As the regular weekly management meeting concluded on the morning of Monday, January 19, 2015, Mayank Chadha, chief operating officer (COO) at Westridge Cabinets in Red Deer, Alberta, stayed behind in the meeting room with Victor Maracle, vice president manufacturing, to review the issues that had been raised in the discussion. Mayank commented to Victor about the challenges they faced:
Manufacturing lead times and capacity issues make it difficult to meet customer delivery dates without expediting. Meanwhile, some customers are delaying orders at the last minute, squandering production capacity and driving up inventory levels. We need to improve our on-time delivery performance without increasing our manufacturing costs.
The budget for next fiscal year has to be finalized by the end of the month, which means I need to get a handle on the improvements we can make in our manufacturing operations and the resulting cost structure, including staffing levels in the plant. We should be realistic with our forecast, but at the same time our plan needs to show significant improvement over this year’s results. Let’s meet on Friday morning to review options. I will send you my analysis and notes before the meeting.
WESTRIDGE CABINETS
Established in 1983, Westridge Cabinets (Westridge) had grown to become Alberta’s largest fully integrated cabinet manufacturer. With a broad product range and a reputation for delivering well-crafted, quality products, Westridge served the new home construction and renovation markets. Most cabinets were for kitchens and bathrooms.
The company’s head office and 150,000-square-foot manufacturing facility were located in Red Deer, Alberta. Westridge distributed its products through authorized dealers in central and western Canada, as well as the United States. In addition, Westridge had showrooms and localized design, service and installation centres in Red Deer, Edmonton and Calgary, which were referred to as “branches.”
Every Westridge cabinet was a custom order, and almost every component — including doors, drawer faces, drawer boxes and panel parts — was manufactured by Westridge. The company offered more than 50 styles, which could be finished in 45 different stains, dozens of paints and thermofoils, and eight species of woods.
ORDER PROCESS
Westridge salespeople dealt with both homeowners and builders when quoting new work. The homeowners would approve the style and finish of the products, and the builder would coordinate the delivery and installation dates. In some situations, Westridge would negotiate contracts with builders to supply cabinets for new single-dwelling homes for subdivisions or condominium developments.
Orders for most cabinets were placed at 8 to 14 weeks before the expected delivery, and the preliminary design and delivery schedule were set. When construction at the customer site reached the point that drywall had been completed, it was possible to accurately measure the dimensions of the area where the cabinets would be placed. A Westridge field inspector would visit the site and make changes to the design as required. Each house, even in subdivisions of similar homes, would have slightly different wall lengths and dimensions, making it impossible to build cabinets solely based on the construction blueprints; thus, all cabinets were required to be custom-made. The revised design would then be reviewed by the production administrator (PA review), who would create a bill of material and forward it to the purchasing manager who would determine the raw material availability.
Approximately 25 days1 before the scheduled delivery date, Jamie Johnson, the logistics manager, would call the builder to set a confirmed ship date (CSD). The builder would then indicate that the construction was on schedule, or a delay of as much of eight weeks could be required. Jamie would notify the appropriate branch of the CSD so that it could arrange for a pre-production check (PPC) by the field inspector to confirm that the site had been drywalled and was ready to accept the cabinets.
Approximately 17 days before the CSD, Jamie called the builder to re-confirm the ship date. If there were no delays, he would set a date with the builder, which was referred to as a “locked CSD.” An order with a locked CSD was automatically placed into the production schedule. At that point, one of Westridge’s three installation coordinators (one was located at each branch) called the builder to schedule installation.
Three or four days prior to the delivery date, Jamie called the builder to confirm the delivery arrangements.
Approximately one-third of the deliveries would be “pushed out” to a later date, typically because of problems at the construction site. Most of these delays were one week or less. Production delays (typically of two to three days) or quality issues affected approximately 20 per cent of deliveries. Once the order was ready, most deliveries were made within one day, and installation ranged from one to four days.
MANUFACTURING PROCESS
Westridge manufactured three families of cabinets, classified on the basis of the finish of the door: wood, thermofoil and melamine. Wood doors were available in a spray stain or wipe stain finishes, and accounted for 35 and 20 per cent of total volume, respectively. Approximately 10 per cent of wood doors added a glaze finish. Melamine was an engineered-wood product consisting of decorative paper saturated with melamine resins laminated to particleboard. Melamine boards were available in a variety of colours and textures, and accounted for approximately 35 per cent of total volume. Thermofoil was a plastic material that was thermoformed to an underlying core, such as medium-density fibreboard (MDF) or particleboard. Thermofoil cabinet doors were offered in a variety of solid colours and imitation wood grains, and represented the remaining 10 per cent of production volume. Wood door cabinets had historically represented more than 90 per cent of total volume at Westridge. However, melamine and foil cabinets had steadily increased in popularity during the past three years, due in part to their lower cost compared with wood cabinets.
Exhibit 1 shows the process flow, and Exhibit 2 provides the cycle times for each operation, current staffing levels and backlogs. Planning and scheduling at Westridge used a “box” as the common unit across all departments. A box represented the front doors (wood, melamine or thermofoil) and box parts, which consisted of the top, bottom, rear and sides of the cabinet. Box parts were manufactured from a water-resistant material that was easy to maintain, such as MDF, particleboard or plywood with a veneer finish. Customers installed a variety of finishes on cabinet countertops, such as granite or marble, which were manufactured and installed separately from the cabinets. Most customer orders, such as kitchen cabinets, consisted of several boxes. Exhibits 3 and 4 provide examples of products offered by Westridge.
Cycle times in each department were based on the average time needed to complete that segment of a box (Exhibit 2). For example, wood preparation required 23 minutes to complete a box, and sanding took an average of 32 minutes per box. Cabinet components (doors and box parts) came together in the staging area, where the components were organized before being sent to assembly. The average time to assemble a box was 36 minutes, regardless of product type.
PRODUCTION SCHEDULING
The plant ran two nine hour shifts per day, five days per week, which included one hour for unpaid breaks (a 30-minute unpaid lunch and two 15-minute breaks). As a result the plant operated eight hours on each shift, and plant workers were paid an average of hourly rate of approximately $20. Overtime was used sparingly. Jamie Johnson, who was responsible for scheduling the plant, described the process:
My biggest challenge is level-loading the plant since orders fluctuate significantly. Our policy is to schedule 250 boxes per day in the plant, and orders with the shortest delivery lead times are given the highest priority. I set the schedule 17 days in advance to provide enough lead time for manufacturing. When the order book is strong I try to push delivery dates out when I call the builders to set the CSD. If the order book is weak, then I will try to move up the delivery dates when setting the CSD. I end up tweaking the delivery schedule when I call to lock the CSD with the builder because of requests to change delivery dates.
Each day’s order moves through the plant in unison, regardless of customer or product mix. The lacquer process takes an entire day, including curing time, so that department sets the pace in which each batch moves from department-to-department — one day at a time. For example, each batch of wood doors spends its first day in panel pro south and moves to wood prep on the second day, then to sanding the third day, and so on. In the case of thermofoil, the doors move to the foil shop three days after entering panel pro south. Melamine doors take six days to go from panel pro south to staging. As a result, the manufacturing lead time is eight to nine days, regardless of the product. In reality, it can take longer to complete most orders because of unexpected quality or production problems. Expediting happens frequently when customer orders are delayed in manufacturing or when they call unexpectedly to move-up the delivery date.
CONSIDERING HIS OPTIONS
For his analysis, Mayank decided to use data from the period June to August 2014, which tended to be the busiest period for the company. Exhibit 5 shows the orders received during that period, and Exhibit 6 shows the number of boxes shipped. Mayank commented on the challenges he faced at Westridge:
The cabinet market is very competitive, so we need to keep our costs in line. At the same time, on-time delivery is critical. Builders do not want to hold up construction projects because of delays receiving cabinets. We have backlogs in several departments that are contributing to delivery problems. Some of our big customers are getting frustrated with our poor on-time delivery performance.
It is common for orders to get expedited because customers want to move up deliveries. We try to push these orders through the factory relatively quickly. Meanwhile, other orders get ‘pushed-out’ by the customer, usually because of problems at the construction site. These orders take a lower priority and can sit in inventory for several days before a new delivery date is set. We should carry anywhere from 2,000 to 2,500 boxes in work-in-progress inventory to support our current production level. Right now inventories are running closer to 3,500 boxes.
In addition, our product mix is evolving. When Signal Hill acquired Westridge we were manufacturing wood door cabinets almost exclusively. Today, thermofoil and melamine cabinets represent almost one-half of our volume, and the popularity of these products continues to increase.
The plant has been in operation for 30 years and we need to take a look at doing some things differently. My immediate challenge is how to get product through the plant faster without increasing our costs.
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Read the Westridge Cabinets case and then answer the following questions. See also the Westridge Cabinets Exhibits spreadsheet with Exhibits 2, 5, and 6. A. [10 pts] Capacity Analysis: i. What is the current percentage product mix for each of the six major product families: Spray stain, spray stain/glaze, wipe stain, wipe stain/glaze, Thermofoil, Melamine? ii. How much time does the average box require at each of the steps show in Exhibit 1, i.e., what is the unit load in minutes for the average box? (Hint: If only 55% of the boxes use a step, the unit load is only 55% of the process time at that step.) iii. What is the capacity of each of the process steps in boxes for an 8-hour shift? (Assume each staff member works on one box at a time at a processing step, and each box is worked on by only one staff member at a processing step) iv. What is the bottleneck under the current product mix? What is the bottleneck capacity in average boxes per day? For each of the six major products what is the bottleneck and its capacity, i.e., which step is the throughput restricting step for that product? v. What is the implied utilization of each step assuming 250 boxes are put into production each day? (Implied utilization = 250 boxes/Capacity) B. [10 pts] Flow Time Analysis: i. What is the average cumulative waiting time for each of the products in the production system? (Hint: What is the backlog for each of the production steps?) ii. Under the current scheduling policy, how long would it take to get each box through the production process if there were no backlogs? iii. What is the total throughput time for each of the product families, i.e., how long does the average box spend in production under current scheduling policy? iv. Compare the average total throughput time for a box to the work-in-progress inventory. v. Compare the total throughput time to the minimum possible production time for each product if there were no delays.
C. [5 pts] Variability i. What are the major sources of variability? Characterize the level of variability. ii. How does Westridge Cabinets address the variability? (1-2 paragraphs) D. [10 pts] Current Strategy i. On what dimensions does Westridge Cabinets compete in the marketplace? What should be noted about the firm's position in the market? ii. What is the broad operations strategy they are taking? Why have they taken this approach? iii. What are the asset and process choices they have made to support the operations strategy? Why have they made these choices? iv. What are the gaps between the operations strategy and the business strategy? In what ways does the operations strategy, its asset and process choices, fail to support the business strategy? E. [25 pts] Improvement What should Mayank Chadha do to improve the manufacturing operations at Westridge Cabinets? Explain clearly what you would recommend and why you believe this will help? (1-2 pages)