CASE STUDY ON FARNRAY TOOLS

INTRODUCTION

Farnray

Tools

Small wooden handled garden tools

Building and DIY

tools

Larger garden tools

Organizational Structure

ABOUT THE COMPANY

ABOUT THE COMPANY… The Company has two main suppliers.

- Local Timber Supplier for Handles- Brierley Forgings - Outside Supplier for Forged Parts

(Blades) The Company has a strong Marketing Team

Manually doing the Sales & Operational Activities such as invoicing, purchase orders, order conformations, delivery documents, Inventory control, BOM, Material Requirement Planning, Production Planning and Scheduling.

Manually doing the Administration and Finance activities such as payrolls, invoicing, legers, etc.

As a result of huge paper works, frequent mistakes were occurred.

NEW ORDER FOR SPADES..

PROBLEMS…• What problem evident to Harish?

• What are the likely difficulties that Farnray will face if they continue to use their existing system of calculating material requirements?

• What practical problems will Peter Chan faces?

ANALYSIS

Level Part Number Description Quantity Order Qty Lead Time On hand (Economic) (Weeks)

0 00289 Spade 1 500 1 3001 10089 Handle Assembly 1 1500 1 3502 10278 Handle 1 500 2 8002 10062 Nail 2 2000 1 01 10077 Shaft 1 400 1 501 10023 Connector 1 700 1 3501 10062 Nail 4 2000 1 01 10045 Rivet 4 2000 1 4001 10316 Blade Assembly 1 200 1 02 10992 Blade 1 200 4 302 10045 Rivet 2 2000 1 400

Details on BOM, Economic Order quantity, Lead Time & Stock Level

MATERIAL REQUIREMENT ANALYSIS

1. MAJOR PROBLEM WHICH EVIDENT TO HARISH:

Peter Chan & Manufacturing team need 200 units of forged

Blades, continuously from 21st, 22nd, 23rd, 24th, 26th and

27th Weeks. If these materials not available on time, Farnray

Tools cannot deliver the product on time.

Countermeasures - Short Term

Steve Barker & Team can ask the existing Blade supplier - Brierley Forgings to deliver

this additional quantity from their existing stock.

They have to find another Blade Supplier, who can provide blades immediately in the

same quality, even though the price is somewhat higher than the existing.

Sales & Marketing team including Steve Barker, can negotiate with the Client -

Sellecks, and ask for extension of the delivery date. This task would be possible since

Sellecks has also identified and shocked by the existing information flow of Farnray.

Countermeasures - Long Term

Tony can increase the batch size of the blades to 1000 units at the same lead time by

considering the capability & the capacity of the Brierley Forgings, hence they have

committed on their capability on handling the extra orders.

Sales & Marketing team can negotiate with the blade supplier and ask them to reduce

their lead time without affecting the existing cost, since 4 weeks lead time is too long

compared to the lot size and it is difficult to meet the delivery dates of new orders.

Farnray Tools is recommended to implement Computerized MRP System since this

will enable to adjust , update and prepare for orders in advance and also enhance fast

decision making.

Other Problems:

1. Peter Chang & the Manufacturing team need to produce 200 extra units of Blade

Assemblies and delivered in the 28th Week.

Countermeasures - Short Term

They can use extra manpower, which was available to cater the extra demand and

produce in a secondary assembly line located in the additional space available in the

facility.

The Farnray Management can outsource Blade assembly Process for a short period to a

outside supplier, who has the capability, machinery and workforce. They can be paid

per piece base.

Countermeasures - Long Term

They can increase the batch size of the Blade Assembly to 700 units at the same lead

time by allocating one more assembly line with trained staff.

1. They need 500 units of Handles in the 23rd Week.

Countermeasures - Short Term

They can ask the existing timber supplier to deliver this additional quantity from their

existing stock.

They can negotiate with the new national firm to deliver this additional quantity, at the

same quality and cost, since they have a lead time of 2 weeks

Countermeasures - Long Term

They can increase the batch size of the handles to 1000 units at the same lead time and

can split the order to the two suppliers.

When considering the calculation of Material Requirements, Farnray Tools has problems in following areas.

1. Lot size calculation

- To produce 500 spades, 500 handle assemblies required. But Order quantity is 1500.

- To produce 500 spades, 500 blades required. But Order quantity is 200 with a lead time of 4 wk

2. Improper communication and Manufacturing data Updating

- Not updated with the new capacity of the existing supplier

- Capabilities of new suppliers were not considered

3. Safety Stock

- No stock available for critical parts like Blade Assemblies.

- Inadequate stock available for critical parts like Blades.

- No stock for fast moving items like Nails

4. Less user friendly inventory management system

- Checking all Bin Cards

- Time consuming & erratic activity

2. Difficulties that Farnray will face if they continue to use their existing

system of calculating Material Requirements.

3. Practical Problems that Peter Chan faces

• The company has one Production Planner - Harish Patel, under Peter Chan and

performing several planning activities. There was no alternative or any other trained

staff member to replace Harish on his absence.

• Capacity issue in Blade Assembly process

• Training the new staff (employees)

• Adequacy of the machineries & other utilities.

• Machinery Breakdowns – need capable maintenance staff and spare parts.

• Maintaining the quality of the product.

CONCLUSION• After considering all the problems which Farnray Tools has to face, we found

that they all associated with the existing high documentary, less user friendly

manual system.

• Farnray Tools can overcome these problems by following short term & long

term alternatives which we have suggested and some problems will be solved

with the computerized system which Farnray is willing to implement

• It is advised to implement a computerized MRP system, to eliminate all the

problems related to production planning and control.

• If properly implemented, it will reduce cash flow and increase profitability.