skilled worker with full wage - 13 13 8 - - -
Training unskilled worker to be a skilled per month - 12 - - - - -
Cost fo hiring new workers required per month - 9.163 2.527 798 36.421 - - 58.441
Cost of layoff worker per month - 92.000 - 2.000 - 72.000 70.000 508.000
Straight time cost 201.474 157.788 207.592 210.578 227.110 242.561 215.326 2.227.429
Total Labor Cost 201.474 258.950 210.119 213.376 263.531 314.561 285.326 2.793.870
Material Cost 2.933.218 2.475.848 3.431.516 3.556.465 3.811.637 4.123.444 3.687.258 35.841.006
Total Cost 3.134.692 2.734.798 3.641.635 3.769.841 4.075.168 4.438.005 3.972.584 38.634.875
Sales revenue 3.320.320 3.511.140 5.775.840 7.104.600 6.502.500 8.071.200 7.725.600 65.665.000
Margin 185.628 776.342 2.134.205 3.334.759 2.427.332 3.633.195 3.753.016 27.030.125
Unskilled workers
Production requirement
Skilled workers
Unskilled workers
Skilled workers

22. Problem Analysis Hiring & Training New Labors
PRO CONS
1. Cost. It is profitable
2. Sustainability; can meet demand if
the demand continuous to increase
3. No need to train; the workers can
perform well from the start
1. Demoralization; future lay off of
superfluous labors may demoralize
other workers
1. Sustainability; can meet the demand
if demand continous to increase
1. Cost; management and supervisor
resources
2. Subsequent result; layoff these new
workface and cost the company in
added unemployment insurance
3. Time; training unskliled workers to
skliled position takes four weeks
Full time regular direct
workers
Training unskilled
workers

23. PLAN 2
Constant Worker, Vary
Inventory

24. PLAN 2 : Constan Worker, Vary Inventory
Jan Feb Mar Apr May Jun Jul
Actual production
Finished Goods (95% yield) CloudChair 41.547 42.750 51.300 51.300 42.750 51.300 51.300 565.947
AlStrong 24.754 23.207 27.849 27.849 23.207 27.849 27.849 309.429
GreenComfort 20.345 19.073 22.888 22.888 19.073 22.888 22.888 254.308
CloudChair 4.480 15.000 45.000 73.800 65.250 79.200 86.400 524.280
AlStrong 18.816 17.850 27.000 29.700 28.500 36.000 32.400 306.916
GreenComfort 16.960 16.530 22.680 25.200 22.500 27.900 25.200 253.570
CloudChair 37.067 64.817 71.117 48.617 26.117 (1.783) (36.883) 151.550
AlStrong 5.938 11.295 12.144 10.293 5.000 (3.152) (7.703) 3.377
GreenComfort 3.385 5.928 6.135 3.823 396 (4.616) (6.928) (12.771)
CloudChair 7.500 22.500 36.900 32.625 39.600 43.200 33.575 266.200
AlStrong 8.925 13.500 14.850 14.250 18.000 16.200 14.875 151.750
GreenComfort 8.265 11.340 12.600 11.250 13.950 12.600 10.625 125.305
CloudChair 29.567 42.317 34.217 15.992 (13.483) (44.983) (70.458)
AlStrong (2.987) (2.205) (2.706) (3.957) (13.000) (19.352) (22.578)
GreenComfort (4.880) (5.412) (6.465) (7.427) (13.554) (17.216) (17.553)
CloudChair 62.356 89.246 72.163 33.726 - - - 349.092
AlStrong - - - - - - - -
GreenComfort - - - - - - - -
62.356 89.246 72.163 33.726 - - - 349.092
CloudChair - - - - 32.239 107.555 168.466 669.898
AlStrong 13.570 10.016 12.295 17.981 59.067 87.925 102.584 674.135
GreenComfort 19.883 22.050 26.337 30.257 55.218 70.139 71.513 562.521
33.453 32.066 38.632 48.238 146.524 265.618 342.562 1.906.554
Straight time cost (Production Hours Required x Labor Cost) 2.567.280
CloudChair 1.344 1.260 1.512 1.512 1.260 1.512 1.512 16.800
AlStrong 30.184 28.298 33.957 33.957 28.298 33.957 33.957 377.300
GreenComfort 25.427 23.838 28.606 28.606 23.838 28.606 28.606 317.840
CloudChair 9.774 32.576 42.650 43.441 48.016 51.247 46.140 436.300
AlStrong 56.179 52.668 63.202 63.202 52.668 63.202 63.202 702.240
GreenComfort 57.344 53.760 64.512 64.512 53.760 64.512 64.512 716.800
Total Material 2.739.744 2.613.084 3.135.701 3.135.701 2.613.084 3.135.701 3.135.701 34.793.573
Total Cost 2.982.353 2.894.729 3.442.301 3.404.656 2.820.923 3.378.736 3.373.629 37.709.945
Total Sales 3.320.320 3.511.140 5.775.840 7.104.600 6.502.500 8.071.200 7.725.600 65.665.000
Margin 337.967 616.411 2.333.539 3.699.944 3.681.577 4.692.464 4.351.971 27.955.055
Cost of shortage of inventory
Skilled workers
Unskilled workers
Demand forcast per month:
Ending inventories
Safety stock
Excess (shortage) of inventory
Cost of excess of inventory

25. Problem Analysis Constant Level of Production
1. producing above the demand
may result in high inventory
level
2. There are cost of carrying
inventory
3. When demand was very high
but production constant may
result in shortage of product
PROS
1. Labour work in a constant time,
produce the same amount per day
makes labour on high productivity and
avoid fatigue
2. Utility of machine easily measure
3. Furniture design likely to change in
long period
4. Keeping inventory in some level help
Foldrite for fast delivery
Recomendation :
By calculating existing labour based on December 2009 data, Foldrite must add
labour to produce constant level of product without overtime to fulfill demand
forecast for the year of 2010. Cost of additional labour and do constant level of
production, although result in vary of inventory level still below the cost of do
nothing (not add worker, no overtime, no training, no subcontracting and no
change in design)
CONS

26. PLAN 3
Subcontracting

27. PLAN 3: Constant Low Workforce, Subcontract
Jan Feb Mar Apr May Jun Jul
Working Hours in Month 160 150 180 180 150 180 180 2.000
CloudChair 12.611 31.310 62.063 71.860 73.961 85.349 78.597 544.219
AlStrong 29.201 22.538 29.366 29.868 33.125 35.204 31.710 322.601
GreenComfort 26.553 19.674 24.761 24.465 25.831 27.322 23.673 267.198
Production hours available
Skilled CloudChair 480 450 540 540 450 540 540 20.000
AlStrong 6.240 5.850 7.020 7.020 5.850 7.020 7.020 70.000
` GreenComfort 5.760 5.400 6.480 6.480 5.400 6.480 6.480 58.000
Unskilled CloudChair 1.920 1.800 2.160 2.160 1.800 2.160 2.160 24.000
AlStrong 13.760 12.900 15.480 15.480 12.900 15.480 15.480 152.000
` GreenComfort 13.760 12.900 15.480 15.480 12.900 15.480 15.480 140.000
Actual production
Finished Goods (95% yield) CloudChair 12.160 11.400 13.680 13.680 11.400 13.680 13.680 152.000
AlStrong 27.788 26.051 31.261 31.261 26.051 31.261 31.261 347.344
GreenComfort 25.255 23.677 28.412 28.412 23.677 28.412 28.412 315.692
CloudChair 29.567 42.317 34.217 15.992 - - - 165.525
AlStrong - - - - - - - -
GreenComfort - - - - - - - -
29.567 42.317 34.217 15.992 - - - 165.525
CloudChair 1.260 55.668 135.278 162.671 174.921 200.388 181.509 1.096.645
AlStrong 16.980 - - - 84.980 47.363 5.398 154.721
GreenComfort 16.501 - - - 27.397 - - 43.898
34.740 55.668 135.278 162.671 287.299 247.751 186.907 1.295.264
Straight time cost (Production Hours Required x Labor Cost)202.485 189.830 227.795 227.795 189.830 227.795 227.795 2.531.060
Total Material 2.792.506 2.617.974 3.141.569 3.141.569 2.617.974 3.141.569 3.141.569 34.906.326
Total Cost 3.029.731 2.863.472 3.504.643 3.532.036 3.095.103 3.617.116 3.556.272 38.732.650
Total Sales 254.893 4.770.140 5.724.167 5.724.167 4.770.140 5.724.167 5.724.167 58.768.605
Margin (2.774.838) 1.906.667 2.219.525 2.192.132 1.675.037 2.107.052 2.167.896 20.035.955
Production requirement
Unit subcontract per month:
Cost of excess subcontracting

28. Problem Analysis Subcontracting
1. Get the job done right and
on time
2. Don’t need to spend
money on recruitment
and training
3. Can have relatively flexible
change according to the
demand
1. Inventory cost and extra
to the cost of labor for the
product.
2. Finding the right
subcontractor can be
difficult
3. Communication can be
problematic
4. Difficult to maintain the
quality of product
PROS CONS

29. PLAN 4
Overtime

30. PLAN 4 : Constant Workforce, Overtime
Jan Feb Mar Apr May Jun Jul
CloudChair - 37.067 61.017 62.757 35.697 9.397 - 302.990
AlStrong - 5.938 11.295 12.144 10.293 5.000 - 56.326
GreenComfort - 3.385 5.928 6.135 3.823 396 - 25.750
Working Hours in Month 160 150 180 180 150 180 180 2.000
CloudChair 12.611 31.310 62.063 71.860 73.961 85.349 78.597 544.219
AlStrong 29.201 22.538 29.366 29.868 33.125 35.204 31.710 322.601
GreenComfort 26.553 19.674 24.761 24.465 25.831 27.322 23.673 267.198
Actual production
Finished Goods (95% yield) CloudChair 41.547 38.950 46.740 46.740 38.950 46.740 46.740 519.333
AlStrong 24.754 23.207 27.849 27.849 23.207 27.849 27.849 309.429
GreenComfort 20.345 19.073 22.888 22.888 19.073 22.888 22.888 254.308
CloudChair 4.480 15.000 45.000 73.800 65.250 79.200 86.400 524.280
AlStrong 18.816 17.850 27.000 29.700 28.500 36.000 32.400 306.916
GreenComfort 16.960 16.530 22.680 25.200 22.500 27.900 25.200 253.570
CloudChair 37.067 61.017 62.757 35.697 9.397 (23.063) (39.660) 298.043
AlStrong 5.938 11.295 12.144 10.293 5.000 (3.152) (4.551) 58.838
GreenComfort 3.385 5.928 6.135 3.823 396 (4.616) (2.312) 26.488
CloudChair - - - - - 23.063 39.660 85.730
AlStrong - - - - - 3.152 4.551 11.152
GreenComfort - - - - - 4.616 2.312 6.928
Overtime hours
Skilled CloudChair - - - - - 769 1.322 2.858
AlStrong - - - - - 672 971 2.379
` GreenComfort - - - - - 1.000 501 1.501
Unskilled CloudChair - - - - - 3.460 5.949 12.860
AlStrong - - - - - 1.471 2.124 5.204
` GreenComfort - - - - - 2.385 1.195 3.580
Overtime cost
Skilled CloudChair - - - - - 29.141 50.110 108.320
AlStrong - - - - - 25.486 36.805 90.177
` GreenComfort - - - - - 37.911 18.990 56.902
Unskilled CloudChair - - - - - 51.374 88.343 190.964
AlStrong - - - - - 21.841 31.541 77.281
` GreenComfort - - - - - 35.417 17.741 53.159
Straight time cost 180.253 168.987 202.784 202.784 168.987 202.784 202.784 2.253.160
Total Material 2.739.744 2.568.510 3.082.212 3.082.212 2.568.510 3.082.212 3.082.212 34.246.798
Total Cost 3.015.806 2.850.795 3.378.160 3.339.712 2.923.998 3.802.665 3.844.602 39.016.748
Total Sales 3.320.320 3.511.140 5.775.840 7.104.600 6.502.500 8.071.200 7.725.600 65.665.000
Margin 304.514 660.345 2.397.680 3.764.888 3.578.502 4.268.535 3.880.998 26.648.252
Demand forcast per month:
Unit available before overtime
Overtime unit
Beginning inventory
Production requirement

31. Problem Analysis Overtime
1. No need to lay off the
superfluous labors and
thus suffer from the
demoralization and high
unemployment insurance
after the surge in demand
2. Flexibility: can make
change according to the
change of the demand
PROS
1. High cost: overtime wages were 1.5 times
the normal fully loaded rates.
2. Decline in quality and yield: overtime may
lead to labors’ fatigue
3. Potential risk: may not able to meet the
demand if the demand continues to
increase
4. Negative effect on potential labors: the
long-lasting overtime may discourage other
labor join in the company
CONS

32. PLAN 5
Design Change

33. PLAN 5 : Design Change
Jan Feb Mar Apr May Jun Jul
CloudChair - 37.067 61.017 62.757 35.697 9.397 - 302.990
AlStrong - 5.938 11.295 12.144 10.293 5.000 - 56.326
GreenComfort - 3.385 5.928 6.135 3.823 396 - 25.750
Working Hours in Month 160 150 180 180 150 180 180 2.000
CloudChair 12.611 31.310 62.063 71.860 73.961 85.349 78.597 544.219
AlStrong 29.201 22.538 29.366 29.868 33.125 35.204 31.710 322.601
GreenComfort 26.553 19.674 24.761 24.465 25.831 27.322 23.673 267.198
Production hours available
Skilled CloudChair 1.600 1.500 1.800 1.800 1.500 1.800 1.800 20.000
AlStrong 5.600 5.250 6.300 6.300 5.250 6.300 6.300 70.000
` GreenComfort 4.640 4.350 5.220 5.220 4.350 5.220 5.220 58.000
Unskilled CloudChair 6.560 6.150 7.380 7.380 6.150 7.380 7.380 82.000
AlStrong 12.160 11.400 13.680 13.680 11.400 13.680 13.680 152.000
` GreenComfort 11.200 10.500 12.600 12.600 10.500 12.600 12.600 140.000
Actual production
Finished Goods (95% yield) CloudChair 41.547 38.950 46.740 46.740 38.950 46.740 46.740 519.333
AlStrong 24.754 23.207 27.849 27.849 23.207 27.849 27.849 309.429
GreenComfort 20.345 19.073 22.888 22.888 19.073 22.888 22.888 254.308
CloudChair 4.480 15.000 45.000 73.800 65.250 79.200 86.400 524.280
AlStrong 18.816 17.850 27.000 29.700 28.500 36.000 32.400 306.916
GreenComfort 16.960 16.530 22.680 25.200 22.500 27.900 25.200 253.570
CloudChair 37.067 61.017 62.757 35.697 9.397 (23.063) (39.660) 298.043
AlStrong 5.938 11.295 12.144 10.293 5.000 (3.152) (4.551) 58.838
GreenComfort 3.385 5.928 6.135 3.823 396 (4.616) (2.312) 26.488
Overtime cost
Skilled CloudChair - - - - - 29.141 50.110 108.320
AlStrong - - - - - 25.486 36.805 90.177
` GreenComfort - - - - - 37.911 18.990 56.902
Unskilled CloudChair - - - - - 51.374 88.343 190.964
AlStrong - - - - - 21.841 31.541 77.281
` GreenComfort - - - - - 35.417 17.741 53.159
Cost of excess of inventory 62.356 81.232 54.532 6.478 - - - 576.010
Cost of shortage of inventory 33.453 32.066 38.632 48.238 186.501 316.499 316.075 1.363.977
Design change setup cost 15.000
Straight time cost 180.253 168.987 202.784 202.784 168.987 202.784 202.784 2.253.160
Total Material 2.739.744 2.568.510 3.082.212 3.082.212 2.568.510 3.082.212 3.082.212 34.246.798
Total Cost 3.015.806 2.850.795 3.378.160 3.339.712 2.923.998 3.802.665 3.844.602 39.031.748
Total Sales 3.320.320 3.511.140 5.775.840 7.104.600 6.502.500 8.071.200 7.725.600 65.665.000
Margin 304.514 660.345 2.397.680 3.764.888 3.578.502 4.268.535 3.880.998 26.633.252
Beginning inventory
Production requirement
Demand forcast per month:
Unit available before overtime

34. Problem Analysis Change Design
1. Once for all: increase the
productivity
1. High cost
2. Long time: it takes one month
to change
3. Little effect: the change may
not have too great influence
on the whole productivity
PROS CONS

35. 5
PART 5
Conclusions
Recommendations
Lesson Learned

36. Conclusions
Plan 1 : Exact Production, Vary Workforce
Plan 2 : Constant Workforce, Vary Inventory and Stock out
Plan 3 : Constant Low Workforce, Subcontract
Plan 4 : Constant Workforce, Overtime
Plan 5 : Design Change
Cost Plan 1 Plan 2 Plan 3 Plan 4 Plan 5
Hiring 58.441
Layoff 2.032.000
Excess Inventory 349.092 576.010 576.010
Shortage 1.906.554
Subcontract 1.295.264
Overtime 576.802 576.802
Design change 15.000
Straight time 2.227.429 2.567.280 2.531.060 2.253.160 2.239.220
Total 4.317.870 4.822.926 3.826.324 3.405.972 3.407.032

37. Conclusions
• FoldRite goal to reduced turnover of work force aligned with stable
workforce strategy. To be a lean manufacturer which has flexibility
to response specific customer requirement, the company could
adopt level strategy.
• Demand variations are high for CloudChair product, so the planning
system must include sufficient flexibility to cope with, that can
achieved by cross-training worker to handle a wide variety of
orders, developing alternative source of supply, and engaging in
more frequent replanning during high-demand periods.
• Chasing strategy at Plan 1 with target production to fullfill
demand requirement using flexible workforce by hiring, training,
and layoff labors seems to be suffer with layoff cost and this also
doesn’t compatible with FoldRite goals. Design change did not
siginificant lowering cost (only 1 minutes improvement for
CloudChair product). Other alternative planning are more suitable
with FoldRite strategy to achieve 4 goals.
• Relationship with among various functional unit, including
marketing is a key of success to manage production planning.

38. Recommendations
• More production for CloudChair since it has greater contribution margin
and lower cost of production and cheaper product line.
• Keep planning strategy aligned with company goals by choosing stable
workforce and level strategy. For seasonal product, it’s more efficient to
have constant of labor and subcontracting the rest of demand. This could
affect to lower employee turnover also, managing quality of product and
lowering inventory fluctuation.
• By calculating existing labour based on December 2009 data, FoldRite
must add labour to produce constant level of product without overtime to
fulfill demand forecast for the year of 2010. Cost of additional labour and
do constant level of production, although result in vary of inventory level
still below the cost of do nothing (not add worker, no overtime, no
training, no subcontracting and no change in design).
• The usage of MRP, ERP, SCM, and other IT related system to improve
production planning quality.

39. Lessons Learned
• Cost reduction initiative for labor cost will not
give significant effect if the labor portion only
small amount of overall cost structure. Reduction
of material cost has more impact on cost
reduction since it’s has 6 time larger than labor
cost.
• Seasonal effect of CloudChair should compensate
with other product that has opposite seasonal
effect to reduce risk of materialized demand.

40. ThankYou