PGDIE A: Roll No. 31-40Operations Management1Company HistoryDore Dore was established by Jean Baptiste in 1819It was the world class manufacturer of fashionable knitted productsIts hosiery division produced socks and stockings for men, women and children & accounted for 88% of DDs salesIts knitwear division produced a line of children's knitwear such as play clothes, sweaters and nightclothes.

2Dore-DoreBeginning course details and/or books/materials needed for a class/project.2ContdIt focused on both quality and fashionIt produced hose not only under its DD trademark, but also for famous designers.DD commented a 30% to 40% market share in this segmentOne of DDs competitive strengths was its superior customer service for hosiery.3Dore-DoreCompany BackgroundDore-Dore established itself as a world class manufacturer of fashionable knitted products.Its hosiery division is accounted for 88% of total DD sales.Due to change in fashion trends, 75% of knitwear collections changed each year.Its hosiery line was characterized by unusual breadth, detail, wide variety and sizes and also impeccable fit4Dore-DoreMarket ShareDD was mainly selling its products through retailors and exclusive stores like Le Printemps and Le Galeries Lafayette. High end segment of hosiery only accounted for 5% in French hosiery market.Out of which DD market share was 30% to 40%DD share of children knitwear market is mere 0.5%.In 1990 sales are expected to total of 250,000,000FF out of which 35% came from exports.5Dore-DoreExisting Scenario(1990)Francois Marguet was appointed as Director of Operations Competitive Pressures rising labour costs and improving service levels of the competitors.Challenge of what changes could be made in the operations to strengthen the companys competitive position.6Dore-DoreRelative vocabulary list. 6ReplenishmentDore-Dore7HOSIERY:Key factor of its customer service strategy was immediate fulfilment of replenishment orders for basic hosiery items.25000-35000 SKUs were classified as replenish able with 2 to 3 days for replenishment. Such rapid response proved costly as they had to hold substantial inventories of finished hosiery itemsDD does not promise replenishment for fashion hosiery. Replenishment was done only if the desired fashion hosiery was available in stock.

Replenishment contd.Dore-Dore8KNITWEAR: DD did not offer replenishment of childrens knitwear products. Retailers placed orders far ahead of the season and DD delivered orders in full at the beginning of the seasonThe Problem StatementDore-Dore9Designing of the products, forecasting and preliminary production schedules were made a full year before the delivery of finished goodsLong lead time is often dangerous as the apparel market segment is quite volatile in regards to fashion and is often at the mercy of natureThe weather dependent articles have seen a big fluctuation in sales when there is unusually hot summer or cooler winter leading to obsolete inventories in case of plummeting demand or stock-outs when demand is plungingThe StrategyDore-Dore10Marguet started to investigate Quick response strategies that would link production and actual demand closelyThe requisite speed and flexibility to respond to the shifting market demandQuick response mode involved making demand forecasts and establishing production schedules closer to selling season, reducing lead times and basing replenishment on actual sales dataMarguet thought that quick response might also allow the company to move from two to four collections per year which helps to meet customer preferencesOperations-KnitwearDore-Dore11 Factory Produces 37,000 pairs of hose and 2,000 childrens garments per day. Production is achieved in two Campaigns 1) First campaign production is done on the basis of forecast from previous year sales data 2) Second Production is started after receiving early orders from retailersLong throughput time leading to slow response to meet demand

ContdDore-Dore12Long throughput time also leading to huge inventories carrying cost, around 20% to 25% 21000000 FF raw material 13,000,000 FF work in progress 45,000,000 FF finished goodsFashion products making forecast more complicated due to volatility of fashion trendsFashion products are very important from long term strategy point of view

Cost Structure for HosieryDore-Dore13Material/Operation Cost (in FF)Raw Material7.08Knitting0.99Sewing0.95Ironing0.15Quality Control and finishing0.72Factory Overhead5.80Cost for Seconds & Closeouts1.10Total Manufacturing Cost17.42 per pairWholesale Selling Price30-32 per pairRetail Selling Price60-70 per pairIntro: Cellular Manufacturing(Knitwear)Dore-Dore14Factors that contributed to the set up of childrens knit wear division To experiment outside flagship hosiery line Lesser dependence of knitwear on heavy machinery It was a more competitive market

The manufacturing experimentation with childrens knit wear division was expected to provide valuable clues for improvements in the hosiery divisions operations

Planning and Production Cycle(Knitwear)Dore-Dore15Production Details (Knitwear) Dore-Dore1680% of knit wear production was sold under Dore-Dore label while remaining 20 % was divided between two other private channels, Chantal de Thomas & Monde des Enfants The average production batch size in sewing was 200 pieces of the same style and colour, with an average of 8 different sizes within a batch. The knit wear sewing room had 55 sewing machines installed and was staffed by 42 workers. The additional machines were either speciality machines used for occasional operations or extra machines used in periods of peak demand. The knit wear factory was currently organised by machine type. Batches of partially-completed product were moved in wheeled bins by floor supervisors or material handlers to next required operation.

Cellular Manufacturing System Dore-Dore17 Sewing an average garment took only 10 minutes while it took 3 weeks for a garment to pass through all the operations. This discrepancy led to the introduction of cellular manufacturing system by the firm. In the new system a group of cross trained workers operated a small cluster of machines to manufacture a family of similar items. The groups were autonomous managing their own time, distribution of work and work flowCell DesignDore-Dore18Six peoples and 12 sewing machines were assigned to the cellMachines had different sewing capabilitiesCost of machines for knit wear ranging from 30000FF-80000FFAll cell workers are cross trained and encouraged to act autonomously with regard to work methodsWorker may move to another machine within cell to continue working.Batches were split within the cell and garments passed from operation to operation as individual unitsDore-Dore19The cell configuration:Originally designed in horseshoe shape.According to workers, there is two drawbacks of this shape, flow is only unidirectional and lack of communication between workers.Workers implemented new shape of cell but it is difficult to adapt to new style.

Dore-Dore20Advantages :Quick replacement and repairing of broke down machine.Replacement might also require set up period of 5 to 10 minutes only.Workers in the cell balanced their workEfficiency were increased.Inventories were reduced.Batch flow through the cell made as quick as possible and moves without need of supervisors.

Cell ResultsDore-Dore21Throughput time dropped from 15 to single working dayDefect rate drop from 5 to 2.5%Motivation among the workers is well maintainedNew system is more suitable to handle smaller batch sizesSecond cell of 6 workers is organizedCross training was provided by first line supervisorsPlanned to have a total of 7 cells for Knitwear sewing operation

Dore-Dore22First Line supervisorWith the new cell manufacturing structure first line supervisors now have a minimal role to playSupervisor began to cross train workers in variety of sewing operationCell Decision MakingWorkers were provided with training to solve relationship problems among workersWith increased loyalty among cell members , workers began to shorten their leaves and are more focused on their work

Childrens Knitwear DivisionDore-Dore23Previous layoutCellular layout1MLT15 days1 day2Labor content10 min10 min3Capacity2016 units20164Production 2000 units 2000 units5% Utilization 99.299.26WIP30000 units2000 units7No. of sewing machines required5512*7 = 848Average Capital cost55 * 60,000 =3,300,00084*60,000= 5,040,0009Defect Rate5%2.5%10Batch SizesLarge BatchesSmaller Batches11SupervisorsMaterial Movement, Handle conflictNot essentialOperations- Hosiery Division24Dore-DoreDyerDyed YarnRejected after QC365 styles/season35,000 annual SKUsBatch Size:- 120 pairs (same size, color; different size)Central Factory at Gres (Handles 200 ton raw material inventory)KnittingObjectives for instruction and expected results and/or skills developed from learning. 24Operation SequenceDore-Dore25Proposal for Autonomous Groups in Hosiery ManufacturingClaude Enfert, Director of Manufacturing of the hosiery division, believed that if total manufacturing throughput time fell to one week, finished goods hosiery inventory would drop 30-40%Then he envisioned a one day throughput time for post knitting operationsEnfert proposed introduction of cell operations which include all the three activities after knitting- closing the toe, ironing and quality control/finishingAll the three activities would be grouped in a single room which forms a cell

26Dore-DoreRelative vocabulary list. 26Enferts proposed cell design was based on the capacity of two ironing machinesHe assigned 36 workers to a cell to balance the capacity, which they would work as two teams of 18 each and as a whole would be capable of producing the entire line of hosieryHe believed that teams should not be completely cross-trained but would be specialized for a specific task and trained for secondEnfert expected that 80% of workers time would be spent on his specialized activity and remaining 20% on cross-trained task

27Dore-DoreObjectives for instruction and expected results and/or skills developed from learning. 27Dore-Dore28He also proposed that two activities, blind loop toe closing and quality control should not be cross-trainedFuture ProspectusGreatest constraint was the availability of raw materials due to current flexibility of knitwear cellsRebuilding its computerized forecasting systemsLimited capacity of MRP system in size and capability to handle 35000 SKU references for hosiery and 12000 references for raw materials

Enferts cell proposal

29Dore-DoreA list of procedures and steps, or a lecture slide with media.29Hosiery DivisionDore-Dore30Previous layoutCellular layout1Production 37000 pairs 36756 pairs2Total WIP- including Knitting37000x33 =1,221,00036756 x 7=257,292WIP Inventory which gets Freed up = 1221000-257292 = 963,708 pairs

Avg. WIP cost = (7.8+17.42) / 2 = 12.61 FF/pair

Money Freed Up = 12,152,357 FF

Alternate LayoutDore-Dore31

662288231Alternate LayoutDore-Dore32

Calculations- Knitwear Dore-Dore33Sewing operationFor Previous layout:Labor content: 10 mins, Workers: 42, Available time = 8 x 60 = 480 mins. Capacity= 42 x 480/10 = 2016 unitsDaily Output = 2000 unitsMfg Lead Time (MLT) = 3 weeks = 15 daysWIP = MLT x Daily production = 15 x 2000 = 30000 units

Dore-Dore34Cellular LayoutWorkers= 6, labor content: 10 mins per pairCapacity per day = 6 x 480 / 10 = 288 unitsNo of cells = Total number of workers / No. of workers per cell = 42/6 = 7 Daily production capacity in sewing operation = 7 x 288 = 2016 units per day MLT = 1 day WIP = 2000 unitsSimilarly we can modify other processes into cellular manufacturing to decrease WIP and Inventory

Childrens Knitwear DivisionDore-Dore35Previous layoutCellular layout1MLT15 days1 day2Labor content10 min10 min3Capacity2016 units20164Production 2000 units 2000 units5% Utilization 99.299.26WIP30000 units2000 units7No. of sewing machines required5512*7 = 848Average Capital cost55 * 60,000 =3,300,00084*60,000= 5,040,0009Defect Rate5%2.5%10Batch SizesLarge BatchesSmaller Batches11SupervisorsMaterial Movement, Handle conflictNot essentialCalculations- Hosiery DivisionDore-Dore36Previous Layout:Knitting operation: (1 week Batch throughput time,7 days a week, 24 hrs, production time=7 min/pair)Cycle time = 7 minutes/pair, Available time = 24 x 60 = 1440 min Capacity = 1440/ 7 = 206 pair/machine/dayActual production= 37000 pairs/ day on 6 days of the week Production required from knitting operations over a week = 37000*6 =222,000Production per day = 222000/7 = 31.715 Allowance for 0.6% defect = 31,715/0.994= 31,907 No of machines = 31907/206 = 155 knitting machinesConsidering the New design setup change over time, other 11 knitting shops not running 24 hrs a day, we approximate the,No. of Machines presently available = 180 machines

Dore-Dore37Closing the toe: (1 week Batch throughput time, 6 days a week, production time=1 min/pair)Cycle time= 1 min/pair, Available time per shift = 8 hrs Lunch + break = 30mins+15mins+15mins = 1 hr Available time for production per shift = 7hrsLabor content= 1 min/pair, Total labors= 92 Capacity = 92 x 7 x 60/1 = 38640 pairs Actual production= 37000 pairs % Utilization = 37000/38640= 95.7%

Dore-Dore38Ironing: (1 week Batch throughput time, 6 days/week, production time=1 min/pair, Labor content = 15sec/pair =0.25 min/pair)Labor content = 0.25 min/pair, Total labor = 24 Capacity = 24 x 7 x60/0.25 = 40320 pairs Actual production = 37000 pairs % Utilization = 37000/40320 =91.7 %

Dore-Dore39Quality Control and Packaging:(2.5 week Batch throughput time, 6 days a week)No of workers = 120 Daily production = 37,000 pairs Labor minutes available = 120 x 7 x 60 = 50400 min Avg. Cycle time = 50400/37000 = 1.36 minTotal Mfg Lead Time = (5.5 weeks x 6 days) = 33 daysWIP = 33 x 37000 = 1,221,000 pairs Annual sales = 250,000,000FF

Dore-Dore40Annual sales in hosiery = 250,000,000*0.88 = 220,000,000FF Annual sales = 220,000,000/31 = 7,096,774 pairs Raw material Inventory = (1/3) *7,096,774 =2,365,591 pairs Given: Across both the divisions, Avg. Raw Material inventory = 21,000,000FFAvg. WIP inventory = 13,000,000 FFAvg. Finished Goods Inventory = 45,000,000 FFCost of FG > Cost of Raw Materials + Cost of WIP So, on assumption, Cost of FG inventory > WIP + Raw Material Inventory

Dore-Dore41Cost of FG >1,221,000*(7.8+17.42)/2 + 2,365,591*7.8 > 15,396,810 + 18,451,610 FF > 33,848,420 FFTherefore Finished Goods Inventory = 33,848,420/ 31 =1,091,884 pairsTotal inventory (WIP+ Raw Materials +FG) =4,678,475 Pairs

Inventory Turns =7,096,774 / 4,678,475 = 1.51 times

Dore-Dore42Cellular Layout:They are converting post-knitting processes into cellular layout. Close the toe: 7 workers, Labor content = 1 min/pair Capacity = 7 x 420 / 1 = 2940 pairsQuality control and packaging + Embroidery:9 workers, labor content = 1.36 min/ pairCapacity = 9 x 420/ 1.36 = 2780 pairs

Dore-Dore43Ironing Machine:2 workers, Labor content = 0.25 min/pair Capacity = 2 x 420 / 0.25 = 3360 pairs Bottleneck = 2780 pairs / team = 5560 pairs/cell No of cells = (92 + 24 + 120)/36 = 236/36 = 6.55 For 6.5 cells = 13 teams. No of workers = 234Additional 2 members can be given to the Bottle neck ie QC of two different Cells. This would increase the capacity of that one particular cell by by = 1* 420 / 1.36 = 308 The new capacity of the cell would be =5560+308= 5868 pairs Total capacity = (5560 x 4.5) + (5868 x 2) = 36756 pairs

Hosiery DivisionDore-Dore44Previous layoutCellular layout1Production 37000 pairs 36756 pairs2Total WIP- including Knitting37000x33 =1,221,00036756 x 7=257,292WIP Inventory which gets Freed up = 1221000-257292 = 963,708 pairs

Avg. WIP cost = (7.8+17.42) / 2 = 12.61 FF/pair

Money Freed Up = 12,152,357 FF

Dore-Dore45 Thank You