CASE STUDY Company Background AUGY COLLECTION was established on October 2008 and has been registered under AUGY Enterprise. The company is located at No 14, Solok Kg Jawa 1, 11950 Bayan Baru, Pulau Pinang (10 minutes from Penang International Airport). Dealing with trading business, the company started with one type of products ( Bedsheet and Comforter ) only and the covered area is only factory and government office around Penang area. After 6 months company has develop more products and the current supplied products are as follows: 1) Bedsheet with/without Comforter – Standard ) Bedsheet with/without Comforter – Ruffles 3) Quilt Bedsheet with/without Comforter 4) Curtain 5) Cushion Cover 6) Travel Mattress 7) Multipurpose Blanket 8) 2 in 1 Pillow Blanket 9) Pillow and Mattress Protector 10) Table Cloth 11) Table Runner 12) Dustbin Cover 13) Fridge Handle Cover 14) Blender Cover 15) Toaster Cover Market Segmentation 99% of the customers are women. 90% of the customers are Malay. Our products segmentation is for all market. They are 40 designs of products. 15 design of the products are for woman adult market. 0 designs are mainly designs for teenagers and 5 designs are target for man’s . 10 designs of the products are cartoons they are specially designs to meet the children market. Marketing Strategy There are two ways of how to market the product:- 1) Direct Sales – Stockist and Dealers Augy Enterprise markets the product by finding the authorized stockist. The stockist then will distribute the product to their existing and new agents. Then the agents will distribute the product to their own customer. [pic] 2) E-commerce sales. E-commerce sales is one of the method that being boom in this new and technology era.
As a modern people they are no longer go to the supermarket and by product. By using this modern strategy agent market the Augy’s product via E-commerce. 30% of agents are using this strategy to market the products. Promotion 1) Catalogs Augy has printed 10,000pcs of catalogs for volume I to promote the products to the customer. The catalog will explain overall picture of the actual products and description about the features of the product to the customers. For next Volume (2) Augy Enterprise has forecasted to print 30,000pcs of catalogs.
As from the database it is clearly stated that the customer has increased 100% than before. 2) Internet From the website customer especially the working customer will get the view about the product from their friends especially the agent. The agent will send the website to their customers to view. So the agent will save time and cost as they do not need the see their customer personally. The advantages of using the website also give the clear picture about the product to the viewers. TRADITIONAL MAKE TO ORDER SYSTEM [pic] Process Flow (1. 1) Process flow 1. 1 shows the “Make to Order Process Flow”.
Once receive order from customer, immediately Purchase Order will be issued to Production. Process of sewing, packing and delivery will take about 14 days after order received from customer. Company has identified the weakness of this system. The weaknesses have been listed as follows: ? Customer tends to cancel order due to long product lead time – 14 days. Some of the customers cancel their order due to long waiting time. ? Inefficiency in servicing customer concluded into low sales. Low sales means bad image to the company. Company will lose their revenue and will get loss. Cannot compete with other company (competitor) where they can supply within 1 week lead time. In this market they are 27 competitors that produce similar product. The competitors are big company so they can provide their own transport. Augy is still young in this market therefore it has to fight and beat the competitors in terms of delivery time. Augy is known as a Bumiputra company so it is a bad image for the company’s reputation if they unable to produce and deliver fast as what their competitors can deliver. ? Production will have capacity problem if the order pattern drastically increased.
Therefore the improvement plan should be implemented so that the production can be pre-planned and scheduled. The machine and the workers also not cramp to prepare the order. ? No forecast done – product made based on order. No stock is keeping is good for the company but business cannot grow with this kind of practice. KEEP STOCK FOR HIGH RUNNING ITEM [pic] Process Flow 1. 2 Process Flow 1. 2 shows the step of action that has been taken by Augy Enterprise in order to improve product delivery time. By keeping the right stock, Augy Enterprise manage to reduce the lead time less than 14 days.
Order pattern analysis is very important so that company will keep the right stock. Augy noticed that they need to keep stock for high running item. But due to less resources Augy used the traditional way by using Microsoft Excel. Firstly, when received order from customer, the staff will check the stock availability. Next, they will Issue purchased order if stock is not available. After the stock had ready the staff will do packing and delivery to the customer. Lastly Augy staff will do stock re-order. ?Graph 1. 1 Table 1. 1 From graph 1. 1 and Table 1. it is clearly stated that the above diagram Using Qualitative method (Executive Opinion). This Pareto Graph explains the pattern of the design for “ Set Cadar Queen Beropol” sales pattern. From the findings it is recommended that highly demanded product should be stock up more than the low demanded product as highlighted in table 1. 1 From the qualitative method that been practice they are several problems arising such as:- ? Risk of having high inventory level – slow moving/non moving products ? Manual analysis is not accurate and take long time to get the result Not analyze previous month sales pattern ? Double transportation cost required if product partially completed ? Fail to commit the delivery date since only selected items are having ready stocks. ? Possibility of keeping stock of wrong products if false order pattern happen IDENTIFY PROBLEM IMPROVEMENT PLAN The previous method need to be improved as company need to save time and energy of the workers. To overcome the cumbersome method, company’s decided to come with the action plan. Some of the action plans taken are:- [pic] Forecasting (using 7 steps)- AUGY’S CASE
AUGY believe that forecasting can be made using Forecasting 7 steps method. AUGY try their level best to organize their forecasting method using 7 steps. The steps are follows:- 1. Determine the use of the forecast As being explained earlier, why Augy need to improve the delivery time and indirectly increase more sales. This perhaps will gain the confidence from the respective customers. Planning inventory Augy has planned its inventory by using the database system. The database system will determine the quantity of stock level that need to be maintained by the company.
For planning re-order From the planning inventory, Augy can plan for re-stock. Re-stock should be control so that the stock level can be maintained at the safe level. 2. Select the items to be forecast There are 469 items available in the catalogs. Selection of right items to be forecasted is very important to avoid excess of unnecessary stock. 3. Determine the time horizon of the forecast • Augy still a new company so that it only able to forecast for 3 months period due to lack of data. Augy also unable to forecast the seasonal method such as Hari Raya Puasa due to short period of time.
The company running its business less than one year and unable to capture the sales pattern for 2008 Hari Raya. 4. Select the forecasting model(s) Currently the company is using Qualitative Method (Moving Average) to do forecast. As improvement plan, company will use database and change it to Quantitative Method. 5. Gather the data Data need to be gathered in proper manner. Data base will help on this issue where it can be segregated and analyze properly. Sales pattern is very important for forecasting and it will react as the raw data for analysis. Types of Products Product |# of design |# of size |TOTAL | |BS |40 |3 |120 | |BR |28 |3 |84 | |BQ |8 |1 |8 | |CC |14 |2 |28 | |C |14 |5 |70 | |CS |14 |5 |70 | |MP |20 |1 |20 | |TIO |40 |1 |40 | |TM |16 |1 |16 | |Others | | 13 |13 | | | |TOTAL |469 | 6. Make the Forecast Company has considered all the action plans and has developed a data base system to solve the problem. This data base system also will generate the forecast automatically. [pic] [pic] [pic] [pic] [pic] [pic] [pic] [pic] [pic] [pic] [pic] [pic] 7. Validate and Implement Result Using newly implement database system result [pic] DISCUSSION [pic]
CONCLUSION [pic] ———————– 14 days Delivery Packing Production Prepare Purchase Order Receive order from customer (1) Make to order system Stock re-order Delivery Packing Issue purchase order if stock is not available Check stock availability Receive order from customer (2) Keep some stock for high running item Order volume High Middle Low 9445E 61169A 3518C 9460A 70502A 50380A 70489A 70552A 61011B 82872A 82411A 61018F 82824A 61167E 61172C 9460E [pic] * Data integrity – correct data entry Data collected need to be accurate. As a result the findings can be concluded and decision made are the best solution for the problem arising. Data arrangement – sorting information The information used need to be sort accordingly. So it is easier to monitor. * Data collection – on time data key in The data collections need to be on time key in. The staff had been brief to have on time data key in. The database system needs to be up dated so that the results of the findings are accurate. * Traceability – keep record for reference * Sales pattern – analyze previous month sales pattern Sales pattern need to be analyzed analytically so that next month forecast sales will follow suit * Consider ‘seasonal component’ into forecast ; e. g. Hari Raya It is generally known that seasonal component should take into consideration.
As during festival season the sales patent will be increased than normal period. Augy had not been faced with Hari Raya Puasa Festival seasons before so that there is no indicator yet to forecast the sales during the festival seasons. * Develop database system to do forecast and analyze the data In order to forecast easier, faster and minimum cost. Company has decided to develop a database system. This is to ensure that the data can be analyzing coherently. The database system will save the time to company and long term will save the cost of the company (less time less workers needed). * * * End Customers End Customers End Customers End Customers Agent Agent Agent Agent Stockist 1 type of product comes with few sizes and few design. Total is 469 item * Keep stock for every design and every size will burden the company – high cost * Keep the right products are very important to smoothen the delivery and at the same will control the inventory cost. * Failed to keep the right stock will drag the product delivery time to customer. * Sales pattern need to be analyze to avoid over stock Make forecasting Record current month sales Delivery to customer, stockist Keep inventory to minimize delivery time Order qty as per database result * From no forecasting ( qualitative forecasting ( quantitative forecasting * Usage of database to increase efficiency of forecasting Still few data, can’t really predict for a cycle of 1 year (seasonal factor) * Business still early stage and progress aggressively – forecast error may high * Benefit : Better planning for inventory (before no inventory) Reduce order ( delivery time Can project for business expansion * Forecasting improve Augy Collection planning * Help to predict for expansion – Augy Collection applying for loan to expand inventory (since high forecast) * Currently need to key in sales order by clerk (take too long time). May require help from stockist to provide data by online database. * May go for other method of forecasting (quantitative method), for better forecasting.