Date post: | 13-Apr-2017 |
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Furniture
Skala Furniture’s
Ladder Back Chair Operation Plan
Prepared by Team 4 Astha Singh
Nishant Bochare Pankaja Nishita Battula
Danny Hsieh Gordon Peng
Chaitanya Reddy
Prepared for
Dr. Kern Peng
Fall 2015
EMGT 253: Operations and Production Systems
Table of Contents 1. About Skala .................................................................................................................................... 3
2. Mission Statement ......................................................................................................................... 3
3. Operation Strategies ..................................................................................................................... 3
4. Location .......................................................................................................................................... 4
Location ......................................................................................................................................... 5
Cost ................................................................................................................................................. 5
5. Layout ............................................................................................................................................. 7
6. Workforce Planning ....................................................................................................................... 8
7. Forecasting ................................................................................................................................... 10
8. Inventory & Master Production Schedule ................................................................................ 14
9. Process Flow ............................................................................................................................... 19
10. Production Time .......................................................................................................................... 21
11. Tool Utilization ............................................................................................................................. 24
12. Supply Chain Management ....................................................................................................... 25
Demand Planning ........................................................................................................................ 26
Supply Planning ........................................................................................................................... 26
13. Bill of Material .............................................................................................................................. 27
Cost Analysis ............................................................................................................................... 28
Required Tool Cost ..................................................................................................................... 28
Rent Cost ...................................................................................................................................... 28
Electricity ...................................................................................................................................... 28
Labor cost: .................................................................................................................................... 29
14. Chair Prototyping: ....................................................................................................................... 59
15. Conclusion: ................................................................................................................................... 61
About Skala Skala is a furniture retail company founded in 2015, located in Tijuana, Baja California,
Mexico. It is a privately owned company that has a single location with 16 employees.
Skala specializes in the conventional ladder back chair, offering high quality furniture at
affordable prices. Our company has strategically differentiated itself from the competition,
because our product pricing is different when compared to conventional products of
comparable quality currently on the market.
Mission Statement Skala Furniture is committed to providing outstanding customer experience by
ensuring consistent quality, low cost, and volume flexibility on ladder-back chairs for all
customers. Skala is the industry standard when it comes to service to customers. We also
maintain a superior level of integrity in interactions with business partners and associates.
We continuously thrive to improve; utilizing quality practices and employee
involvement to manufacture surface finishing systems, for the production manufacturing
industry that result in customer and employee satisfaction.
Operation Strategies Strategizing and having plan is important in manufacturing. Operational strategies
are used to reach company's’ objectives as envisioned. By deciding an operation strategy
to follow, a company can analyze effectives ways to use their resources. Skala follows
the make-to-stock strategy for its production and inventory strategies. This approach is
coordinated with the line process choice in mind. Using a line process with the make-to-
stock strategy is defined as mass production. In other words it is the classical
manufacturing process.
To maintain customer standards and uphold to promised delivery times, the make-
to-stock strategy allows manufacturing firms to hold items in stock for immediate delivery.
This method is applicable for standard products with high volumes and accurate
forecasts. Make-to-stock strategy is the traditional production strategy used in the industry
to match production with consumer demand forecasts. Thus we have to determine how
much stock should be produced which we will go into detail later on.
The advantage to adapting the make-to-stock strategy is that we have no
variations in our product. We are producing a single type of defined ladder-back chair with
no customizations. This allows us to save on labor and have faster delivery speed. In
addition to the delivery and labor savings, make-to-stock lets us minimize excess
inventory by using accurate forecasting methods.
Location The method of selecting our factory location is as follows, with a weighted score
for each candidate in the respective categories: Labor costs, land cost, transportation &
logistics, and taxes/duties. We understand that each location of interest will present
numerous advantages and shortcomings relative to the other choices, and using this
method allows us to holistically and objectively compare them.
Our first location of interest is Shenzhen, China, a port city suitable for offshore
manufacturing. With average labor rated at $3 USD an hour and rising, it is the most
affordable location in the short term. Industrial land rent is approximately 30 RMB per
square meter per month, or about 43 cents US per square foot per month. Transportation
is the most problematic, as it will have to be by sea first then handing over to ground
carriers to reach our distributors. Due to overseas shipping from a foreign COO, we will
also be expecting taxes and duties that will no doubt raise our bottom line costs.
The second selection is Tijuana, Mexico. Tijuana is located an hour south of the
US-Mexico border, typical port of entry is through San Diego, California. Labor rate is
currently at $2.50 USD per hour and appears to be stable in the foreseeable future,
favorable for long-term planning. Industrial land use is at $0.33 USD per square foot per
year, considerably cheaper than the other location candidates. Since Tijuana is
contiguous to the US by land, only land carriers are required for transportation. With
NAFTA in effect, transporting goods to and from Mexico will be tax and duty free.
Our final location choice is Dallas, Texas, our only consideration located in the continental
US. With a minimum wage of $7.25 USD per hour, it has the most expensive labor rate
of all three, although a very stable rate at that. A snapshot of the most affordable industrial
warehouses turned up $4 USD per square foot per month, an order of magnitude higher
than the other two locations. Like Tijuana, transportation will be handled by land freight
only, although with a slight edge in efficiency since no international borders will be
involved. The domestic advantage carries over to taxes and duties as well, which we
expect none of.
After evaluating our decision matrix, we've selected the Presidentes industrial
zone in Tijuana, Mexico to locate our manufacturing operations. This location already
has a 53,000 square foot warehouse-style facility sitting atop, with overhead lighting,
insulation, shipping docks, and line grids all included. This northwestern Mexico offers
several advantages over other locations we've considered.
1) Location
The Presidents district in Tijuana is within an hour's drive to the US-Mexico border
(proximity to our destination market) and thus favoring ground transportation, avoiding
troublesome and expensive logistics compared to offshore manufacturing. Freight
services will be contracted out to major carriers, eliminating the need for us to take
logistics in-house and allows us to focus our resources better on our products.
Furthermore, Tijuana offers a host of incentives that benefit a start-up manufacturing
company like ours. Corporate tax discounts in the first 5 years of operation, worker
training, and grants for acquisition of land for development and/or industrial use are all
categories which help us in the first few years of operation.
2) Cost Property - At just $0.33 USD per square foot per year, rent is an order of magnitude
cheaper compared to any available industrial space found in the continental US states.
Our manufacturing footprint (to be discussed further in detail) does not require the full
53,000 square foot space, and coupled with the facility's favorable amenities we are
confident that the space can easily be shared with other businesses.
Labor – Mexico's standard labor rates stand at $3.00 USD per hour at time of writing. We
chose to benchmark China's labor wages, which have been on the rise and surpassed
the $3.00 USD per hour rate, reinforcing our selection of Tijuana over offshoring.
Layout The factory layout can be generalized as a U-shape, one-direction shop floor
process. Inbound raw materials first enter through the north-eastern load docks, where
the first stop is the IQA station. Materials satisfying our IQA criteria are delivered to
various machine shop stations that immediately follow. The machine shop stations are
designed to allow some expansion before major revisions are required, with ample
spacing between each station so that a couple more machines (drills, lathes, cutters, etc.)
may be added in the future. After machining processes are complete, the semi-finished
components pass through the post-machining quality checks, where our floating QA
personnel will have fixtures and go/no-go gauges to ensure correct parts fitment in the
next stations. Satisfactory components move on to sub-assembly stations, where
adhesives are applied to fitted chair sub-assemblies. Sub-assemblies are left to cure in
the next station where another QA check evaluates fitment – this is critical as the
adhesives have not cured at this point, allowing reworks to be made to components thus
avoiding complete scrapping of failed parts. Passing assemblies are painted here and
allowed to dry/cure overnight; note that the floor space allocations in the painting area
allows more than two days' worth and more of products to be held without issues. Next
step is the cushion assembly, where ordered seat cushions are installed to the chair
frame, and the product is considered complete. From here the product can take one of
two routes, heading either to storage or to the shipping docks.
Workforce Planning Our Tijuana facility will be staffed with the minimum amount of skilled and unskilled
labor, sufficient to handle fluctuating demands while minimizing idle time. The workforce
proposed shall be divided in the following categories, with job functions outlined below:
10 regular skilled laborers, 3 floating quality assurance specialists with 1 supervisor, and
1 full-time plant manager.
The 10 skilled laborers will each be in charge of one of the following: a single
process station, shipping, or receiving, paid at a standard hourly rate of $3.00 USD. When
loading is high, priorities will be placed on manning the process stations from machining
to paint, with final packaging/shipping done after production for the day is completed.
Workers will be trained to operate the respective machines/processes at their respective
stations, with opportunities to learn other stations to increase overall flexibility.
3 floating quality assurance personnel can be found at the IQA, FQA, and the two
in-line quality check stations on the shop floor. This group will be paid a standard hourly
rate of $5.00 USD and shall be present whenever regular production is in progress.
Quality assurance must inspect incoming raw materials/production supplies to ensure
they are adequate for further processing, documenting reason and quantity of rejects
according to the quality specifications we agreed upon with our vendors, serving as the
first point of data in our throughput analysis. In-line stations and final quality assurance
will perform form and fitment checks after the machining and assembly processes, using
a mix of fixtures, gages, and design specifications to verify components if components
are correctly fabricated/assembled. The floating QAs will be trained in all of our
manufacturing steps, hence the name 'floating' as they will be qualified to overlook any
station on the shop floor. The lone supervisor role is to deliver guidance and provide
management presence on the shop floor, for the floating QAs as well as the skilled
operators at all stations. This supervisor will be paid a regular hourly rate of $10.00 USD
and is scheduled the same way as the operators and QA personnel.
Finally, a full-time manager will be hired to overlook all operations at the plant. This
non-exempt position is earmarked for a $35,000.00 USD annual salary, and is not subject
to the planned shift schedules as the operators but is required to be on-call whenever
needed. The plant manager is tasked to maintain a record of shipments and receiving,
throughput and quality reports, as well as executing shift changes and workforce well-
being/punctuality. This plant manager is the final decision maker in any and all cases of
incidents, accidents, and deviations from planned production schedules, with inputs from
the supervisor.
Forecasting Given a 12-month demand as a heads-up, our marketing department was tasked to
forecast the demand for the next three years of operation. Since our business is strictly
in the United States, it was appropriate to use the US census bureau's historic furniture
sales data as the basis of our forecast:
Plotting the 4-year data all in one and fitting a linear trend line, we've arrived at reliable
2.42% year-to-year growth with a confident R2 value of 0.90. This growth rate is used to
scale the given 12-month heads-up demand, producing the 3-year forecast shown in the
following:
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Year 1
120
0
200
0
230
0
210
0
140
0
160
0
250
0
200
0
180
0 2600
220
0 1800
Year 2
124
0
207
8
236
8
218
0
145
5
166
9
259
7
208
3
186
5 2714
229
1 1871
Year 3
128
1
215
8
243
7
226
4
151
2
174
1
269
9
217
0
193
3 2833
238
6 1944
Avg %
growth
103.
32
103.
88
102.
95
103.
83
103.
93
104.
33
103.
90
104.
16
103.
63
104.3
9
104.
14
103.93
Forecast production volumes, by month
Inventory & Master Production Schedule With our previously established demand forecast, it is insufficient to plan a
master production schedule based purely on market demand. As with any
extrapolations, the resulting data must have a confidence level attached to it, implying
the existence of some uncertainties. As the master production schedule is planned out
at the weekly level, the uncertainties carried over from yearly projections will have a
severe impact if not addressed appropriately. Thus, we must introduce the mechanism
of safety stock and incorporate its contributions into our overall production targets.
Consider the following expression:
𝑆𝑆 = 𝑆𝑆 × √𝑆(𝑆)𝑆𝑆2 × (𝑆(𝑆))2𝑆𝑆
2
Where:
𝑆𝑆 = 𝑆𝑆𝑆𝑆𝑆𝑆 𝑆𝑆𝑆𝑆𝑆
𝑆𝑆
= 𝑆
− 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆 𝑆𝑆𝑆𝑆𝑆 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆 𝑆𝑆 𝑆𝑆𝑆𝑆𝑆𝑆𝑆 𝑆𝑆𝑆𝑆𝑆𝑆(𝑆)
= 𝑆𝑆𝑆𝑆𝑆𝑆𝑆 𝑆𝑆𝑆𝑆 𝑆𝑆𝑆𝑆𝑆(𝑆) = 𝑆𝑆𝑆𝑆𝑆𝑆𝑆 𝑆𝑆𝑆𝑆𝑆𝑆 (𝑆𝑆𝑆𝑆𝑆)𝑆𝑆
= 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆 𝑆𝑆 𝑆𝑆𝑆𝑆 𝑆𝑆𝑆𝑆𝑆𝑆
= 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆 𝑆𝑆 𝑆𝑆𝑆𝑆𝑆𝑆
Regarding service level, this refers to the likeliness of our safety stock's ability to satisfy
fluctuating demands in our forecast. For this, we chose a confidence level of >85%,
which corresponds to a 𝑆𝑆 value of 1.11. The calculated safety stock by month is as
follows:
Jan
Fe
b Mar Apr
Ma
y Jun Jul
Au
g Sep Oct
No
v Dec
Year 1
120
0
200
0
230
0
210
0
140
0
160
0
250
0
200
0
180
0
260
0
220
0
180
0
Producti
on
133
3
208
8
233
3
207
8
132
3
162
2
259
9
194
5
177
8
268
8
215
6
175
6
Inventor
y 133 221 254 232 155 177 276 221 199 287 243 199
E(D) 40 67 77 70 47 53 83 67 60 87 73 60
Safety
Stock 133 221 254 232 155 177 276 221 199 287 243 199
Z(a) 1.11
E(L) 6.25
S(L)
2.98
6
S(D) 0
Jan
Fe
b Mar Apr
Ma
y Jun Jul
Au
g Sep Oct
No
v Dec
Year 2
124
0
207
8
236
8
218
0
145
5
166
9
259
7
208
3
186
5
271
4
229
1
187
1
Producti
on
137
7
217
0
240
0
216
0
137
5
169
2
270
0
202
7
184
1
280
8
224
4
182
5
Inventor
y 137 230 262 241 161 184 287 230 206 300 253 207
E(D) 41 69 79 73 49 56 87 69 62 90 76 62
Safety
Stock 137 230 262 241 161 184 287 230 206 300 253 207
Z(a) 1.11
E(L) 6.25
S(L)
2.98
6
S(D) 0
Jan
Fe
b Mar Apr
Ma
y Jun Jul
Au
g Sep Oct
No
v Dec
Year 3
128
1
215
8
243
7
226
4
151
2
174
1
269
9
217
0
193
3
283
3
238
6
194
4
Producti
on
142
3
225
4
246
9
224
5
142
9
176
6
280
5
211
2
190
7
293
3
233
7
189
5
Inventor
y 142 238 269 250 167 192 298 240 214 313 264 215
E(D) 43 72 81 75 50 58 90 72 64 94 80 65
Safety
Stock 142 238 269 250 167 192 298 240 214 313 264 215
Z(a) 1.11
E(L) 6.25
S(L)
2.98
6
S(D) 0
Note that the inventory of ship-ready products is never equal to zero, guaranteeing
demand fulfillment with the appropriate margin defined by the safety stock.
With the safety stock defined and derived on a monthly basis, they are added to
our monthly demand to produce the overall production targets. Dividing the monthly
targets by the respective number of weeks in each month, we arrive at the master
production schedule:
2015 Jan Feb Mar Apr
Wee
k 1 2 3 4 5 6 7 8 9
1
0
1
1
1
2
1
3
1
4
1
5
1
6
1
7
Plan
ned
2
6
7
2
6
7
2
6
7
2
6
7
2
6
7
5
2
2
5
2
2
5
2
2
5
2
2
5
8
3
5
8
3
5
8
3
5
8
3
5
2
0
5
2
0
5
2
0
5
2
0
May Jun Jul
Wee
k
1
8
1
9
2
0
2
1
2
2
2
3
2
4
2
5
2
6
2
7
2
8
2
9
3
0
3
1
Plan
ned
2
6
5
2
6
5
2
6
5
2
6
5
2
6
5
4
0
6
4
0
6
4
0
6
4
0
6
5
2
0
5
2
0
5
2
0
5
2
0
5
2
0
Aug Sep Oct
Wee
k
3
2
3
3
3
4
3
5
3
6
3
7
3
8
3
9
4
0
4
1
4
2
4
3
4
4
Plan
ned
4
8
6
4
8
6
4
8
6
4
8
6
4
4
5
4
4
5
4
4
5
4
4
5
5
3
8
5
3
8
5
3
8
5
3
8
5
3
8
Nov Dec
Wee
k
4
5
4
6
4
7
4
8
4
9
5
0
5
1
5
2
Plan
ned
5
3
9
5
3
9
5
3
9
5
3
9
4
3
9
4
3
9
4
3
9
4
3
9
2016 Jan Feb Mar Apr
Wee
k 1 2 3 4 5 6 7 8 9
1
0
1
1
1
2
1
3
1
4
1
5
1
6
1
7
1
8
Plan
ned
2
7
5
2
7
5
2
7
5
2
7
5
2
7
5
5
4
3
5
4
3
5
4
3
5
4
3
6
0
0
6
0
0
6
0
0
6
0
0
4
3
2
4
3
2
4
3
2
4
3
2
4
3
2
May Jun Jul
Wee
k
1
9
2
0
2
1
2
2
2
3
2
4
2
5
2
6
2
7
2
8
2
9
3
0
3
1
Plan
ned
3
4
4
3
4
4
3
4
4
3
4
4
4
2
3
4
2
3
4
2
3
4
2
3
5
4
0
5
4
0
5
4
0
5
4
0
5
4
0
Aug Sep Oct
Wee
k
3
2
3
3
3
4
3
5
3
6
3
7
3
8
3
9
4
0
4
1
4
2
4
3
4
4
Plan
ned
5
0
7
5
0
7
5
0
7
5
0
7
3
6
8
3
6
8
3
6
8
3
6
8
3
6
8
7
0
2
7
0
2
7
0
2
7
0
2
Nov Dec
Wee
k
4
5
4
6
4
7
4
8
4
9
5
0
5
1
5
2
Plan
ned
5
6
1
5
6
1
5
6
1
5
6
1
4
5
6
4
5
6
4
5
6
4
5
6
2017 Jan Feb Mar Apr
Wee
k 1 2 3 4 5 6 7 8 9
1
0
1
1
1
2
1
3
1
4
1
5
1
6
1
7
1
8
Plan
ned
3
5
6
3
5
6
3
5
6
3
5
6
5
6
4
5
6
4
5
6
4
5
6
4
4
9
4
4
9
4
4
9
4
4
9
4
4
9
4
4
4
9
4
4
9
4
4
9
4
4
9
4
4
9
May Jun Jul
Wee
k
1
9
2
0
2
1
2
2
2
3
2
4
2
5
2
6
2
7
2
8
2
9
3
0
3
1
Plan
ned
3
5
7
3
5
7
3
5
7
3
5
7
3
5
3
3
5
3
3
5
3
3
5
3
3
5
3
7
0
1
7
0
1
7
0
1
7
0
1
Aug Sep Oct
Wee
k
3
2
3
3
3
4
3
5
3
6
3
7
3
8
3
9
4
0
4
1
4
2
4
3
4
4
Plan
ned
5
2
8
5
2
8
5
2
8
5
2
8
3
8
1
3
8
1
3
8
1
3
8
1
3
8
1
7
3
3
7
3
3
7
3
3
7
3
3
Nov Dec
Wee
k
4
5
4
6
4
7
4
8
4
9
5
0
5
1
5
2
Plan
ned
5
8
4
5
8
4
5
8
4
5
8
4
4
7
4
4
7
4
4
7
4
4
7
4
Process Flow
The flow of operations at Skala’s manufacturing unit starts with the set-up of the
inventory for the receiving of the ordered raw materials. The pre set-up of the inventory
means to bifurcate the older raw materials and making room for the new materials that
are to be received. Post this, based on the demand forecasted, the order for the various
raw materials are made. On the arrival of the raw materials based on the lead time, they
are received and stocked in the inventory. For the order received, the bill is made ready
and the payment for the same is made.
As the day starts, few workers are assigned to make batches of the raw materials in
the inventory, as the assembly line involves running all the machines as batches. After
the raw materials are made as batches, another set of laborers move the batched
materials to the respective stations. As per given specification the rods and the thick
boards are sent to the straight cutter area and the thin boards are sent to the flex cutter.
The straight cutter and the flex cutter operate simultaneously. From these we get raw leg
supports, raw back and front legs and also raw seat frames from the straight cutter and
raw back slats as the output from the flex cutter. Again as per given specifications the raw
leg supports and the raw back and front legs are transported to the Lathe machines.
Simultaneously to save on time, the raw seat frame is already sent to the Drilling machine
and the raw back slats arrive at the ladder back sub-assembly station. At the Lathe station
the raw leg supports and the raw front and back legs are furthered cut to specifications,
knurled and sanded. So we get the processed leg supports and processed front and back
legs as the output from the Lathe. Now the processed front and back legs are sent to the
Drilling machine station where required number of holes are each made on the front and
back legs. The seat frames are already drilled by the time the lathe process is completed.
Next comes the assembling part. The required number of screws are already in the
sub-assembly station. After the Lathe process one leg support is already transported to
the ladder-back sub-assembly while two leg supports are sent to the seat sub-assembly
station. The raw back slats from the flex cutter are also already at the ladder-back sub-
assembly station. Now after the drilling process, two drilled back legs, one leg support
and the raw back slats are assembled at the ladder-back sub-assembly station. Post this,
the holed front legs and two leg supports are assembled onto the ladder-back sub-
assembly. This unit is now sent to the seat-frame sub-assembly station where the holed
seat frame from the drilling machine are assembled. Post this there will be a quality check
by Skala’s department to check for the dimensions, sturdiness etc. After this quality check
the assembled unit is sent to be painted. The paint is done at the painting area and sent
to the drying room, where it is left to dry for 24 hours. After this we perform another quality
check, because after the painting job is how the product looks to our customer and that
is a very important factor for Skala, hence another quality check. After the chairs have
dried and inspected they are moved to the final assembly section where seat cushion is
assembled to the painted seat-frame sub-assembly.
This ends the process of manufacturing the chair. Now the chairs are covered with
Skala’s packaging and sent to be stocked in the Inventory. From here, as per the demand
of our customers, the products are transported to them.
Production Time
Process Process
Time
Note
Cut: legs / leg
supports
10 sec/leg To measure and cut legs / leg supports from rod.
Cut: Seat-
frame boards
1 min./board To measure and cut Seat-frame boards from thick
boards.
Cut: Back slats 2 min./slat To measure and cut Back slats from thin boards.
Lathe: Back
legs
12 min/leg Initial setup time 20 min. for change over.
Lathe: Front
legs
5 min/leg Initial setup time 10 min. for change over.
Lathe: Leg
supports
6
min/support
Initial setup time 15 min. for change over.
Drill: Legs 10 sec/leg To measure and drill two holes on each leg.
Drill: Seat-
frame boards
10 sec/board To measure and drill two holes on the front seat-
frame boards.
Ladder-back
subassembly
5 min. Assembly of back legs, back slats, and one leg
support.
Seat
subassembly
4 min. Assembly of front legs and leg supports to the
ladder-back subassembly.
Seat-frame
subassembly
3 min. Assembly of Seat-frame boards and the rest of the
chair.
Paint 10 min./chair Paint chairs. Chairs must be dried for 24 hours.
Seat cushion
subassembly
3 min. Assembly of Seat cushions to the printed chairs.
Based on this data and the parallel assembly lines that Skala is implementing, the
following procedural methodology which will be used for every chair that goes through
Skala’s assembly line from raw material to finished product. Since weekly demands need
to be met punctually, and we have to abide by our customer’s strict demand schedules,
this standardized process will stream-line all unique assembly lines to prevent as much
human error as possible and also keep chair-to-chair quality consistent. This means that
manufacturing for each chair is quality-controlled and the amount of defects will be
eradicated as much as possible. Each assembly line will be directed to follow the
procedural steps outlined below. (NOTE: The process steps below are calculated based
on the number of tools that are being utilized, check the Tool Capacity section – time is
also shown in seconds).
Four material handlers and personnel will be responsible for allocating the amount of raw
material to each specified station. Raw material handlers will put together material for the
chair,. Once the material has been obtained from raw material storage, it should take
about two minutes to move required parts to cutting stations. Once at cutting stations,
each chair component will have a designated area and ‘swim-lane’, where their
manufacturing process will commence. As soon as the cutting steps for the back leg, leg
supports, and front leg is complete, these parts will be moved by handlers to the lathe
stations. The table above takes into account the set-up of lathes, but we are assuming
that this work will be done in the morning, before the daily production begins. After lathe
steps are complete, the material handlers will move parts to the drilling stations. Once
drilling is complete, designated parts are moved to each chair sub-assembly station, for
the ladder back, seat, and seat frame. Next, chairs are brought to the painting and drying
areas, where each chair has wood stain applied to its surfaces, and then chairs are dried
and seat-cushions are installed. Finally, the last step to complete the manufacturing
process is to label chairs with serial number and update inventory on the computer. The
final step is to move completed chairs and stack them on storage racks. As soon as
chairs are being moved to storage, material handlers are prepping raw material for the
next batch of chairs. The figure below graphically displays the procedural steps from start
to finish for chair manufacturing. It has been calculated to take about 14 minutes of work
time (not counting chair drying) to complete the operation process.
Machine Description Repeats
Cut
(min)
Lathe
(min)
Drill
(min) Total
1 Slat 4 2 0 0 8
2 Front legs 2 0.17 5 0.17 10.67
3 Back Legs 2 0.17 12 0.17 24.67
4 Leg support 4 0.17 6 0 24.67
5 Frames 4 1 0 0.17 4.67
Tool Utilization
Tool Preventive
Maintenance
(hrs/week)
Uptime Utilization
Straight Cutter 2 95.00% 90.00%
Flex-Cutter 3 90.00% 90.00%
Lathe 1 3 95.00% 90.00%
Lathe 2 3 95.00% 90.00%
Drill 1 98.00% 90.00%
Based on the given data for tool utilization, effective tool usage time must be calculated
in order to figure out how much actual time that each tool can be run. Once the number
of actual tool hours are calculated, our company will be able to see the differences
between actual run time and stated runtime and then find time during the week or on
weekends to allocate for the make-up lost tool time.
Uptime can be seen as the actual effective time that a tool is used. Utilization can be
seen as the effective employee work rate, based on employee breaks, work ethic, and
tool set-up. Uptime indicates the actual useful hours of work that the machine does – if a
machine works for 10 hours and has a 90% uptime, then it has only done 9hrs of useful
work.
The equipment engineers on the company rolls perform preventive maintenance on the
weekends. For the six tools that we have on the floor, there will be 15 hours of PM that
will be examined during the weekend. If any machine has a defect, officials from the
company the machine was purchased from will be called to repair the machines.
Supply Chain Management
Skala furniture’s supply-chain management strategy begins right from the storage of raw
materials to the origin and shipping of the manufactured chairs. This means that the
supply-chain management approach deals with the storage of raw materials, work-in-
process inventory and finished goods from the point of origin to the point of consumption.
Such an approach ensures that inventory holding is positive all the time to maintain on-
time delivery of the chairs. In order to simplify the raw material procurement process,
Skala furniture places orders in a periodic fashion. It is assumed that if the raw material
suppliers are failing to fulfill the order, then it is solely their responsibility to supply the
material of the same standards and at the same cost from a different supplier. A failure in
achieving it would lead to a penalty in order to reimburse the loss sustained by Skala
furniture.
The supply-chain management strategy adopted by Skala furniture is “Efficient Supply
Chain”. Since, the demand is predictable with low forecast errors, and consistent quality
and on-time delivery is a priority, therefore, “Efficient Supply Chain” is most suited.
Demand Planning Skala furniture conducts thorough demand planning to create reliable forecasts. This kind
of planning helps Skala furniture improve the accuracy of revenue forecasts and align
inventory levels as per the demand. Table shows the forecast, which illustrates the
demand of the chair. The table shows a very linear demand however it does have a slow
increase.
Supply Planning The objective of supply planning is to balance supply and demand in a manner that
achieves the financial and service objectives of Skala furniture. This is accomplished with
the help of demand planning and the location where the facility is established. The
demand planning provides an efficient forecast and the location is selected in such a way
that it is very close to all the suppliers. This proximity to the suppliers helps in procuring
the raw material in advance and in minimum time in order to cover the demand and the
production schedules.
Bill of Material The tables shows the bill of material for one Chair. Skala manufacturing used to
store inventory and track each and every order as well as raw material. To make this
tracking system effective Skala Company select specific code number for each part based
on the type of material that being used, example prefix Sk-P is for the wood piece part
and prefix Sk-SA is for the Subassembly part. Skala Company does not use specific code
for Adhesive and paint as it is order as per the calculated demand but still it is monitor by
tracking their order slot number. Each part from bill of material is according to CAD
drawing as per ASME standard and guidelines.
Table No:
Sr.
no
Skala Part
No
Part
Name
Quanti
ty
Part
Price Type
1 Sk-P001 Back Slat 4 $1.2 Part
2 Sk-P002 Front Leg 2 $1.5 Part
3 Sk-P003 Back Leg 2 $1.5 Part
4 Sk-P004
Leg
Support 4 $1.5 Part
5 Ad-01 Adhesive 135gm $0.07 Ad
6 Sk-SA001 Frames 4 $1
Subassem
bly
7 Sk-SA002 Cushion 1 $5
Subassem
bly
8 Pa-01 Paint 0.5gm $1 Pa
Total $12.77
Fig No. Paint For Furniture. Fig
No. Adhesive Glue
Cost Analysis The cost analysis is an important aspect for Skala Furniture as per company’s
strategy. Company’s strategy is to produce consistent quality and mass production chair
for quick break even and to make company profitable as early as possible. To
determine the cost analysis we need to take all required cost in the consideration such
as tool cost, machinery cost, labor cost, raw material cost etc. Also costing is important
for us to determine the reasonable price for per chair to sand in very competitive market
and remain profitable for remaining two years. To determine the per chair cost we
actually come up with all the following fixed and variable cost.
Required Tool Cost Component Total Tools Cost for
each ($)
Final Cost ($)
Straight
Cutter
1 2000 2000
Flex Cutter 1 2800 2800
Lathes 2 8000 16000
Drill 1 1000 1000
Total 21800
Rent Cost Sq.Ft Cost/Sq.ft Total/Year Total/Week
Full Facility 54000 0.33 17820 342.692307
7
Actual Size 21750 0.33 7177.5 138.028846
2
Electricity Energy/K W Usage/kW Total/Year Total/Week
$0.12(Mexic
o)
78549 $9425.88 $181.25
$12435 per week in year 2015
$13678.50 per week in year 2016 10%
increment
$ 15046.35 per week in year 2017 10%
increment
Labor cost:
Insurance (equipment + Employee) = $25000/yr = $480.77 per week
Paint + Glue = $1.07/ chair
Maintenance + Misc = $2000 + $1000= $3000/week
Cost of materials (per chair): $12.766
Raw Material cost:
Year 2015
Component Quantity
Per Chair
Week 1 to 5
Jan 15
Cost/e
a in $
Total
cost
Lead Time in
Days
Rod 2 2670 1.5 4005 5
Thin Board 1 1335 2 2670 7
Thick
Board
0.5 667.5 2.5 1668.75 3
Seat
Cushion
1 1335 5 6675 10
Total
Chairs
1335 Total
Cost=
15018.7
5
Component Quantity
Per Chair
Week 6 to 9
Feb 15
Cost/ea in
$
Total cost Lead Time in
Days
Rod 2 4176 1.5 6264 5
Thin Board 1 2088 2 4176 7
Thick Board 0.5 1044 2.5 2610 3
Seat
Cushion
1 2088 5 10440 10
Total Chairs 2088 Total
Cost=
23490
Component Quantity
Per Chair
Week 10 to
13
Mar 15
Cost/ea in
$
Total cost Lead Time in
Days
Rod 2 4664 1.5 6996 5
Thin Board 1 2332 2 4664 7
Thick Board 0.5 1166 2.5 2915 3
Seat
Cushion
1 2332 5 11660 10
Total Chairs 2332 Total
Cost=
26235
Component Quantity
Per Chair
Week 14 to
17
Apr 15
Cost/ea in
$
Total cost Lead Time in
Days
Rod 2 4160 1.5 6240 5
Thin Board 1 2080 2 4160 7
Thick Board 0.5 1040 2.5 2600 3
Seat
Cushion
1 2080 5 10400 10
Total Chairs 2080 Total
Cost=
23400
Component Quantity
Per Chair
Week 18 to
22
May 15
Cost/ea in
$
Total cost Lead Time in
Days
Rod 2 2650 1.5 3975 5
Thin Board 1 1325 2 2650 7
Thick Board 0.5 662.5 2.5 1656.25 3
Seat
Cushion
1 1325 5 6625 10
Total Chairs 1325 Total
Cost=
14906.25
Component Quantity
Per Chair
Week 23 to
26
June 15
Cost/ea in
$
Total cost Lead Time in
Days
Rod 2 3248 1.5 4872 5
Thin Board 1 1624 2 3248 7
Thick Board 0.5 812 2.5 2030 3
Seat
Cushion
1 1624 5 8120 10
Total Chairs 1624 Total
Cost=
18270
Component Quantity
Per Chair
Week 27 to
31
July 15
Cost/ea in
$
Total cost Lead Time in
Days
Rod 2 4160 1.5 6240 5
Thin Board 1 2080 2 4160 7
Thick Board 0.5 1040 2.5 2600 3
Seat
Cushion
1 2080 5 10400 10
Total Chairs 2080 Total
Cost=
23400
Component Quantity
Per Chair
Week 32 to
35
Aug 15
Cost/ea in
$
Total cost Lead Time in
Days
Rod 2 3888 1.5 5832 5
Thin Board 1 1944 2 3888 7
Thick Board 0.5 972 2.5 2430 3
Seat
Cushion
1 1944 5 9720 10
Total Chairs 1944 Total
Cost=
21870
Component Quantity
Per Chair
Week 36 to
39
Sept 15
Cost/ea in
$
Total cost Lead Time in
Days
Rod 2 3560 1.5 5340 5
Thin Board 1 1780 2 3560 7
Thick Board 0.5 890 2.5 2225 3
Seat
Cushion
1 1780 5 8900 10
Total Chairs 1780 Total
Cost=
20025
Component Quantity
Per Chair
Week 41 to
44
Oct 15
Cost/ea in
$
Total cost Lead Time in
Days
Rod 2 5380 1.5 8070 5
Thin Board 1 2690 2 5380 7
Thick Board 0.5 1345 2.5 3362.5 3
Seat
Cushion
1 2690 5 13450 10
Total Chairs 2690 Total
Cost=
30262.5
Component Quantity
Per Chair
Week 45 to
48
Nov 15
Cost/ea in
$
Total cost Lead Time in
Days
Rod 2 4312 1.5 6468 5
Thin Board 1 2156 2 4312 7
Thick Board 0.5 1078 2.5 2695 3
Seat
Cushion
1 2156 5 10780 10
Total Chairs 2156 Total
Cost=
24255
Component Quantity
Per Chair
Week 49 to 52
Dec 15
Cost/ea in
$
Total
cost
Lead Time in
Days
Rod 2 3512 1.5 5268 5
Thin Board 1 1756 2 3512 7
Thick Board 0.5 878 2.5 2195 3
Seat
Cushion
1 1756 5 8780 10
Total Chairs 1756 Total
Cost=
19755
Year 2015
Component Quantity Per
Chair
Week 1 to
5
Jan 16
Cost/ea in
$
Total
cost
Lead Time in
Days
Rod 2 2750 1.5 4125 5
Thin Board 1 1375 2 2750 7
Thick Board 0.5 687.5 2.5 1718.75 3
Seat
Cushion
1 1375 5 6875 10
Total Chairs 1375 Total
Cost=
15468.7
5
component Quantity Per
Chair
Week 6 to
9
Feb 16
Cost/ea in
$
Total
cost
Lead Time in
Days
Rod 2 4344 1.5 6516 5
Thin Board 1 2172 2 4344 7
Thick Board 0.5 1086 2.5 2715 3
Seat
Cushion
1 2172 5 10860 10
Total Chairs 2172 Total
Cost=
24435
Component Quantity Per
Chair
Week 10 to
13
Mar 16
Cost/ea in
$
Total
cost
Lead Time in
Days
Rod 2 4800 1.5 7200 5
Thin Board 1 2400 2 4800 7
Thick Board 0.5 1200 2.5 3000 3
Seat
Cushion
1 2400 5 12000 10
Total Chairs 2400 Total
Cost=
27000
Component Quantity Per
Chair
Week 14 to
18
Apr 16
Cost/ea in
$
Total
cost
Lead Time in
Days
Rod 2 4320 1.5 6480 5
Thin Board 1 2160 2 4320 7
Thick Board 0.5 1080 2.5 2700 3
Seat
Cushion
1 2160 5 10800 10
Total Chairs 2160 Total
Cost=
24300
Component Quantity Per
Chair
Week 19 to
22
May 16
Cost/ea in
$
Total
cost
Lead Time in
Days
Rod 2 2752 1.5 4128 5
Thin Board 1 1376 2 2752 7
Thick Board 0.5 688 2.5 1720 3
Seat
Cushion
1 1376 5 6880 10
Total Chairs 1376 Total
Cost=
15480
Component Quantity Per
Chair
Week 23 to
26
June 16
Cost/ea in
$
Total
cost
Lead Time in
Days
Rod 2 3384 1.5 5076 5
Thin Board 1 1692 2 3384 7
Thick Board 0.5 846 2.5 2115 3
Seat
Cushion
1 1692 5 8460 10
Total Chairs 1692 Total
Cost=
19035
Component Quantity Per
Chair
Week 27 to
31
July 16
Cost/ea in
$
Total
cost
Lead Time in
Days
Rod 2 5400 1.5 8100 5
Thin Board 1 2700 2 5400 7
Thick Board 0.5 1350 2.5 3375 3
Seat
Cushion
1 2700 5 13500 10
Total Chairs 2700 Total
Cost=
30375
Component Quantity Per
Chair
Week 32 to
35
Aug 16
Cost/ea in
$
Total
cost
Lead Time in
Days
Rod 2 4056 1.5 6084 5
Thin Board 1 2028 2 4056 7
Thick Board 0.5 1014 2.5 2535 3
Seat
Cushion
1 2028 5 10140 10
Total Chairs 2028 Total
Cost=
22815
Component Quantity Per
Chair
Week 36 to
40
Sept 16
Cost/ea in
$
Total
cost
Lead Time in
Days
Rod 2 3680 1.5 5520 5
Thin Board 1 1840 2 3680 7
Thick Board 0.5 920 2.5 2300 3
Seat
Cushion
1 1840 5 9200 10
Total Chairs 1840 Total
Cost=
20700
Component Quantity Per
Chair
Week 41 to
44
Oct 16
Cost/ea in
$
Total
cost
Lead Time in
Days
Rod 2 5616 1.5 8424 5
Thin Board 1 2808 2 5616 7
Thick Board 0.5 1404 2.5 3510 3
Seat
Cushion
1 2808 5 14040 10
Total Chairs 2808 Total
Cost=
31590
Component
Quantity Per
Chair
Week 45 to
48
Nov 16
Cost/ea in
$
Total
cost
Lead Time in
Days
Rod 2 4488 1.5 6732 5
Thin Board 1 2244 2 4488 7
Thick Board 0.5 1122 2.5 2805 3
Seat
Cushion
1 2244 5 11220 10
Total Chairs 2244 Total
Cost=
25245
Component
Quantity Per
Chair
Week 49 to
52
Dec 16
Cost/ea in
$
Total
cost
Lead Time in
Days
Rod 2 3648 1.5 5472 5
Thin Board 1 1824 2 3648 7
Thick Board 0.5 912 2.5 2280 3
Seat
Cushion
1 1824 5 9120 10
Total Chairs 1824 Total
Cost=
20520
Year 17
component Quantity Per
Chair
Week 1 to 4
Jan 17
Cost/ea in
$
Total
cost
Lead Time in
Days
Rod 2 2848 1.5 4272 5
Thin Board 1 1424 2 2848 7
Thick Board 0.5 712 2.5 1780 3
Seat
Cushion
1 1424 5 7120 10
Total
Chairs
1424 Total
Cost=
16020
component Quantity Per
Chair
Week 5 to 9
Feb 17
Cost/ea in
$
Total
cost
Lead Time in
Days
Rod 2 4512 1.5 6768 5
Thin Board 1 2256 2 4512 7
Thick Board 0.5 1128 2.5 2820 3
Seat
Cushion
1 2256 5 11280 10
Total
Chairs
2256 Total
Cost=
25380
component Quantity Per
Chair
Week 9 to
13
March 17
Cost/ea in
$
Total
cost
Lead Time in
Days
Rod 2 4940 1.5 7410 5
Thin Board 1 2470 2 4940 7
Thick Board 0.5 1235 2.5 3087.5 3
Seat
Cushion
1 2470 5 12350 10
Total
Chairs
2470 Total
Cost=
27787.5
component Quantity Per
Chair
Week 14 to
18
Apr 17
Cost/ea in
$
Total
cost
Lead Time in
Days
Rod 2 4490 1.5 6735 5
Thin Board 1 2245 2 4490 7
Thick Board 0.5 1122.5 2.5 2806.25 3
Seat
Cushion
1 2245 5 11225 10
Total
Chairs
2245 Total
Cost=
25256.2
5
Component Quantity Per
Chair
Week 19 to
22
Cost/ea in
$
Total
cost
Lead Time in
Days
May 17
Rod 2 2856 1.5 4284 5
Thin Board 1 1428 2 2856 7
Thick Board 0.5 714 2.5 1785 3
Seat
Cushion
1 1428 5 7140 10
Total
Chairs
1428 Total
Cost=
16065
Component Quantity Per
Chair
Week 23 to
27
Jun 17
Cost/ea in
$
Total
cost
Lead Time in
Days
Rod 2 3530 1.5 5295 5
Thin Board 1 1765 2 3530 7
Thick Board 0.5 882.5 2.5 2206.25 3
Seat
Cushion
1 1765 5 8825 10
Total
Chairs
1765 Total
Cost=
19856.2
5
component Quantity Per
Chair
Week 28 to
31
Jul 17
Cost/ea in
$
Total
cost
Lead Time in
Days
Rod 2 5608 1.5 8412 5
Thin Board 1 2804 2 5608 7
Thick Board 0.5 1402 2.5 3505 3
Seat
Cushion
1 2804 5 14020 10
Total
Chairs
2804 Total
Cost=
31545
component Quantity Per
Chair
Week 32 to
35
Aug 17
Cost/ea in
$
Total
cost
Lead Time in
Days
Rod 2 4224 1.5 6336 5
Thin Board 1 2112 2 4224 7
Thick Board 0.5 1056 2.5 2640 3
Seat
Cushion
1 2112 5 10560 10
Total
Chairs
2112 Total
Cost=
23760
Component Quantity Per
Chair
Week 36 to
40
Sept 17
Cost/ea in
$
Total
cost
Lead Time in
Days
Rod 2 3810 1.5 5715 5
Thin Board 1 1905 2 3810 7
Thick Board 0.5 952.5 2.5 2381.25 3
Seat
Cushion
1 1905 5 9525 10
Total
Chairs
1905 Total
Cost=
21431.2
5
Component Quantity Per
Chair
Week 41 to
44
Oct 17
Cost/ea in
$
Total
cost
Lead Time in
Days
Rod 2 5864 1.5 8796 5
Thin Board 1 2932 2 5864 7
Thick Board 0.5 1466 2.5 3665 3
Seat
Cushion
1 2932 5 14660 10
Total
Chairs
2932 Total
Cost=
32985
Component Quantity Per
Chair
Week 45 to
48
Nov 17
Cost/ea in
$
Total
cost
Lead Time in
Days
Rod 2 4672 1.5 7008 5
Thin Board 1 2336 2 4672 7
Thick Board 0.5 1168 2.5 2920 3
Seat
Cushion
1 2336 5 11680 10
Total
Chairs
2336 Total
Cost=
26280
Component Quantity Per
Chair
Week 49 to
52
Dec 17
Cost/ea in
$
Total
cost
Lead Time in
Days
Rod 2 3792 1.5 5688 5
Thin Board 1 1896 2 3792 7
Thick Board 0.5 948 2.5 2370 3
Seat
Cushion
1 1896 5 9480 10
Total
Chairs
1896 Total
Cost=
21330
Cumulative Cost: According to above raw material cost and other fixed and variable
cost we calculated cumulative cost for three years.
Wee
k
Raw
Material
Cost
Labor
Cost
Paint +
Glue/We
ek
Mainte
nance
+ Misc
Insuran
ce Rent
Electric
ity
Total
Cumulative
Expenses
1 15018.75 12435 285.69 3000 480.77 342.7 181.25 31744.16
2 12435 285.69 3000 480.77 342.7 181.25 16725.41
3 12435 285.69 3000 480.77 342.7 181.25 16725.41
4 12435 285.69 3000 480.77 342.7 181.25 16725.41
5 12435 285.69 3000 480.77 342.7 181.25 16725.41
6 23490 12435 558.54 3000 480.77 342.7 181.25 40488.26
7 12435 558.54 3000 480.77 342.7 181.25 16998.26
8 12435 558.54 3000 480.77 342.7 181.25 16998.26
9 12435 558.54 3000 480.77 342.7 181.25 16998.26
10 26235 12435 623.81 3000 480.77 342.7 181.25 43298.53
11 12435 623.81 3000 480.77 342.7 181.25 17063.53
12 12435 623.81 3000 480.77 342.7 181.25 17063.53
13 12435 623.81 3000 480.77 342.7 181.25 17063.53
14 23400 12435 556.4 3000 480.77 342.7 181.25 40396.12
15 12435 556.4 3000 480.77 342.7 181.25 16996.12
16 12435 556.4 3000 480.77 342.7 181.25 16996.12
17 12435 556.4 3000 480.77 342.7 181.25 16996.12
18 14906.25 12435 283.55 3000 480.77 342.7 181.25 31629.52
19 12435 283.55 3000 480.77 342.7 181.25 16723.27
20 12435 283.55 3000 480.77 342.7 181.25 16723.27
21 12435 283.55 3000 480.77 342.7 181.25 16723.27
22 12435 283.55 3000 480.77 342.7 181.25 16723.27
23 18270 12435 434.42 3000 480.77 342.7 181.25 35144.14
24 12435 434.42 3000 480.77 342.7 181.25 16874.14
25 12435 434.42 3000 480.77 342.7 181.25 16874.14
26 12435 434.42 3000 480.77 342.7 181.25 16874.14
27 23400 12435 556.4 3000 480.77 342.7 181.25 40284.84
28 12435 556.4 3000 480.77 342.7 181.25 16884.84
29 12435 556.4 3000 480.77 342.7 181.25 16884.84
30 12435 556.4 3000 480.77 342.7 181.25 16884.84
31 12435 556.4 3000 480.77 342.7 181.25 16884.84
32 21870 12435 520.02 3000 480.77 342.7 181.25 38829.74
33 12435 520.02 3000 480.77 342.7 181.25 16959.74
34 12435 520.02 3000 480.77 342.7 181.25 16959.74
35 12435 520.02 3000 480.77 342.7 181.25 16959.74
36 20025 12435 476.15 3000 480.77 342.7 181.25 36940.87
37 12435 476.15 3000 480.77 342.7 181.25 16915.87
38 12435 476.15 3000 480.77 342.7 181.25 16915.87
39 12435 476.15 3000 480.77 342.7 181.25 16915.87
40 30262.5 12435 575.66 3000 480.77 342.7 181.25 47277.88
41 12435 575.66 3000 480.77 342.7 181.25 17015.38
42 12435 575.66 3000 480.77 342.7 181.25 17015.38
43 12435 575.66 3000 480.77 342.7 181.25 17015.38
44 12435 575.66 3000 480.77 342.7 181.25 17015.38
45 24255 12435 576.73 3000 480.77 342.7 181.25 41271.45
46 12435 576.73 3000 480.77 342.7 181.25 17016.45
47 12435 576.73 3000 480.77 342.7 181.25 17016.45
48 12435 576.73 3000 480.77 342.7 181.25 17016.45
49 19755 12435 469.73 3000 480.77 342.7 181.25 36664.45
50 12435 469.73 3000 480.77 342.7 181.25 16909.45
51 12435 469.73 3000 480.77 342.7 181.25 16909.45
52 12435 469.73 3000 480.77 342.7 181.25 16909.45
201
5
year
sTot
al 237487.5 646620 25369.7 156000
25000.0
4
17820.
4 9425 1140566.24
1 15468.75 13678.5 294.25 3000 480.77 342.7 181.25 33446.22
2 13678.5 294.25 3000 480.77 342.7 181.25 17977.47
3 13678.5 294.25 3000 480.77 342.7 181.25 17977.47
4 13678.5 294.25 3000 480.77 342.7 181.25 17977.47
5 13678.5 294.25 3000 480.77 342.7 181.25 17977.47
6 24435 13678.5 581.01 3000 480.77 342.7 181.25 42699.23
7 13678.5 581.01 3000 480.77 342.7 181.25 18264.23
8 13678.5 581.01 3000 480.77 342.7 181.25 18264.23
9 13678.5 581.01 3000 480.77 342.7 181.25 18264.23
10 27000 13678.5 642 3000 480.77 342.7 181.25 45325.22
11 13678.5 642 3000 480.77 342.7 181.25 18325.22
12 13678.5 642 3000 480.77 342.7 181.25 18325.22
13 13678.5 642 3000 480.77 342.7 181.25 18325.22
14 24300 13678.5 462.24 3000 480.77 342.7 181.25 42445.46
15 13678.5 462.24 3000 480.77 342.7 181.25 18145.46
16 13678.5 462.24 3000 480.77 342.7 181.25 18145.46
17 13678.5 462.24 3000 480.77 342.7 181.25 18145.46
18 13678.5 462.24 3000 480.77 342.7 181.25 18145.46
19 15480 13678.5 368.08 3000 480.77 342.7 181.25 33531.3
20 13678.5 368.08 3000 480.77 342.7 181.25 18051.3
21 13678.5 368.08 3000 480.77 342.7 181.25 18051.3
22 13678.5 368.08 3000 480.77 342.7 181.25 18051.3
23 19035 13678.5 452.61 3000 480.77 342.7 181.25 37170.83
24 13678.5 452.61 3000 480.77 342.7 181.25 18135.83
25 13678.5 452.61 3000 480.77 342.7 181.25 18135.83
26 13678.5 452.61 3000 480.77 342.7 181.25 18135.83
27 30375 13678.5 577.8 3000 480.77 342.7 181.25 48636.02
28 13678.5 577.8 3000 480.77 342.7 181.25 18261.02
29 13678.5 577.8 3000 480.77 342.7 181.25 18261.02
30 13678.5 577.8 3000 480.77 342.7 181.25 18261.02
31 13678.5 577.8 3000 480.77 342.7 181.25 18261.02
32 228115 13678.5 542.49 3000 480.77 342.7 181.25 246340.71
33 13678.5 542.49 3000 480.77 342.7 181.25 18225.71
34 13678.5 542.49 3000 480.77 342.7 181.25 18225.71
35 13678.5 542.49 3000 480.77 342.7 181.25 18225.71
36 20700 13678.5 393.76 3000 480.77 342.7 181.25 38776.98
37 13678.5 393.76 3000 480.77 342.7 181.25 18076.98
38 13678.5 393.76 3000 480.77 342.7 181.25 18076.98
39 13678.5 393.76 3000 480.77 342.7 181.25 18076.98
40 13678.5 393.76 3000 480.77 342.7 181.25 18076.98
41 31590 13678.5 751.14 3000 480.77 342.7 181.25 50024.36
42 13678.5 751.14 3000 480.77 342.7 181.25 18434.36
43 13678.5 751.14 3000 480.77 342.7 181.25 18434.36
44 13678.5 751.14 3000 480.77 342.7 181.25 18434.36
45 25245 13678.5 600.27 3000 480.77 342.7 181.25 43528.49
46 13678.5 600.27 3000 480.77 342.7 181.25 18283.49
47 13678.5 600.27 3000 480.77 342.7 181.25 18283.49
48 13678.5 600.27 3000 480.77 342.7 181.25 18283.49
49 20520 13678.5 487.92 3000 480.77 342.7 181.25 38691.14
50 13678.5 487.92 3000 480.77 342.7 181.25 18171.14
51 13678.5 487.92 3000 480.77 342.7 181.25 18171.14
52 13678.5 487.92 3000 480.77 342.7 181.25 18171.14
201
6
457963.7
5 711282 26342.33 156000
25000.0
4
17820.
4 9425 1428133.52
year
s
Tota
l
1 16020
15046.3
5 380.92 3000 480.77 342.7 181.25 35451.99
2
15046.3
5 380.92 3000 480.77 342.7 181.25 19431.99
3
15046.3
5 380.92 3000 480.77 342.7 181.25 19431.99
4
15046.3
5 380.92 3000 480.77 342.7 181.25 19431.99
5 25380
15046.3
5 603.48 3000 480.77 342.7 181.25 45034.55
6
15046.3
5 603.48 3000 480.77 342.7 181.25 19654.55
7
15046.3
5 603.48 3000 480.77 342.7 181.25 19654.55
8
15046.3
5 603.48 3000 480.77 342.7 181.25 19654.55
9 27787.5
15046.3
5 528.58 3000 480.77 342.7 181.25 47367.15
10
15046.3
5 528.58 3000 480.77 342.7 181.25 19579.65
11
15046.3
5 528.58 3000 480.77 342.7 181.25 19579.65
12
15046.3
5 528.58 3000 480.77 342.7 181.25 19579.65
13
15046.3
5 528.58 3000 480.77 342.7 181.25 19579.65
14 25256.25
15046.3
5 480.43 3000 480.77 342.7 181.25 44787.75
15
15046.3
5 480.43 3000 480.77 342.7 181.25 19531.5
16
15046.3
5 480.43 3000 480.77 342.7 181.25 19531.5
17
15046.3
5 480.43 3000 480.77 342.7 181.25 19531.5
18
15046.3
5 480.43 3000 480.77 342.7 181.25 19531.5
19 16065
15046.3
5 381.99 3000 480.77 342.7 181.25 35498.06
20
15046.3
5 381.99 3000 480.77 342.7 181.25 19433.06
21
15046.3
5 381.99 3000 480.77 342.7 181.25 19433.06
22
15046.3
5 381.99 3000 480.77 342.7 181.25 19433.06
23 19856.25
15046.3
5 377.71 3000 480.77 342.7 181.25 39285.03
24
15046.3
5 377.71 3000 480.77 342.7 181.25 19428.78
25
15046.3
5 377.71 3000 480.77 342.7 181.25 19428.78
26
15046.3
5 377.71 3000 480.77 342.7 181.25 19428.78
27
15046.3
5 377.71 3000 480.77 342.7 181.25 19428.78
28 31545
15046.3
5 750.07 3000 480.77 342.7 181.25 51346.14
29
15046.3
5 750.07 3000 480.77 342.7 181.25 19801.14
30
15046.3
5 750.07 3000 480.77 342.7 181.25 19801.14
31
15046.3
5 750.07 3000 480.77 342.7 181.25 19801.14
32 23760
15046.3
5 564.96 3000 480.77 342.7 181.25 43376.03
33
15046.3
5 564.96 3000 480.77 342.7 181.25 19616.03
34
15046.3
5 564.96 3000 480.77 342.7 181.25 19616.03
35
15046.3
5 564.96 3000 480.77 342.7 181.25 19616.03
36 21431.25
15046.3
5 407.67 3000 480.77 342.7 181.25 40889.99
37
15046.3
5 407.67 3000 480.77 342.7 181.25 19458.74
38
15046.3
5 407.67 3000 480.77 342.7 181.25 19458.74
39
15046.3
5 407.67 3000 480.77 342.7 181.25 19458.74
40
15046.3
5 407.67 3000 480.77 342.7 181.25 19458.74
41 32985
15046.3
5 784.31 3000 480.77 342.7 181.25 52820.38
42
15046.3
5 784.31 3000 480.77 342.7 181.25 19835.38
43
15046.3
5 784.31 3000 480.77 342.7 181.25 19835.38
44
15046.3
5 784.31 3000 480.77 342.7 181.25 19835.38
45 26280
15046.3
5 624.88 3000 480.77 342.7 181.25 45955.95
46
15046.3
5 624.88 3000 480.77 342.7 181.25 19675.95
47
15046.3
5 624.88 3000 480.77 342.7 181.25 19675.95
48
15046.3
5 624.88 3000 480.77 342.7 181.25 19675.95
49 21330
15046.3
5 507.18 3000 480.77 342.7 181.25 40888.25
50
15046.3
5 507.18 3000 480.77 342.7 181.25 19558.25
51
15046.3
5 507.18 3000 480.77 342.7 181.25 19558.25
52
15046.3
5 507.18 3000 480.77 342.7 181.25 19558.25
201
7yea
rs
Tota
l
287696.2
5
782410.
2 27363.11 156000
25000.0
4
17820.
4 9425 1305715
Tota
l
3
year
s
1015378.
75
214031
2.2 79075.14 468000
75000.1
2
53461.
2 28275 3874414.76
After summing all of the cumulative expenses and dividing this by the number of chair
produced, the total cost/per chair is found to be $52.43. In order to remain a competitive
force in the market for home and office chairs, Skala has chosen to price their chairs at
$59.99. It comes to 12.59% profit per chair cost. This takes into account potential rising
costs in terms of inflation or downward inflections in the economy. Break-even point for
Skala’s profitability will be analyzed in the next section.
Skala’s Cost per Chair = $52.43
Selling Price per Chair = $59.99
Profit Percent per Chair = 12.59%
Break-Even Analysis
Break-even analysis gives the company an indication to the exact moment that they
transition from accumulated losses to profits. The graph below sums up all of the revenue
from chair sales @$59.99 and compares it with the total running costs for the company.
Costs are shown by the upward trending Red line, and the orange line represents the
running total for revenue. After 8 weeks of operation, the revenue line crosses the costs
line. After this week, Skala becomes profitable, and the break-even point for the number
of sold chairs is found to be 2901 which occurs at Week = 8.
Fig No. Break Even Analysis for Year 2015
Fig No. Break Even Analysis.
The cash-flow analysis tabulated below. Per the amount of sales, cash is accumulated
per the selling price of each chair, and from the formula profit / loss = revenue – costs.
The last column in the cash flow table shows when Skala has positive cash, after week
8.
Cash-Flow Analysis
Units
Sold
cumulative
Units Sold
Revenue
From Sales
Accumulated
Revenue Expense
Accumulated
Expense
Net
Income
267 267 16017.33 16017.33 31744.16 31744.16
-
15726.8
3
267 534 16017.33 32034.66 16725.41 48469.57
-
16434.9
1
267 801 16017.33 48051.99 16725.41 65194.98
-
17142.9
9
267 1068 16017.33 64069.32 16725.41 81920.39
-
17851.0
7
267 1335 16017.33 80086.65 16725.41 98645.8
-
18559.1
5
522 1857 31314.78 111401.43 40488.26 139134.06
-
27732.6
3
522 2379 31314.78 142716.21 16998.26 156132.32
-
13416.1
1
522 2901 31314.78 174030.99 16998.26 173130.58 900.41
522 3423 31314.78 205345.77 16998.26 190128.84
15216.9
3
583 4006 34974.17 240319.94 43298.53 233427.37 6892.57
583 4589 34974.17 275294.11 17063.53 250490.9
24803.2
1
583 5172 34974.17 310268.28 17063.53 267554.43
42713.8
5
583 5755 34974.17 345242.45 17063.53 284617.96
60624.4
9
520 6275 31194.80 376437.25 40396.12 325014.08
51423.1
7
520 6795 31194.80 407632.05 16996.12 342010.2
65621.8
5
520 7315 31194.80 438826.85 16996.12 359006.32
79820.5
3
520 7835 31194.80 470021.65 16996.12 376002.44
94019.2
1
265 8100 15897.35 485919.00 31629.52 407631.96
78287.0
4
265 8365 15897.35 501816.35 16723.27 424355.23
77461.1
2
265 8630 15897.35 517713.70 16723.27 441078.5
76635.2
0
265 8895 15897.35 533611.05 16723.27 457801.77
75809.2
8
265 9160 15897.35 549508.40 16723.27 474525.04
74983.3
6
406 9566 24355.94 573864.34 35144.14 509669.18
64195.1
6
406 9972 24355.94 598220.28 16874.14 526543.32
71676.9
6
406 10378 24355.94 622576.22 16874.14 543417.46
79158.7
6
406 10784 24355.94 646932.16 16874.14 560291.6
86640.5
6
520 11304 31194.80 678126.96 40284.84 600576.44
77550.5
2
520 11824 31194.80 709321.76 16884.84 617461.28
91860.4
8
520 12344 31194.80 740516.56 16884.84 634346.12
106170.
44
520 12864 31194.80 771711.36 16884.84 651230.96
120480.
40
520 13384 31194.80 802906.16 16884.84 668115.8
134790.
36
486 13870 29155.14 832061.30 38829.74 706945.54
125115.
76
486 14356 29155.14 861216.44 16959.74 723905.28
137311.
16
486 14842 29155.14 890371.58 16959.74 740865.02
149506.
56
486 15328 29155.14 919526.72 16959.74 757824.76
161701.
96
445 15773 26695.55 946222.27 36940.87 794765.63
151456.
64
445 16218 26695.55 972917.82 16915.87 811681.5
161236.
32
445 16663 26695.55 999613.37 16915.87 828597.37
171016.
00
445 17108 26695.55 1026308.92 16915.87 845513.24
180795.
68
538 17646 32274.62 1058583.54 47277.88 892791.12
165792.
42
538 18184 32274.62 1090858.16 17015.38 909806.5
181051.
66
538 18722 32274.62 1123132.78 17015.38 926821.88
196310.
90
538 19260 32274.62 1155407.40 17015.38 943837.26
211570.
14
538 19798 32274.62 1187682.02 17015.38 960852.64
226829.
38
539 20337 32334.61 1220016.63 41271.45 1002124.09
217892.
54
539 20876 32334.61 1252351.24 17016.45 1019140.54
233210.
70
539 21415 32334.61 1284685.85 17016.45 1036156.99
248528.
86
539 21954 32334.61 1317020.46 17016.45 1053173.44
263847.
02
439 22393 26335.61 1343356.07 36664.45 1089837.89
253518.
18
439 22832 26335.61 1369691.68 16909.45 1106747.34
262944.
34
439 23271 26335.61 1396027.29 16909.45 1123656.79
272370.
50
439 23710 26335.61 1422362.90 16909.45 1140566.24
281796.
66
23710
1140566.
24
275 23985 16497.25 1438860.15 33446.22 1174012.46
264847.
69
275 24260 16497.25 1455357.40 17977.47 1191989.93
263367.
47
275 24535 16497.25 1471854.65 17977.47 1209967.4
261887.
25
275 24810 16497.25 1488351.90 17977.47 1227944.87
260407.
03
275 25085 16497.25 1504849.15 17977.47 1245922.34
258926.
81
543 25628 32574.57 1537423.72 42699.23 1288621.57
248802.
15
543 26171 32574.57 1569998.29 18264.23 1306885.8
263112.
49
543 26714 32574.57 1602572.86 18264.23 1325150.03
277422.
83
543 27257 32574.57 1635147.43 18264.23 1343414.26
291733.
17
600 27857 35994.00 1671141.43 45325.22 1388739.48
282401.
95
600 28457 35994.00 1707135.43 18325.22 1407064.7
300070.
73
600 29057 35994.00 1743129.43 18325.22 1425389.92
317739.
51
600 29657 35994.00 1779123.43 18325.22 1443715.14
335408.
29
432 30089 25915.68 1805039.11 42445.46 1486160.6
318878.
51
432 30521 25915.68 1830954.79 18145.46 1504306.06
326648.
73
432 30953 25915.68 1856870.47 18145.46 1522451.52
334418.
95
432 31385 25915.68 1882786.15 18145.46 1540596.98
342189.
17
432 31817 25915.68 1908701.83 18145.46 1558742.44
349959.
39
344 32161 20636.56 1929338.39 33531.3 1592273.74
337064.
65
344 32505 20636.56 1949974.95 18051.3 1610325.04
339649.
91
344 32849 20636.56 1970611.51 18051.3 1628376.34
342235.
17
344 33193 20636.56 1991248.07 18051.3 1646427.64
344820.
43
423 33616 25375.77 2016623.84 37170.83 1683598.47
333025.
37
423 34039 25375.77 2041999.61 18135.83 1701734.3
340265.
31
423 34462 25375.77 2067375.38 18135.83 1719870.13
347505.
25
423 34885 25375.77 2092751.15 18135.83 1738005.96
354745.
19
540 35425 32394.60 2125145.75 48636.02 1786641.98
338503.
77
540 35965 32394.60 2157540.35 18261.02 1804903
352637.
35
540 36505 32394.60 2189934.95 18261.02 1823164.02
366770.
93
540 37045 32394.60 2222329.55 18261.02 1841425.04
380904.
51
540 37585 32394.60 2254724.15 18261.02 1859686.06
395038.
09
507 38092 30414.93 2285139.08
246340.7
1 2106026.77
179112.
31
507 38599 30414.93 2315554.01 18225.71 2124252.48
191301.
53
507 39106 30414.93 2345968.94 18225.71 2142478.19
203490.
75
507 39613 30414.93 2376383.87 18225.71 2160703.9
215679.
97
368 39981 22076.32 2398460.19 38776.98 2199480.88
198979.
31
368 40349 22076.32 2420536.51 18076.98 2217557.86
202978.
65
368 40717 22076.32 2442612.83 18076.98 2235634.84
206977.
99
368 41085 22076.32 2464689.15 18076.98 2253711.82
210977.
33
368 41453 22076.32 2486765.47 18076.98 2271788.8
214976.
67
702 42155 42112.98 2528878.45 50024.36 2321813.16
207065.
29
702 42857 42112.98 2570991.43 18434.36 2340247.52
230743.
91
702 43559 42112.98 2613104.41 18434.36 2358681.88
254422.
53
702 44261 42112.98 2655217.39 18434.36 2377116.24
278101.
15
561 44822 33654.39 2688871.78 43528.49 2420644.73
268227.
05
561 45383 33654.39 2722526.17 18283.49 2438928.22
283597.
95
561 45944 33654.39 2756180.56 18283.49 2457211.71
298968.
85
561 46505 33654.39 2789834.95 18283.49 2475495.2
314339.
75
456 46961 27355.44 2817190.39 38691.14 2514186.34
303004.
05
456 47417 27355.44 2844545.83 18171.14 2532357.48
312188.
35
456 47873 27355.44 2871901.27 18171.14 2550528.62
321372.
65
456 48329 27355.44 2899256.71 18171.14 2568699.76
330556.
95
48329
1428133.
52
356 48685 21356.44 2920613.15 35451.99 2604151.75
316461.
40
356 49041 21356.44 2941969.59 19431.99 2623583.74
318385.
85
356 49397 21356.44 2963326.03 19431.99 2643015.73
320310.
30
356 49753 21356.44 2984682.47 19431.99 2662447.72
322234.
75
564 50317 33834.36 3018516.83 45034.55 2707482.27
311034.
56
564 50881 33834.36 3052351.19 19654.55 2727136.82
325214.
37
564 51445 33834.36 3086185.55 19654.55 2746791.37
339394.
18
564 52009 33834.36 3120019.91 19654.55 2766445.92
353573.
99
494 52503 29635.06 3149654.97 47367.15 2813813.07
335841.
90
494 52997 29635.06 3179290.03 19579.65 2833392.72
345897.
31
494 53491 29635.06 3208925.09 19579.65 2852972.37
355952.
72
494 53985 29635.06 3238560.15 19579.65 2872552.02
366008.
13
494 54479 29635.06 3268195.21 19579.65 2892131.67
376063.
54
449 54928 26935.51 3295130.72 44787.75 2936919.42
358211.
30
449 55377 26935.51 3322066.23 19531.5 2956450.92
365615.
31
449 55826 26935.51 3349001.74 19531.5 2975982.42
373019.
32
449 56275 26935.51 3375937.25 19531.5 2995513.92
380423.
33
449 56724 26935.51 3402872.76 19531.5 3015045.42
387827.
34
357 57081 21416.43 3424289.19 35498.06 3050543.48
373745.
71
357 57438 21416.43 3445705.62 19433.06 3069976.54
375729.
08
357 57795 21416.43 3467122.05 19433.06 3089409.6
377712.
45
357 58152 21416.43 3488538.48 19433.06 3108842.66
379695.
82
353 58505 21176.47 3509714.95 39285.03 3148127.69
361587.
26
353 58858 21176.47 3530891.42 19428.78 3167556.47
363334.
95
353 59211 21176.47 3552067.89 19428.78 3186985.25
365082.
64
353 59564 21176.47 3573244.36 19428.78 3206414.03
366830.
33
353 59917 21176.47 3594420.83 19428.78 3225842.81
368578.
02
701 60618 42052.99 3636473.82 51346.14 3277188.95
359284.
87
701 61319 42052.99 3678526.81 19801.14 3296990.09
381536.
72
701 62020 42052.99 3720579.80 19801.14 3316791.23
403788.
57
701 62721 42052.99 3762632.79 19801.14 3336592.37
426040.
42
528 63249 31674.72 3794307.51 43376.03 3379968.4
414339.
11
528 63777 31674.72 3825982.23 19616.03 3399584.43
426397.
80
528 64305 31674.72 3857656.95 19616.03 3419200.46
438456.
49
528 64833 31674.72 3889331.67 19616.03 3438816.49
450515.
18
381 65214 22856.19 3912187.86 40889.99 3479706.48
432481.
38
381 65595 22856.19 3935044.05 19458.74 3499165.22
435878.
83
381 65976 22856.19 3957900.24 19458.74 3518623.96
439276.
28
381 66357 22856.19 3980756.43 19458.74 3538082.7
442673.
73
381 66738 22856.19 4003612.62 19458.74 3557541.44
446071.
18
733 67471 43972.67 4047585.29 52820.38 3610361.82
437223.
47
733 68204 43972.67 4091557.96 19835.38 3630197.2
461360.
76
733 68937 43972.67 4135530.63 19835.38 3650032.58
485498.
05
733 69670 43972.67 4179503.30 19835.38 3669867.96
509635.
34
584 70254 35034.16 4214537.46 45955.95 3715823.91
498713.
55
584 70838 35034.16 4249571.62 19675.95 3735499.86
514071.
76
584 71422 35034.16 4284605.78 19675.95 3755175.81
529429.
97
584 72006 35034.16 4319639.94 19675.95 3774851.76
544788.
18
474 72480 28435.26 4348075.20 40888.25 3815740.01
532335.
19
474 72954 28435.26 4376510.46 19558.25 3835298.26
541212.
20
474 73428 28435.26 4404945.72 19558.25 3854856.51
550089.
21
474 73902 28435.26 4433380.98 19558.25 3874414.76
558966.
22
From Cash-Flow analysis Skala’s statistics after 3 years of operation:
● Numbers of Chairs sold: 73902 only.
● Total Revenue: $4433380.98 only.
● Total Expense: $ 3874414.76 only.
● Net Income: $ 558966.22 only.
Chair Prototyping:
Skala Furniture delivering top quality comfortable chairs to customers. The dimensions of
the chair plays an important role in the same. Apart from this, it also plays a very important
in determining the floor area, Packaging and delivery. Since our stocking area is a vertical
expansion and we have a limit of 1000 for the number of chairs that can be stocked at a
time, the prototype of the chair is indeed a big factor. The dimensions of each chair that
Skala manufactures is shown below.
Front Side of Chair
Back Side of Chair
Conclusion:
In sum, Skala’s mission is to offer a affordable product to the public, yet profitable
to us and dependable with consistent quality at the same time. Our price point of $59.99
is a very competitive price on the market. The decision of selling to distributors rather than
selling the chairs ourselves further enable us to be profitable. In Skala we do not only aim
to offer the most economical chair on the market, but to have a dependable product as
well, and to achieve this we make to stock so that we do not have to manage an
overwhelming number of stock, thus reducing problems associating with quality. To
further enable us to offer a competitive price to our chairs, the location we chose is low
on the rent and convenient on shipping to our major market, with incentives from the local
government.
Our goal was to be profitable within the first year, and with our effort, we are able
to profitable in just 8 weeks. Our product is effective, economical, and dependable.
Location: Tijuana, Mexico
Forecast: Monthly average of 2053 chairs for 36 months.
Production: Production varies from 1300 chairs to 2700 chairs a month.
Inventory and Raw materials: Minimum Inventory: 130 chairs, Maximum Inventory
290 chairs. Re-ordering happens every 4 weeks, except for week 204 to 209
Tools:
● 1 Straight Cutter,
● 1 Flex Cutter,
● 2 Lathes,
● 1 Drill.
Factory Size: 21750 sq.ft.
Workforce: 15 employees including non-production staff.
Cost Analysis:
● Cost price per chair: $52.46
● Selling price to the distributor per chair: $59.99
● Profit % per chair: 12.59%
Break-even point: Week 8