Production and Operations Management: Case Study of Hudson Alpine Furniture
Organizational growth is among the chief objectives for nearly any small business. However, particularly for small business of limited resources and scale, sometimes this growth can come on more rapidly than expected. In such instances, it is incumbent upon the organization to accommodate this growth. This often calls upon organizational leaders to make difficult decisions about how best to proceed. Such is the nature of the dilemma facing Hudson's Alpine Furniture, serving the entire Australian Alps region with custom-designed furniture that is locally sourced and targeted to appeal to private owners of ski lodge properties and vacation rentals. As the analyses hereafter demonstrate though, the unexpected acceleration of commercial buyer interest has led to a Production and Operations Management (POM) impasse that will be examined hereafter.
The impasse centers on the increased workload produced by a heightened demand from commercial buyers. From a sheer technical standpoint, the greater quantity called for, the lower profit margin and the more rigid delivery demands all associated with commercial buyers are not inherently compatible with the production management strategy historically used to do custom woodworking for private buyers. More directly stated, the facilities used for this custom woodworking simple do not have the capacity to take on the new volume of commercial work while maintaining the same expedience and quality of service to which Hudson has historically aspired. The case describes a workshop and warehouse space segmented according to different tasks such as cutting wood, employing a lathe, jointing furniture or completing final assembly. This, combined with the storage demands created by the completion of partial orders for commercial buyers, has pushed the physical space and equipment to its limits. Consequently, production bottlenecks have resulted from a glut of projects and a scarcity of machinery for the completion of simultaneous orders.
Here, our research denotes that Hudson's production flexibility has been hampered by a rapid pace of growth and a short-term delay in making operational adjustments. Accordingly, the text by Panneerselvam (2006) calls for "flexibility in meeting customers' demand in terms of change in product design" and continues on to assert that "very often the design of products/services keep changing because of customers' taste, technological obsolescence and change in technical requirements where these products/services will be used. Under such situations, the design and development section of the organization should immediately respond to these changes and make available the required design so that the organization can retain its customers and also attract more customers." (Panneerselvam, p. 14) This speaks to the dual challenges facing Hudson, which must find ways to adjust the technical aspects of its production process in order to maintain the satisfaction of its private buyers while still growing to accommodate the emergent and potentially profitable demands of its current and future commercial buyers.
The technical limitations at Hudson's Alpine Furniture reflect something of a happy problem for a small company, if properly navigated. That is, the company's sales growth and multiplication of markets have both outpaced the growth of its physical size and strategic orientation. At the time of the case history's writing, Hudson found itself faced with inconsistencies in the area of supply chain management as a consequence of its spatial, labor and equipment limitations. Sodhi et al. (2012) remark that there is a diversity of "gaps" in our understanding of supply chain management that can be used to understand why companies such as Hudson find themselves faced with emergent inconsistencies. Accordingly, Sodhi et al. indicate in their research that "findings characterize the diversity in terms of three "gaps": a definition gap in how researchers define SCRM, a process gap in terms of inadequate coverage of response to risk incidents, and a methodology gap in terms of inadequate use of empirical methods." (Sodhi et al., p. 1)
A methodology gap is perhaps most pertinent to Hudson's case. As a small business with a niche market, the company was able to achieve a great deal of early success without much empirical control over the flux of its supply chain. This would simply respond to daily production needs. However, as the production picture has gained greater complexity, so too have supply chain management demands. Thus, in order for the company to resolve the problems causing its current shortfall of performance expectations, it must conduct empirically controlled internal research on the aspects of its supply chain management that need reconsideration.
Day-to-Day Operational Issues:
Ultimately, in any growth scenario, small business enterprisers will be faced with difficult day-to-day decisions. At present, Hudson must make decisions aimed at prioritizing and deprioritizing its various production projects. These decisions are made largely at the expense of commercial buyer scheduling due to the higher profit margins and greater sales proportion currently represented by private purchase. However, this invokes two managerial dilemma which are pertinent from a day-to-day basis. First and foremost is the reality that the continued growth in prospects of the commercial buying demographic should be managed properly and may well eventually match or even exceed the sales proportion of privately purchased furniture. Secondly, the current strategy for prioritization seems to impose lag times on both private and commercial-purchased items. Much of this can be attributed to a daily uncertainty regarding facility availability. But as Bhaskaran & Ramachandran (2011) assert, a "firm can reduce the uncertainty surrounding product development by dedicating more resources; the effectiveness of this investment depends on the firm's innovative capacity." (Bhaskaran & Ramachandran, p. 541)
It would seem almost beyond a reasonable doubt that Hudson currently finds itself in a scenario where some such considerations must be made. The recommendations for more resources and greater innovation in production development are especially pertinent here, where the company is experiencing positive economic latitude. This should accord it the resources for expansion in the appropriate proportion to the heightened demand. In this respect, it can be argued that the main priority of management on a day-to-day basis must be the achievement of congruity between its production operation and the demands placed on it by its particular market. As Chary (2004) argues, "manufacturing has to very actively support the marketing function. Engineering has to listen to customer needs. Materials and Logistic people have to react swiftly to the needs of the manufacturing system. The human resources (HR) function has to ensure that people within the firm will not only the needed skills but also the essential attitudes." (Chary, 1.2) At present, management is not doing the right things to establish this three-way harmony between HR functions, market demands and manufacturing conditions.
While the path forward for Hudson is uncertain, one possible recommendation to emerge from the company's key decision-makers might be the shift its attention exclusively to commercial buyers. Because they buy products in higher quantities, there may be an argument for this strategic reorientation. However, any such transformation must be made with an understanding of some of the likely effects on the company's financial structure. In particular, the case study denotes that demands from commercial buyers often come with more rigid conditions and pressures. This suggests an inherent adjustment period in which some degree of service failure is likely to occur. As Lapre (2010) reports, because "service failures are inevitable, firms must be prepared to recover and learn from service failures" (Lapre, p. 491)
This denotes the likelihood of a learning curve and even some lost profitability in the short-term as personnel adjust accordingly. In addition, there are inherent challenges which are courted simply by making such a transition into an entity chiefly serving commercial buyers. This decision will remove Hudson from its niche and expose it to a new class of competitors. Thus, its financial structure will depend on maintaining or enhancing certain competitive advantages preemptively. According to Brennan (2010), "an operation provides a competitive advantage by delivering products and services better, faster, and/or cheaper than the competition." (Brennan, p. 4) While Hudson has mastered the production of a "better" product than the competition, its foray into this new market will require the company to also find ways of producing faster. Thus, without sacrificing the quality that distinguishes Hudson's work, the company must work to streamline its production operations. This will likely also mean streamlining its distribution of labor and substantially overhauling its facilities to establish compatibility with the company's new strategic focus.
The improvement of the company's facility may impose the most elaborate changes on the company's financial structure. This denotes an opportunity for the company's leaders to fully reconsider the use of its physical space and the procedures used to produce its goods. It also encompasses a number of emergent challenges specific to manufacturing. As noted by Kleindorfer et al. (2009), "the resulting challenges include integrating environmental, health, and safety concerns with green-product design, lean and green operations, and closed-loop supply chains." (Kleindorfer et al., p. 482) This denotes that with transformation also comes an opportunity to take progressive steps in areas of efficiency and sustainability.