Case Four Star

Topics: Inventory, Economic order quantity, Mattress Pages: 9 (2362 words) Published: July 10, 2013
Team M
Team M

Four Star Industries Case Study
Case Study Anaysis
Four Star Industries Case Study
Case Study Anaysis

Table of Contents
Background
Current Situation
* Market
* Production
* Manufacturing
* Order Process
* Inventory Management
Issues
* Model Proliferation
* Inventory and Demand Mismatch
* Poor Order Management
Analysis
* Safety Stock Analysis
* Warehouse Rent Analysis
* MOQ v/s EOQ
* Production /Assembly Line Analysis
Recommendations
Conclusion

Background:
Four Star Industries Private Ltd is the manufacturer and wholesaler of the renowned Four Star Pocketed spring mattresses which was founded by Neo Gim Sin in 1966. Its business is aggressively and exclusively focused on servicing the local market and until recently, the company has enjoyed tremendous growth and recognition – becoming a leading manufacturer of pocketed spring mattress (PMS) and winning the Grand Prix for International quality. Four Star sells directly to large dealers (LDs) and small dealers (SDs) who then sell to consumers. Current situation: Market:

Mattress models grew rapidly from 13 to 230 models between 1996 and 2002, while sales has been experiencing steady decline within the same period. Decline in mattress sales can be attributed to various factors such as; increased competition, seasonality and volatility of the mattress market, supply and demand mismatch, poor production scheduling and focus on high-end mattresses. Production:

Four Star’s manufacturing process was based on the traditional assembly-line with four departments i.e. spring unit, quilt panel, assembly and warehouse. Available production capacity for the spring unit and quilt panel assembly is more than adequate to meet demand. However, significant setup times were needed for both these processes with the spring unit producing in batches of 100, and the quilt panel producing in batches of 50. Manufacturing:

Mattress manufacturing begins at the spring unit and the quilt panel simultaneously. Outputs from these departments are then assembled into the desired model of mattress at the assembly unit, sent to inspectors who check that quality standards are met. Goods that pass the quality test are then sent to that warehouse. Ordering process:

LDs and SDs placed orders only after confirming orders from retail customers, and expected JIT delivery form Four Star. Product proliferation significantly complicated scheduling production. Stock-outs of some mattress models became a norm, resulting in a decline of order fill rates. Resultant backorders had to be produced on an expedited basis, making production more expensive than necessary. Most recently, an order from V-shopper – a Four Star dealer could not be met even after two weeks of order placement. Inventory management:

Product proliferation resulted in increased finished goods inventory and warehouse capacity. Also, the new trend that vendors were no longer willing to keep inventory translated into increased finished goods inventory and warehouse capacity. Issues:

Model proliferation:
Four Star Industries Private Ltd increased its number of mattress model by 18 folds in the last 6 years. This was a huge increase in the variation of the models. The company was trying to accommodate all the requests of the Dealers. It also launched in house models for large dealers. But while doing this, it still continued to produce the slow-moving goods. This resulted in huge proliferation of the mattress models and affected the number of mattress sold annually. Inventory and Demand Mismatch:

The company struggled to fill the orders received from the dealers. Even after 2 weeks it could not fulfill V-shopper’s order. This was due to the poor floor layout and assembly table layout. The demand could not be forecasted and resulted in stock outs and expedition. Even though, the demand pattern for seasonal sales was predictable, it was difficult to predict the sales for...
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