Table of Contents

List of Tables.. 3
List of Figures. 3
1.0 CASE SUMMARY...4
2.0 STATEMENT OF PROLEMS..6
2.1 Low Quality of Operation Management in Production Process....6
2.2 Inefficient Job Shop Layout...7
2.3 Raw Material Inventory.8
2.4 Loss on Returned Orders due to Poor Quality...9
3.0 ANALYSIS ...9
4.0 RECOMMENDATION...14
4.1 Separate to Two Line Production....14
4.2 Rearrange Job Shop Layout.15
4.3 Stock Raw Material Inventory.16
5.0 CONCLUSION... 17
6.0 REFERENCES... 19

List of Tables
Table 3.1 Financial Data and Forecasted Material Cost for Year 2009-2011...10
Table 3.2 Distributed Forecast Raw Material Usages for Year 2012........11
Table 3.3 Sales and Order Number for March 201212-13
Table 4.1 Total Backorder Sales for March 2012..........15
List of Figures
Figure 1.1 Order Entry Flow5
Figure 2.1 Current One Line Production.7
Figure 2.2 Original Job Shop Layout..8
Figure 4.1 Propose Two Line Production..14
Figure 4.2 Propose Job Shop Layout.16

1.0 CASE SUMMARY

Bennett Auto Sales and Services (BASS) consists of three car dealerships that sell and
service several makes of American and Japanese cars, two auto part stores, a large body shop
and car painting business, and an auto salvage yard. Bennett does aware that publics are
interested in the restoration of vintage automobiles. He also thinking of expending into the
vintage car restoration business and needs help in accessing the feasibility of such a move.
Bennett do believes that many people want the thrill of restoring an old car themselves, but
they do not have time to run down all the old parts.

Others just want to own a

vintage auto because it is different and many of them have plenty of money to pay someone to
restore an auto for them. BASS could assemble a library of parts and body manuals for old
cars to serve as information resource for do-it-yourself restores. The do-it-yourselfers could
come to BASS for help in compiling parts lists, and BASS could acquire the parts for them.
For others, BASS would take charge of the entire restoration. Bennett asked the director of
service operations to take good look at her Mustang and determine what needs to be done to
restore it to the condition it was in when it came from the factory more than 40 years ago. He
wants to restore this car in time to exhibit it at the Detroit Auto Show. If the car gets a lot of
press, it will be real public relations coup for BASS, especially if Bennett decides to enter this
new venture. Even if he does not, the car will be a showpiece for the rest of the business.

2.0 USING THE INFORMATION PROVIDED prepare the report that David Bennett
requested, assuming that the project will begin immediately. Assume 45 days are
available to complete the project, including transporting the car to Detroit before the
auto show begins. Your report should briefly discuss the aspects of the proposed new
business, such as the competitive priorities that Bennett asked about.
David Bennet interested to venture into vintage car restoration aligned with his interest and

passion with high performance car. Utilizing his current businesses and facilities, he will be
able to execute most activities required for the car restoration project. He strategy is going to
use this restored Shelby Mustang 1965 as an advertisement at Detroid Motor Show for BASS
and his new business segment.
David asked for a report from his Director of operation. This report included car restoration
project for 1965 Shelby Mustang GT 350, the additional works are repair, order, installation
and replacing parts and material such as upholstery, windshield, carburetor, and oil pump.
David has limited budget for this restroration which are listed as $50,000 for the car, $20,000
for restoration cost and expenses of $3,600 per week. Restoration has to be completed within
45 days , this is to allow him to get his Mustang for Detroit Auto Show.
Bennet Auto Sales (BASS)
Owner : David Bennet

Auto
Parts store
and
salvage
yard

Car dealership

Acquire new car

restoration projects.

Purchasing used/
vintage cars to be
refurbished
or
salvaged for parts.

Sales
promotion
restoration
service.

and
of

Identifying
and
sourcing of old
parts
that
are
required for the
restoration project.
Database of parts
identification and
supplier for
different type of
refurbished cars.

Bodywork
and painting
workshop
-

Providing
consultation service
for customization of
refurbished cars.

Executing
physical
restoration
of cars.

Producing replica
of parts that are
not available.

Basic restoration
Customized
Page | 2
restoration
- Parts library for DIY
- Replicate parts
- Quality Parts
SUB: PROPOSAL ANALYSIS OF VINTAGE CAR RESTORATION BUSINESS
Vintage Car
Restoration

Operation department
1.

Service Design BASS consists of 3 car dealerships that sell & services American
and Japanese model, 2 auto part stores, 1 body shop & painting business and 1 auto salvage
yard that designed to cater various type of customer in the automobile business. It offers a line
of supply chain business of automobile industry that can gave good price to customer.

2. Flexibility BASS respond to the customer wants and needs in restoring an old cars.
Mr. Bennett believes customer dont have time to help themselves up in restoring
their vintage car. Hence, BASS will consider venturing in this new line of business to
cater 2 type of customer. First type is find the right parts/customized parts for
customer and second type is do-it-yourself section that BASS play a facilitator role to
assist customer to restore their old cars.
Marketing department
1. Promotion BASS willing to spend money to restore an old Mustang Shelby and
participate in the Detroit Auto Show within 45 Days. This action reflex on to inform
customer regarding a new line of business that BASS will venture in the near future.
To attract more vintage cars owner or collector, BASS decided to restore the Mustang
into a mint condition without customization. The idea was to show customer, BASS
have capabilities to gain original old parts for their cars and restore them as good as
new.
Target Market:

2.

1. People who would like to do the restoration on their own and come to BASS for car
parts and body manuals, which BASS will eventually acquire for them.
People who come to BASS for the entire restoration of their vintage cars.
The new business venture is a great way to make BASS as a one-stop shop for all car
enthusiasts needs. Not only that, with the knowledge and experience that BASS has in the
car business, if the new venture succeeds, than BASS could also be the market leader for
its industry. However, before making a commitment, this might also depend on how well
BASS is able to pull off the mint restoration of the Mustang. If they are able to pull it off
well, then they certainly have the skills and capabilities to enter into the restoration
market.
Page | 3

Business Recommendation for Vintage Restroration

Refering to the Corporate Strategy for Vintage Restoration, its carrying a different competitive
priority which is for low demand environment with high quality product. As to balance the
constrains triangle, it will require longer period to produce the product. As per this project, the
constrains is the limitation of the resources. If BASS fully utilise all the other resources for
Car Restoration Project, it will jeopardize the rest of the business segment. It is not
recommended for BASS to venture into Vintage Restoration as all the current business model
is quick respond for high volume demand.

Page | 4

2.3 Raw Material Inventory

Customer Gear Inc. did not keep raw materials inventory on hand. The controller will
place purchase order for raw materials required upon received customer orders. These
materials often take from 1 to 2 weeks to arrive depends on the supplier and the type of
material ordered. The delivery time of the raw material has cause the delay to the production.

2.4 Loss on Returned Orders due to poor quality

Custom Gear Inc. experienced about 6 % return rate on orders due to poor quality. In
75% of the cases of return order, most returned order was found failed to undergo one or more

operations or the operations was not properly done. This could be due to the inefficient of job
shop layout, jumbled flow of products through the shop. This would result in a huge chunk of
unnecessary costs as compensation products are processed followed by other product orders to
prevent any loss transpired in a company. Unnecessary costs range from cost needed to
transport, repack, reprocess, and reschedule the production and etc. compensation products are
processed followed by other product orders to prevent any loss transpired in a company.
Unnecessary costs range from cost needed to transport, repack, reprocess, reschedule the
production and etc.

3.0 ANALYSIS
Financial data and forecasted material cost for year 2009-2011 of Customer Gear Inc. as
shown in Table 3.1. Sales are rapidly increasing and it has a direct relationship with several
other manufacturing costs such as material, labor and overhead as indicated by near to 1 Rsquare value. Period expenses such as sales expenses and general & administration expenses
are correlated to sales as well. Hence, Custom Gear Inc. is able to prepare budgeted expenses
from its sales forecast to plan for its operation for year 2012. However, the figure which is our
concern is the material cost as inventory plays a very crucial role in reducing total lead time to
deliver customers product.

2009

2010

56
Sales
Manufacturing Cost

1,50
0

6
Material

Depreciation

Total Manufacturing Cost

Sales Expenses

7
17

39

3
42

1,47
4

0.995
8

0.694
7

2,41
9

13

26

87
0

0.982

41
2

8
44

Forecast
2012
5,00
0

0.990

1,06

21
6

52

58

7
Overhead

R2

3,10

27

13
Labor

2011

0.995

0
7

G&A Expenses

0
58

Total Cost

Profit from operation

6)

3
11
7
1,71

4
(2

0.949
1

2,97
9

(21
4)

6
29

12
1

Table 3.1 Financial Data and Forecasted Material Cost for Year 2009-2011

By having a forecasted value of material cost, Custom Gear Inc. is able to store up
their inventories on few of the most common material to reduce waiting time for the material
to arrive before production could start their fabrication work. Table 3.2 shown forecasted raw
material usage for year 2012 some of the most common materials are E, H and J.
Type of
Materia
l
A
B
C
D
E
F
G
H
I
J
K
Others
Total

2011
usage $
'000
36
10
15
43
110
18
32
75
40
60
30
53
522

Forecast
2012
usage
$ '000
60
17
25
72
183
30
53
125
67
100
50
88
870

Table 3.2 Distributed Forecast Raw Material Usages for Year 2012

While the sales figure in March 2012 shown that the sales of Custom Mold Inc. order size
from 1 to 50 is considered small order size, on the other hand 100 and above is categorized as
large order which Mr. Roger Rhodes is currently receiving to pay for their overhead at a
cheaper price.

Order

Order
Size

10

15

20

25

30

40

M
50
Tota
l
Order

N
O
P
Q
R

Order
Size
10
0
20
0
40
0
70
0
1,00
0

Number
of
Order
8
0
5
3
6
9
3
2
8
2
4
7
6
4
2
2
4
2
2
7
1
8
2
2
1
0

Number
of
Order
4
2
1
2
1

Total
Order
8
0
10
6
20
7
12
8
41
0
37
6
64
0
33
0
84
0
67
5
54
0
88
0
50
0
5,71
2
Total
Order
40
0
40
0
40
0
1,40
0
1,00
0

Total $
Sales $ per
Value of
Unit of
Orders
Order
3,20
40.0
0
0
4,25
40.0
0
9
8,16
39.4
3
3
4,80
37.5
0
0
16,39
39.9
2
8
15,98
42.5
7
2
26,87
41.9
1
9
13,17
39.9
2
2
31,55
37.5
5
7
23,68
35.0
2
8
21,60
40.0
0
0
32,00
36.3
0
6
18,69
37.3
3
9
220,36
5
Total $
Sales $ per
Value of
Unit of
Orders
Order
12,50
31.2
0
5
14,06
35.1
8
7
9,65
24.1
2
3
35,60
25.4
0
3
20,00
20.0
0
0

Tota
l
GRAN TOTAL

3,60
91,82
0
0
9,31
2 312,185

Table 3.3 Sales and Order Number for March 2012

Table 3.3 Sales and Order Number shown that in March 2012 Custom Gear Inc. has a total
of 9,312 units of gear to be produced. 61.34% of total number of gears to be produced is from
small order size while 38.66% is contributed from large order size. Nonetheless the revenue
of Custom Gear for small size order is 70.58% from a total of $312,185. These shown that
Custom Gear Inc. main product had yet to depend on large size order. The sales per unit of
order further indicate that Custom Gear Inc. smaller unit order had a higher profit margin as
compare to large size order.

4.0 RECOMMENDATIONS
4.1 Separate to two line production

Figure 4.1 Proposed Two Line Productions

We proposed to separate to two production lines and apply chase demand strategy to
maximize production output. With two line production, Custom Gear Inc. can produce large
size order and small size order concurrently. By apply two line productions; Custom Gear may
minimize the back order sales variance of $14,377 as shown in Table. 4.1.
One Line Production
Average
Sales $ Total Sales
Quantity per Unit $ per Unit
of Order Of Order
Delay

Order
Size
Small
Order

4,312

TOTAL

38.58 166,356.96

166,356.96

Two Line Production

Average
Sales $ Total Sales
Order Quantity per Unit $ per Unit
of Order Of Order
Size
Delay
Large
Order
1,100
25.51 28,061.00
Small
Order
3,212
38.58 123,918.96
TOTAL

151,979.96

Table 4.1 Total Backorder Sales for March 2012

4.2 Rearrange Job Shop Layout

We proposed job shop layout should be rearranged according to the work process flow as
shown in Figure 4.2. By swapping drilling center and heat treating center, the production
process will be more organized and employees will be able to complete their task smoothly
without causing any confusion or loss of item. We also recommended setting up another shop
for inspection for finished product to ensure its quality before sending for shipping.

Besides, minor rearrange job shop layout will takes within 3 to 5 days to complete
which will not have a major impact to force the entire production line to shut down. These
will have a significant drop of lead time taken to transport the products from one center to
another and also lead to increase of process efficiency.

Figure 4.2 Propose Job Shop Layout

4.3 Stock Raw Material Inventory

Custom Gear Inc. may consider to source supplier who be able to provide more variety of raw
materials at lower prices with shorter delivery time rather than rely on many different supplier
to provide different type of raw materials. Besides that, Custom Gear Inc. may keep some
stock for those common used raw materials for production as shown in Table 3.2 Distributed
Forecast Raw Material Usages for Year 2012 to reduce production lead time.

5.0 CONCLUSION
Based on the case study, Custom Gear Inc. is one of the companies which manufacture
custom-made gears for its clients. Within the company, certain process control characteristics
exist to provide operational support to the company. The management of the company should

be implementing an efficient operational strategy in order to avoid any unwanted

circumstances in production line. Current business conditions, all companies compete in terms
of volume of the gear purchase, speed of product delivery, and customization.
Besides that, the job shop is organized by process, where assembly lines or continuous
flow operations are organized in a product layout. In the latter layout, equipment or work
processes are arranged according to the exact steps in which the product is made and the path
for each part resembles a straight line. Thus the company should have to improvise to the new
layout and redesigning their production flow due to produce the gear to avoid bottleneck in
the production process. In other hand, this will lead the productivity increase.

This we can conclude that Custom Gears Inc. should adopt a well-structured layout as
proposed to serve as the first step to contend with the issue of production process flow. In
terms of management, due-diligence and ability to schedule and forecast future materials to be
sourced from suppliers should be exerted to avoid unnecessary expenses due to wastage of
resources.

6.0 REFERENCES
Reference Book
Putra Business School. 2014. Operating Management. Singapore: McGraw-Hill Education.
Webpage
Graham Winfrey, 2015.Facility Layout and Design. http://www.inc.com/graham-winfrey/the5-most-profitable-industries-in-the-us.html. Accessed on 14th March 2015.