Forefront Manufacturing

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1.What is the organization trying to achieve?Forefront Wood Products would like to become China’s leader for wood doors manufacturing, goal which will be induced by increases in profitability - necessary both for the financial survival in the immediate term and for the viability of an IPO planned for 2007. 2.What seems to be the immediate problem?Forefront Holdings consists in two different companies: Forefront Manufacturing and Forefront Contracting. For the last 15 year the financial situation were consolidated, but in 2005 when were divided it was discovered that Forefront Manufacturing was affected by the “portfolio effect”. The holding was profitable, but its Manufacturing division is struggling to survive with only 3% in pretax earnings. 3.What is the significance of this problem?This issue’s significance is that Forefront Manufacturing is trying to survive on a side, but on the other side they also need to prepare for the upcoming IPO expected to happen in less then two years. In order to be ready for the IPO they need to develop a profitable track record, tighten its corporate governance, streamline its operations and reduce investor risks. 4.How would you describe the operating environment of the industry, company, customers, decision makers, and other aspects of the general operating environment? So what?In conformity with China’s National Bureau of Statistics the GDP rise by 9.9% from 2003 to 2004 and the construction industry increased by 20% in the same period. Please see Appendix No.1So What?This indicates high growth opportunities for Forefront Manufacturing. This is also a main strength for Forefront Manufacturing, their product being always in demand as “other features and fixtures in a building may vary – the floors may be wood or marble or carpet, for example…But every single building in the world need doors.”As described in the case the door manufacturing in China is characterized by complications such as relationship issues, resources problems, time delivery problems and not at last high diversification. The success in this industry is highly dependable on the proper network system as the key factor in winning a bid is the right relationship with the right person. The contractors have a very close relationship with their clients which allow an early acknowledgement of the future building plans. So what?As convenient as it seems, this relationship is not for free and is not cheap as the contractors do not afford to refuse late orders or charge more because of the additional costs they incur in speeding up the production. The resources and the time that manufacturers dispose of are two other tremendous issues. Between an order is placed and the delivery moment there is usually little time. To complicate the problem even more, the resources are imported. So what?Because of the time constraints the manufacturer often plans in advance even before a bid is won, which carry the risk of losing time and money because the bid might afterall not be won. Additionally, in regards to the resources, as it takes two-three months for delivery, the manufacturers are forced to order raw materials in advance of winning a bid, which can result in time and more money wasted if the bid is not won. The industry is characterized by high product diversification. For a recent order of 4000 room hotel 20000 door-sets were required and a single project could have even 20 different types of door-sets, each type being different in terms of wood variety, height, width, thickness, moldings, features, color and finish, as well as holes for locks, handles and windows. So what?This puts a high pressure for specification accuracy on the manufacturer as had to change machine setup for each door type. Regarding Forefront Manufacturing in particular they are facing layout issues, capacity constraints, poor production planning and high personnel turnover. So what?This led to increases in operating costs on the expense of diminishing profits....
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