PART A: CASE ANALYSIS (30 marks) Instruction: Read the case and answer ALL the questions, Gombak's Creative Concepts designs and manufactures wood furniture. Founded by Hameed on the banks of Lake Field in Ampang, Selangor, the company began by producing custom-made wooden furniture for vacation cabins located along the coast of Lake Field and on nearby Tioman's Island in Johore and Langkawi Island in Kedah. Being an "outdoors' type himself. Hameed originally wanted to bring a bit of the outdoors" inside. Gombak's Creative Concepts developed a solid reputation for creative designs and high-quality workmanship. Sales eventually encompassed the entire Lakes in the region in the state of Perak. Along with growth came additional opportunities. Traditionally, the company focused entirely on custom-made furniture, with the customer specifying the kind of wood from which the piece would be made. As the company's reputation grew and sales increased the sales force began selling some of the more popular pieces to retail furniture Outlets. This move into retail outlets led Gombak's Creative Concepts into the production of a more standard line of furniture, Buyers of this line were much more price-sensitive and imposed more stringent delivery requirements than did clients for the custom line. Custom-designed furniture, however, continued to dominate sales, accounting for 60 percent of volume and 75 percent of sales. Currently, the company operates a single manufacturing process in Ampang, where both custom furniture and standard furniture are manufactured. The equipment is mainly general purpose in nature to provide the flexibility needed for producing custom pieces of furniture. The layout puts together saws in one section of the facility, lathes in another, and so on. The quality of the finished product reflects the quality of the wood chosen and the craftsmanship of individual workers. Both custom and standard furniture compete for processing time on the same equipment by the same craftspeople During the past few months, sales of the standard line steadily increased, leading to more regular scheduling of this product line. However, when scheduling trade-offs had to be made, custom furniture was always given priority because of its higher sales and profit margins. Thus, scheduled lots of standard furniture pieces were left sitting around the plant in various stages of completion As he reviews the progress of Gombak's Creative Concepts, Hameed is pleased to note that the company has grown. Sales of custom furniture remain strong, and sales of standard pieces are steadily increasing. However, finance and accounting indicate that profits are not what they should be. Costs associated with the standard line are rising. The costs are being tied up in inventory, both in raw materials and work- in-process. Expensive public warehouse space has to be rented to accommodate the inventory volume. Hameed also is concerned with increased lead times for both custom and standard orders, which are causing longer promised delivery times. 3 Capacity is being pushed, and no space is left in the plant for expansion. Thomas begins a careful assessment of the overall impact that the new standard line is having on his manufacturing process. QUESTION 1: Answer the following questions a. What types of decisions must Hameed make daily for his company's operations to run effectively? Over the long run? (5+5=10 marks) ( b. How has the move to producing standard furniture affected the company's financial structure? (5 marks) c. What might Hameed have done differently to avoid some of the problems he now faces