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1111111111111111111 111111111111111111111
, .. .,,.,,

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. .

Production Management
for Small- and Medium-Scale
Furniture Manufacturers

,f,13-i;~
UNIDO
~:_~JR
'""'"'7":-;;

UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION

 General Studia Selia
._,' i ! ' ~ i-

· ..

PRODUCTION MANAGEMENT
FOR SMALL-AND MEDIUM-SCALE
FURNITURE MANUFACTURERS
AMANUAL FOR DEVELOPING COUNTRIES

UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION

Vienna. 1992
 Material in this publication may be freely quoted or reprinted. but
acknowledgement is requested. together with a copy of the publication containing
the quotation or reprint
Mention of firm names and commercial products does not imply the
endorsement of the United Nations Industrial Development Organization.

Note I
This publication previously appeared as "Pro~
duction management for small- and medium-
scale furniture manufacturing firms in develop-
ing countries" uncter the symbol 10/300.

10/SER.0/3

UNIOO PUBLICATION
UNI00.92.3.E
ISBN 92-1-106258-6
 - iii - . J
•

PREFACE

This manual has been w~-itteo in response to the growing need for "soft-
ware" information (how to manage a particular technology) on the part of
small- and medium-scale furniture manufacturers in developing countries. Such
information, when it is available, is often of the "bits and pieces" variety;
it seldom offers an integrated perspective. On the other hand, a considerable
amotmt of "hardware" information (what machines are best suited for various
applications) is available, distributed by suppliers of machinery and general
furniture manufacturing technology. Both types of information, however, are
required for the effective diffusion of modern furniture manufacturing know-how
in developing cotmtries, especially to small- and medium-scale firms. Success
in the development of the principles, concepts, tools and practices needed for
the smoott. and effective operation of such firms lies in the selection, adapta-
tion and applicatior. ot existing production management principles.

This manual has been prepared primarily for owner-managers; production

managers; and industrial extension off;cers or small-business consultants.
For brevity, the term "small-scale" is used throughout the publication to
denote a firm employing up to 100 workers, i.e. a family, small or medium-
sized business. It is assumed that such a firm will be managed by or.e .,Jerson
(owner-manager) or a group of partr.ers, and have a highly fluid organizational
structure with few staff support ftmctions. Furniture manufacturing refers to
the production of pieces for household, office and institutional use.

The manual contains eight chapters, all of whica deal with production
management themes that are seldom given adequate coverage in the literature on
furniture manufacturing. Topics covt:?red range from the production t·mction to
production planning and control, which is considered by many to be the inte-
grating element of the production system. Topics such as the principles of
plant organization, safety, accident prevention, and maintenance management
are well covered in contemporary, readily obtainable publications on produc-
tion management, and for that reason have not been included in the present
manual. The reference works consulted in t~1e preparation of the manual are
listed in the form of a bibliography.

The manual was prepared for the United Nations Industrial Development
Organization (UNIDO) by Eduardo Q. Canela (Philippines), a production manage-
ment consultant for small- and medium-scale manufacturing enterprises in devel-
oping countries. The views and opinions expressed are those of the aJthor and
do not necessarily reflect the views of the UNIDO secretariat.
 - v -

CONTENTS

Chaptex-

I. PRODUCTION IN THE SMALL-SCALE FURNITURE MANUFACTURING FIRM .••... l

Introduction . • • • • • • • . . • . . . . . . • • • • . . • . • . . • . . • . • . . • . . • • . . . . . . . • . • . l
Production management: definition and scope ....••••.••..••..••. l
Tne production system as a "black box" ...•••....•.....•.•....... 3
Production systems • • • • • • • • • • • . • • • . . • . . . . • . . • . . • • • • • • • • • • • • • • • • • . S
The choice of production system .•.•••••••••••••.•.•.•••.•..••.•. 7
Production management problems •.•..•.••...••.••••••••••....••..• 10

II. PLANT LOCATION AND LAYOUT . . . . . . . • . . . . . . . . . • • . . . . . . . . . . . . . • . . . . . . 12

The location decision • • • • • • . . • • . • • . . • . • • • • • • • • • • • • • • . • . . . . . . . . . . 12

Factors affecting the location decision......................... 12
Checklist for deciding on plant location •..••••••.•••••.•..•.... 15
Criteria for effective plant layout •••••••••.•••...•.....•..•.•. 16
Types of layout • . . . • • • • • • • • • . • . . • • • • . • • . • • • . . • • • • • • • • • . . . . . . . . . . 1_8
Concepts in improving plant layout ••••••....•..•••.••••••••••.•• 21
Checklist for identifying plant layout problems .•.....•.•.•..••. 22

III. MATERIALS MANAGF.MENT AND INVENTORY CONTROL...................... 24

Materials management problems •..•.••••••••••••••••••••..•...•... 24

Scope of material : mar.agemen t • . . • . . . . • . . . . . . . . . . • . . . • • • • • • . . . • . . 24
Symptoms of poor lndterials manage~1ent ....•••.................... 26
The purchasing fwiction in materials management •••••••••••••.••. 26
Inventory control systems •••.••.••••••••.•••••••...•.••....•..•• 30
Designing an effe~tive in~entory control system •••••••.....•.... 41

IV. QUALITY MANAGF.MENT AND CONTROL • • . . . • . . • • . . • • . • • . • • • • . • . • • . . . . . . . 43

Specifications of quality . • • . • . . • • • • • • • • • . . • . . • • • • • • . . • • . • • • . . • . 44
Quality of design and conformance • • • • • • • • . . • • • . . . • • . • . . . . • . . • • . • 45
Quality control systems . . . • . • . • . • • . • • • • • • • • . . • • • . . . • • . . . . • . . • . • • 45

V. METHODS ENGINEERING IN SMALL-SCALE FURNITURE MANUFACTURING •••••. 48

Low productivity • . . . . . . . . . . . . • . • • . . • • . . . . . . . . . . . . . . . . . . . . . . . • . • • 48
Work study procedures ••••.....................••••...•.......... 49
Met.hods engineering . . • . . • . . • • • . . • . . • . • . . . . . . . . . • . . . . . • • • • • • • . • . . 53
Tools of methods engineering . • • . • • . . . • . . • • • • . . • • • .. • • • • . • • .. . . . . 53
Flow charts • • • • . . . . . . . . . • • . • . • • . • • . . . . . . . . . . . . . . . . . . . • . . • • . 54
Process analysis chart . . • . . . . . . . . . . . . . . . . • . • . • • • • . • . . . . . . . . 57
Multi-activity chart . . . . . . • . . . . . . . • • . . . . . . . . . . . . . . . . . . . . . . . 57
Principles of metho~s engineering •••.•..••••.•••••....•.••....•• 60
Application of methods engineering ••.•••.••.....•.....•.•....... 63

VI. WORK MEASUREMENT: CONCEPTS AND PRACTICES IN SMALL-SCALE

Fi.JRNITURE MANUFACTURING FIRMS .. . .. . .. .. .. .. . • .. . . . . . . .. . .. . . . . .. 61•

Scope of work measurement . . . . . . . . . • • • • • • • • • . . • . . . . . . . . . . . . . . . . . . 64

Work measurement and productivity improvement ..••.••.•.....•.•.. 64
 vi

Techniques of work measurement ••••••••..•.••.••••••••.....••••• 65

Ratio delay studies •.••••••..•..•.••••..•••.••.•..•..•.•..•..•. 66
Time studies • • • • • • • • • • • • • . • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • . • • • • • 69
Establishme~t of time standards .•.••••••••••••••..•••••••••.••. 70
Standa~d times; costing and incentive schemes •••••••••.•..•..•• 74

VII. COST ACCOUNTING AND VALUE ANALYSIS ••••••••••••.••.•.••.•••••••. 76

Costing in small-scale furniture manufacturing firms:

misapplications ••.•••••••••••••.•••••••••••••••••..•••••••••. 76
Basic costing; cost accounting principles and terminology .••.•• 78
Cost accounting methodologies •.•••••.•••••••••.•••••••••••••••. 80
The value analysis concept ••••••••••••••..•.•••••••.••.••••.••• 85
Value analysis methodology •••....•••••••••••••..••••••••••••••. 86
Applying value analysis ••••••••••.•••.••••••••••••••••..•.••••• 89
Value analysi~ and cost reduction ••••••••••.••.••••••••••••..•. 90

VIII. PRODUCTION PLANNING AND CONTROL ••.•••••••••.••.•..••••.••••.... 91

Scope of yLoduction planning and control ••...•..••••••••.••.•.. 91

Production planning • • . • • • • • • • • • • • . • . • • • • • • • • • • • • • . • . • • • • • • • . • • • 93
From sales forecasts to production plans ••••••••••••••••••••••• 95
From job orders to production plans •.•••••••••.•..•.•.••••••••. 98
Basic production control procedures •••••..•.••••••••••••••••••• 103
Order and ftow product:on control systems ••••••••••••..•••••••• 103
Order control system •••••••••••••••••••••••••••••.••••••.. 103
Flow control system • • • • • • • • • • • • • • • • • • • • • • • • . • • • • • • • • • • • • • • 108
Production planning and control and its links with other
artas of the firm • • . . • . . • • • • . • • . • • . • • • . . • • • • • • . • • . • . . • • • • . • • • 111

Bibliography • . • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • . • • • • • . • • • • • • • • • . 114

Fi,ures

1. The relationship between production management and other aspects

of the manufacturing operation •••••••••••••••••••••.••••••••••••. 2
2. The production system as a ''black hox" • . . • • • . • • • . • • • • . . . . • . . • . • • • 3
3. Job order production system...................................... 5
4. Rigid mass production system . .. .. .. .. • . • . .. . .. .. .. .. • . . . . . . . • . .. . 6
5. Flexible mass production system.................................. 7
6. Production systems as stages in the evolution of the small-scale
furniture manufacturing firm • . • . . • • . • . • • • • • • • • • . . • . . . • • • . . . . • . . . . 8
7. Checklist for choosing a production system....................... 9
8. Location decision factors • . • • • . . • • . . • . • • • . . . . . • . . . . . • • • • • . . . . . . . . 13
9. Plant location checklist . • • • • • • • • • • • • • . • . • . • • • • • • • . • . • . . . . • • . . • . • 17
10. Process layout • • • • • • • • • • • • . . . . . • . • • . • • . • • • . . . • . • . • • • • • • . . . . . • . . . . 19
11. Product layout •.••.•.•..•.......•...•.••.•.......•.••........••.. 20
i2. Scope of mal:erial management • • • • . • . • • • . • • • • • . . • . . . . . . • . . . . • . . . . . . 25
13. Basic purchase cycle •••••••.•.••.••••••••..•..••.••••••. ••...•.• 27
14. Forms used in the purchase cycle • • • . • • • • • • • . • . • • • • . • • . • • • • . • • • • • • 28
 - vii -

Page

lS. Listing raw materials for ABC classification •..•.•....•.......... 33

16. Raw materials listing rearranged for .-\BC classification . . • . . . • . . . 33
17. Cos ts involved in materials purchas ir.6 .. , . . • . . • . • • . . . . . . . . . . . . . . 3S
18. Procurement, inventory carrying and total incremental
purchase costs • • • • • • . • • . • • • • • • . • • • • . • . . . • • . • • • . • . . • • • • . . • • . • • • • • . 36
19. Determining economic order quantities using the tabular method... 37
20. Behaviour of inventory carrying cost and inventory ca ·rying
period • . . • • . • . • • . • • • . . • . • • . • • . . • . • • . • . . • . • . . • • . • . • • . • • • • • • • . • • • • . 38
21. Four factors in detearining re-order points .••.•.•••••...••.•••.. 41
22. How quality definitions emerge ••.•••••••••..•..•.••.••••..•.••..• 44
23. Quality control procedures for small-scale furniture
manufacturing firms • • . • • . • • . • • • • . • . . . . . . . • . . • . . . • • . . • . . . • • . . • . . . . 47
24. Introducing the work study cvncept through an industrial
extension officer • • • • • • . . • • . • . . . . • • • • • . • • • • . • • • • • • • . • • • • • . • • • • • . • S2
2S. General flow chart for the preparation of solid wood
components . . • . • • . • . • • . • • • • • • . • . • • • . • . • . • . • . • • . • • • . • . • . . . . . . . . . • . . SS
26. Detailed flow chart of plain flush door manufacturing process . . . . S6
27. Process analysis chart ••••••.••.••.•••••••..••••.••••.•.•.••.••.• S8
28. Right-hand and left-hand chart •...•.•.•••••.••••••••••••••••••••• S9
~9. Example of use of a multi-activity chart .••••...•••......•....•.. 60
30. Sample listing of activities performed in small-scale
furniture manufacturing firll'ls •••.•.•••...•.••.•.....••..•.....•.• 67
31. A simple ratio delay form • . • • • . . • • . • • • • • • • . . • . • • • • . • • • • • • . . • . • • . . 68
32. Example of a completed time study form........................... 71
33. Establishing stand3rd time for a simple manual job •.••...•..•..•. 72
34. Costing as a closed-loop process •..••..•.•..•....•..•.........•.• 77
35. Cost breakdown and costing terminology ••••..•••..•.••.•.....•••.. 79
36. Job cost sheet for a non-departmentalized small-scale
furniture manufacturing fi!:111 • • • • • • • • • • • • • • • • • . • • • • • . • • • • • • • • • • • • • 81
37. Job cost sheet for a departmentalized small-scale
furniture manufacturing firm • • • • . . • • • • • • . • • . • . • . . . • . . . . • • • . . • . • . . 82
38. Materials requisition sheet ••••••••••••••••.•.•••••••••••••.•.•.• 83
39. Job time card • . • . • • • • • • . • • • • • . • • • • • • • • • • • • • • • . • • . • • . • • . • • • • • • • • . . 84
40. Value analysis methodology (brain-storming technique) •••••••••••• 87
41. Example of search phase: value analysis of a blackboard eraser .. 88
42. Production planning and control as an interphase between
market and production system..................................... 92
43. A simplified production planning scheme for a small furniture
manufcacturing firm • • . . • . . • . . . • . • . . . . . . . . . . . . • . . . . . . . . . . • . . . . . . • . . 94
44. Factors affecting future sales in small-scale furniturP.
manufacturing firms • . • • • . • . • . . • . . • . • . . . . • . . . • . . . . . . . . • • . . . . . • • • . • 96
45. Production planning sheet for a small-scale furniture
man11facturing firm • • . . • • . • . • . • • • . • . • • • . • • • . • • . . . . . • . • • . • • . . . . . • . • 99
46. Production plan for a job-order manufacturing system .....•..•.•.. 102
47. Basic structure of a production control system................... 104
48. Gantt chart (operator record type) ..........•.................... 106
49. Production monitoring chart • . . . • . • . • . • • • • • • . • . . • . • • . • . . • . • . . • . . • . 107
50. Format of a job-order processing reporL .....•.................... 107
51. Production monitoring charts for continuous furniture
manufacturing • . . . . . • . . • . . • . . . . . . . . . . . . . . . . . . . . . • . • • . • . . . . . . . . . . . . 109
52. Relationship between production plan-.ling and control and with
areas of the firm . • • . . • . . • . . . • • . . . . . • • • . . • • . • . . • . . • . • . . . . . . . • . . . . 110
 - l -

I. PRODUCTION IN THE SMALL-SCALE FURNITURE

MANUFACTURING FIRM 1*

Fur:~~tutr m..:u1utJCtur1ng r1rms, lLI"L5p~...:tiVt."' ('! tLeir St:i:r...· \lI tla• di,_-._.. rs1ty
('I! t[lelt pr1...'\Ju~t i1nt•s, ll.:1\"t? tWl' b ..1Sl~ :uil~ti\"'ltlS; \;!) ttit... \' Ftl',;ll~~ iuttliturt:~
p1e~es .uh.1 \~~l tnr: .._. t:athit".J\"...._,ur tL' r::..::!1-t.;.et titer.:. [tit._• perr1...,rr::..::1n(t' "-~I tht'~e !l~1:.:-
t1,,ns ._.. t:t . 11lsLab1...,ur ..lth.i money, t•nt(il exp~.:itns tht' 1.Jr~.:.in1;:.Jttl1 1~ ,,I tL, . i...::1r:a:,t.•-
s~a.l.: t."tltt·rprisL' tn lL':.t:i.s 1...'t m.. ,r~t.·ttnt:: .. pt\.h.llh..·tt"'n ..
·i~t.:'r.it."'t1t. r~ . . sra:i.ilt."llI" tirrr:~. [:'-''-'t.'\"t.•r. ti!t' \;.:_!rt\.'ll~ :-t·~p~'nsiC1 lit It'~ \'t
metlt r.:J:: llL't ~'t.: .JS ne.J.t iy ~..ltt"'t;,\....'r ~ Zt_ld, a.s mvst "'t t[a:::: ...irt.• Il\.'fr::..:11 iy
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iurniturt' tt:~.ii:ufacturin~
( ar.11 i y-,>wn.:,i.
firms h .1\·e
. e i t L ,, [ ..
pr...:'pt tt·t ...'t .. t re.."

S"-'r.ll' r.! .. sa.tf"-.. r.lt'nt ~Xpt2'r[S bt:>l1~ve tu.it t'~t~ ,.;ii.,:-,.;. '--'t pLr~1s ..... ly uef1th2 ... 1 r.:.:tn:i~'l . -
mt~nt :un~t1 . . )us 1s ~ u1st1n..:t .aJv.:..u1t~bt.: tl't· tia_· sm.siler t1rm, Dul tht• w~tjutity

..ir,;u.: tn.:;t s.:p..ir.itLn~ thuse iunctiuns ,•!:L.:>!Kt'S a t1rm's f.'l'tentt.:ii l•'t !'.-llll•ti.
.Jnll sur\'1\'.:;1. ii:,•y aiS•' .:Hhuc th.:;t ti.'-' :J!urrtnh ,)[ rn ..1n .. 1~t· :- i .:s ~ r .. ·sp1..'ll!-tlb1 ii-
lit.'S is t"rSt)l.'n:::.Llllt::- tur .J hU!.:t lJ! ptut)lerns un1liu~ l"-' t [:,· sm.:i l l •· 1· t it r.1s, l 1 e~ i . .i,·
tl•vs~ nurma i ly ~nClJllntt-•t·e . .i in prlh.!u..:t ion mau..i~er.tent.

Pr,·,i•1(t L,rn LS t,, tilt' manutacturing <'nt.:-rprtst• 10i1at t11t• e:l).'.lllt' ;,; tu th··
..iutom0"1l~'; it keeps !t in constant mc~1un with tile p11mary u~j<·ctiv.• .i: .t,•-
!1\.'l.'1·111,_; c011\.'etlL<'tl•'e and c,imt0rt t..) cu,;t,,m.·rs tLrougi: its pr0ducls. l'r0,luc-
t1t)n m.1nag.•ment reters tu th0se .1ctiv1ti,,s 1nvu! ... ing planning, .ng:rn1z1ng, .1i-
rect1n:;, 111tei;rat1ng, c.intiolli11g ;rnd ev.i!u.Hing th,, entire pr,1c.'ss ,,i marw-
t<1ctur1ng go0d·s 0r prnvidin" st>n·ic•'>' al the right ..:0st and 111 lh•' right time,
qu<1ntity, quality and pLlC•!. It i,., clost•iy r.·lat<?d to <>tbt•r· lunct1,,n;il .1r .. as
ot th•' rn.1nulacturing ,1pt':-atio11. This r»!.H;_;,·,_·hip, grt'atly simpiiti .. ,~. 1~ il-
iustratt'<i in figure !.

It •i 11 bt' llbSt'rVt•d that pr,1,1uct toe is c !,1s1•iy c0nnect•·,! 1.·l(h ;iii ,1fl:,•r
t11nct1<111ai .n.,;is nt rn;1nutactu11ng .:1:d ml St nut b,, l!<.".Jted .is .1n i11d··r··11d.·nr ,q
;s.>iat.·J ;;ct1v1ty. "!ht.• s1mpl•' rel.itiorsh1ps depict,•d rn tL.· llfllr•· 111 z .. ;ll1t"
r1·p1,•sent lhe t l•>\oi ,1r ,!ep!,iym,·nt n! int:,1rmat ion, m<H1t•y, mat.·11;11 .111d pt•rs.im11·l
within th•• I 1rm. rlit• urganizat ional ::.l ructltrt' "! th1• furnitur.· m;1nu:;i.-tu11ni'.
t•t1tt·1p1·1se, wi ... cli,•r :;imp!t' ,,[ Cllmpi.·x, mu:,t 1·,•pr1•sent a C••nst.111t :lttt·r.:pt I••
<HCiit'stratt· ,q 1nt··~rat•· .-ill lh<· prlld11ct.1uP-1eiatt•d a.:tiv1t1.·,; ,l[ th•· v .. 111111:,
ll;n..:ti0n.il •• r.·;1:; 101tii .1 vit:W t,1 1'ns11r1ng .1tt.1i11m1'lll ,q th,· g11.1!:. ••I th•· 1·11!1·:-
pris ... F1i~ur.. m:1y . .!,;,, 1,.. lts1•d .is;, :.t;1rti11g p<>tnt 111 d1•tt•1m1n111.; li1" ;~·.­
port.inc.· •>I, :111d 1.·!.1r 11111,;liip l>··tw•••·n, th.· \.',1ri.n1::. 111n1·t 1.i1 •. d .111•.1,., ,q tl10'
m.111utactu1111;; ''P•'Ltti•>ll, aithd11gh :;uch d1·t,·rmi11;1t1.>11 m;1y [,·;id tn .1 ,,·1!.1111
am1>1111t •>! c11ntlict. Tht· p•·r,·1111i.tl ..:1•11tlicl b,·l101·•·n pr11d11ctiun .ind mari<.1·ti11>'.
!>l.ll! as tu wli1cli :.id.· d1ct:1t1·:; wh.it th·· 11·m :d1n11id pr<>d11,·1· "r ,;,·iii~ .i
!am1!1a1 •>llt'. It m.iy 11<1t 11.:.:111 •o1h1•11 b.itii tli .. p1tldt11·t i1111 .ind m;irk··f 111~ t1111.:-
tio11s .1rl' subject to d11t·ct m;1nag1'm••nt. S11hs1•qu1'nl g1owtr1 ;111d 1·xpa11:.11111, li"w-
t•Vt·r, m.1y ll•'C•·ssit.1lt: tl11·1r ,;,•p.trilti.,n, i11 which c:1:.1· th•· l°(llltlicl ;,,.,·,uni·:: .il-
m.ist lll•·V1tat>l,·. l;•'llt'rJily sp1•i1klll)',, w11,•11 .t !11m, i1.i:; 11·.n·i11•d [111· )',l11wtl.

.;, F<>! th1· ll<'!••s, SPt' p. ti! l>t•inw.

 - z-

Figure 1. The relationship between production management

and other aspects of the manufacturing operation

Delivery
Sales force
(Marketing
mana~ement)

Equipment
P:-oduction
management

Costing
Data
Manpower
resources

Personnel Financial
mana~cmcnt
Accounting iind
costing management

Parts of the firm

~External factors
-----'~~Sequence(Fccdhack ha; not hccn indicated in order to
simplify present at ion:1
 - 3 -

stagt:> u~ ueveiopment,::._i m.:nketing should have .:Htau1ed 1:ir1macy 0V<'t ptoduc-

t1on and should be allowed to u1ctate th<' type, quantity and qu<ilit~· ui pr0-
Jucts t0 ptuduce anJ wh<'n tu pruduct' .:hem. Tile scL.::mc sii01.111 lt'
shoulJ bt:> ust:>tui in Jealini; with the prL1Jucti0n-rr.ark<'ting Jil,•nn,;,.

The p1·oduct1on system <iS a "black box"

A "biack bux" is essentially a converter mechanism 1o·hich requires a set of

inputs and in turn yields a set of outputs. Figure l.. shows a simplitit:>d
representation of the production system as a black box.

11
Fi_rurc . . . The rroduction systcr.. as :1 bl:1Ck 1:>c:,··

I rlPUTS
- --- QU.IP.UIS
o Moncv ~ .. Prociucts. ...

{
o M.::ncr1al;; U"\. ~ . '
Sen:1ce:; \... k
~~3r·ct~
: ll

o InLirmat
o Methods
:1011 l'r0d:1c t H'l1
t" .S craps-=--- - -..,
() rnowl t:C!'t:-1 I
o Time I
o Utilities ,_.__""!""----...---.-----..... I
o Manpower / I
I r;;.J l c r i a1s- - - - L-J
I I , I
I
I L- - - --- --Lxiler icnce - - - - __ _J
I '
I
I
''
I ''
I
Machinery/equipment '
I
I 0
0 Space (Lind ;rnd hui ldin_rs)
''
I '
I '
I
I '''
I '
I ''
I
L~~~'~--------~~~·~--'-~~~~~~------~-
,('"System houndarv
''
'
Th2 black box approach facilitates description of the various types 01
manufacturing systems availabl-:: to furniture manufacturers and, within the
context of the presf'nt n..1nu.il, makes it possibl1, to it1'mize ir. relativPly
broad u,rms - without going into the details of the steps involvt•d in ~onvert··
ing raw materials into finished products - the various inputs (s.:iwnwood, ply-
wood, adhf'sivt'S, electricity etc.J 11r,ecled tu generate th•· rPquire<l 011tp11ts.

V1('win;: the production f1111ction as a black box m;•an:. starting at the out-
put ratlit'l· than the 1np11t :; de. Simply put, this m1 ans :;tart 1ng with th••
qu>'st 11in: "What to prod11c1•'!" r:ith .. r than "ls thr produ:t ion capac 1 ty tht>re to
mar111tact11t1· f11r111t1H1· p1ec .. s·: 11 At tirst glance, thi·; ~t'quence ol questions
may not ;ippPiit significant. lnd1•,·d, th1·r1· 1:; •'Viclf'lll"t' th.1t th1• majority of
small-:;calt'. l111111!1il1' m;u111factur111g l1rm:; 111 df'V1·lop1111. c011n!tlf'S t••ncl to
consicl1·1 th•· i11p11ts tirst. This 1:. 11nd1·r:;cor1•d by th1• !;1ct !liar most s11ch
 - 4 -

Do>en ;;ble to tinJ .:1 prL)duLt 0r ..1 pro1.! 1ct i1tlt'l t1...11sp,•ci.ilize
application ,,f tht! basic pr1nc1plt? _L•i ~pt)L1.::!.l!zat1on~ tht?t"t !d . -t'.

gained tvo much heaJway in such c.:1ses • ..=:·

Ut'to?tffitr!ing lo'hat pto<iu<:t ~O prc'Juce is th1t t'.JSy, t'Sp•:C i.ii :v ; i ; tttt' :urn1-
ture manufacturing business. 'r'i.e ptc'blem 11.-s in cuns1C:er1nli "furniture" as
an en<l-proJuct u1 itself. Hie terra turn1ture refer,,, .ippiupti;ltt>ly, t,• .:i
family ot product lint:>s. AltLough in tlit' bt:>ginning ti.t: smai 1-scale turn1turt'
manutactur·er mav turn ou~ as ra.iny products ,:is there are customt:rs, l.'ttr:
varying spo>cifications, the 01o1aer-manager must not los·~ sight of th<' m.:iin
product line in whid. he r:nght special'..<:e in the tutur.-. Ute<' h1gt.!y
successful Jwner-mar:ager, reLHing the stury 0f i"'"' itt' s·art..:<l his bus1:1t•ss,
told the author: "I st.nted pr0duc ing turn1turt' nine ye;irs ;,b''· ,tt.-r
approximately three years, began producing nttic .. turn1ture, :mJ .. tt .. r
another thr•!e 1o1as r:;a,;sproducing utiict:' tables." 1t1is ,_.:;st' illustrates the
step-by--;tep pr0co>ss ot attaining a lt>Vt'l of pro..iuct spt>ciaiiz;.;ttt'n ti.at ...-i!l
ensure tile ion;.;-tt:rm !"rowth u1 a tirm.

Essentially, ti ..: small-scale firm derives tlo'o maJOl ,mtputs fr,1m its
inputs: products ... 1u serv;ces. There art>, h'.iw.:-ver, two ;1ther outputs ot 111-
teresl: offcuts ath~ t-now!Pdge. Scr.:ips are oi significance bt>cause oi the
growing concern i:...,1 better waste utilizatiL,11 and anxiety ov,•1· the rapiJ Je-
pletion ot natural resources. Knnwledge is important t'>t•cause <'t the t1t•ed cd
de11elop the technological capabilities oi the l.'orkers anJ thus ,·:1;;1H•' the
long-term survival of the firm. Knowledge acquired It~ f1anitur.· r.1.inufa.:t1ning
car. be fed back into the production system in the form ot cuilectiv,• exp•·r1-
ence to support the process oi technolugy build-up.

Looking at the inputs, it ...-i 11 be obst•rved that some art• "un•' t im<-" ur
fixed (land, buildings, ce'.·tain types of machinery anci eq1:1pm.-:nt ••tc.), I.•·.
inputs on which investment is usually madt: .inly once, oftt·n .1t the st;Ht uf
the uusinPsS. Accountar.ts normally reter to thesP as "fix.·d co,ts" "inc.· •iwy
do not vary, no m;;ttt>r at what lt'Ve i of eff 1c tt·nc:: they ; i r .. ust·<l. Uth .. t input
ro>quirt.'ments raw materials, m.1npow.·r, mt·tih.J<lOl''hY• tur.e, i;ttittl•'S, tut"rr.;;,-
tion etc. are of;; continuing .Jt rt·curr1nh natu!'c ;111<! d.·ra:in<! r.--.ore att•·t1-
t ion. Ac.-ountants re fer t" tht"S•· as "var iab l;, cu st s" s 1 nee tL•·y v;11y <i•·r··nd-
ing on the lev•d <>l outpur' g••tl•'Ltted in the Cdnv.:rs1on pr,;ct·ss. Tl.t· it1t•·:·-
action ut th<' var1ou:> inputs as tll•'Y operate in th•· manufact1ir1ng
produce the Jt'sir·eu results is alsu worth obst·rv1ng.

In urct1.:strat1ng th1• inputs t.i th•· pr·uductt<.ll1 pt<JCt'''"• t ii'. pr 1 n-

c 1ples of snund manag1•m•·nt sii<rnld bt• b"rtl•· 101 mind, 11.rnwly:

tlmt~" st , : 1e pl.:atHh·d mt·t l1•.:ulo1i~,ly. ll1t'~t·

1
(a) The t 1x.:<l or ''one iop11t!::'.
require 1 tgorous ;it t••nt ion t" d•«.aii 1t1 planning ;1,., initi;ii l;,1.s ,-.11, :w v.ty
t•Xpens1v1· tu corr.:ct tn th" lo11g 11111. L,k,·1.'tS•', plann1nv t•.r 1 .. c·11:1 .. 11t 1;:1»1t::
should b .. cln,.,t•ly mon1t·i1••d :ind c•intirn1ally adju::t.·d t" ;1rt:;in tw::t '•1. .. 11ws,;
rt>sults;

(l>) M:inp<>1o1o·r r,·soutc1·s st..,uld lw 1.1tt·t11ll]' <!t-pl"Y"'I. A "1mpl.-, l";-.ldy

flt"x1bl1· org.1n1zat1nnal ,;t111cr11r1· w11l In• .,1 ,:(\11•.1do·t:1bl.· l1t•lp I l l ;tc'liit·Vill/',
tht: go:ils ot !'It' firm. ~;1t.·r1als, lltil1t11·,., .-iti·I th" 11~... 'd11 \Ii l d i ~t· ( i.11:,••[l f 11
conf,,rm with tlw m:i1111t.ac!11r1:.~ nwtii,,d,; ,,,·l•·• I •·d;

(c) ·1t11· p:.int's o•x1,;!1n): ,,,,.,11111..i!t"n:1l ·.o·t-11p :.h .. 11ld },.. m"d'· 111 .. tt· .. 11 ... ·-
t i Vt• \;ind <>V•·rall !H<ldt1rrt1lll moro· 1•f!1.-1o·nt by <<•tl!illllilll•/ :t1>dlV.1tlll)', 1111'
st a f I :and c o-,ird 111ilt Inv. !. lw v.11 '""" 111p11! s;
 - 5 -

1.d:i Whtie this is being done, all the inputs should be monitoreJ in 0rJer
to ensure ~heir pruper and effective utilization.

The pertormance oi all the resources and systems used in the firm should be
evaluated periodic.illy and adjustments made where necessary. ~ost of these
principles, insofar as th.:y relate to the production management of a small-
s.:aie fur:nture r.ianutacturing tirm, are discussed in r.iore detail elsewhere in
this manual.

Production systems

Chasing the right type ot production system is crucial to the small-scale

furnitur.: manufacturer because; I.a) he has a very limited margin for
strategic error, and (bi each system makes unique demands on ras time and
skill as an owr:er-manager. Various options are open, but these, gene::ally,
.:an oe classlfied in two broad categories: i.nterm1ttent and continuous. An
intermittent production system 1s s1mply one that is responsive to specific
orders or tne demands of specific buyers; a continuous system is one 10hereby
the firm manufactures to stock \.i.e. without a given buyer .. t a given time).
The majority oI. sm.ail-scale turniture manufacturers in the developing
countries employ intermittent systems, at varying levels of sophisticatior.,
irrespective of whether they a-:e exporting their products or not. A "job
ordt:.r" operation 1s a good example of an intermittent system, and a mass
pi:oduct.on operation, whether rigid or flexible, is an example of th€
continu:>us type.

Job order production system

Employed :;1· most small.-scale furniture manufacturers in developing

coJntries, the job order system features the production of cus~om-built pieces
of furnitur·e, tailor-made to the specific requirements of 'myers. It is
characterizeci by relatively small-volume job orders, the need for highly and
multi-skilled workers, and the extensive use of general-purpose r.iaci.inery and
equipment. Because using this ::;ystem entails working with a ·.;ide variety of
product designs, ente•;-rises employing it often complain of low pr)uuctivity,
are unable to attain a high degree of specialization, and experience con-
siderable fluctuation in their manufacturing time-tables. Figure 3 is a sche-
matic presentation of a job order production system .

ri g11 r c .). .loh ordl'r rroJuction system

Product~

I n ;: ll t "·
__. . Io Ii
nrdC'r
rnid11cr 1 on
....... i\( p' "· ' C, [l • E, F C, etc.
, iduc ,., ! t 0 t; I(: ' :.pecifi-
!
:; '/ '.; ( l' I;; c ;i !_ i (!fl:; (; f !; p L: c i f i c
btiyt..: r· !, )
 - 6 -

This type of production system offers, nevertheles~, an attractive way for

firms with limited capital resources to start operations. The problem lies in
the extended use of the system, failure to identify a product line to specia-
lize in, and consequently inability to move to a higher level of pr0duction.
Manufacturers employing this type of system should, at the outset, deploy
their workers on the basis Jf the skills or crafts they possess, then, after
some time, reorganize them according to the various stages the products have
to pass through, making sur~ that all the cecessary skills are available for
each stage. Obviously, this car.not be achieved overnight. Some small manu-
facturers need five to eight years to evolve from a skills/crafts to a stage-
type organization. In the meantime, attempts shuuld continually be made to
standardize '"ools, jigs and materials to the point where a definitive if
limited range of products can be tackled by the production system. This will
trigger the shift from job order to other production systems.

Rigid mass production

Rigid mass production is employed by firms producing few but unifo~m lines
of products in large quantities for specified markets. It is characterized by
a relatively high degree of specialization in terms of the product lines hand-
led; the sophistication of the machinery and equipment used; and the employ-
ment of machine operators rather than skilled craftsmen. Other features are
longer production runs and relatively large quantities per production batch.
In view of the high levels of inventories involved, considerable storage space
must be set aside for raw materials, semi-finished and finished products. The
focus of attention is on marketing rather than production as firms engaged in
this type of ptoduct ion manufacture to stock, as opposed to having a ready
buyer befo~e the start of manufacturing, as is the case with job order produc-
tion. Figure 4 is a schematic presentation of a rigid mass production sys-
tem. It will be observed that the final products of this system - in addition
to the tools, jigs and materials employed are standardized and uniform.
Uniformity, in as few product lines as possible, is the key to rigid mass pro-
duction.

Fi!!urc 4. Ri~id mass production systcr:

Products
!{i Fi d T'.l<lSS X, A and Y product lines
Jn r l 1 t s---41L~M proctuction ----;.-~e3chi 11 a very 1 arge
~ystc:n, VO 1 ur;,('

Flexlble mass production

The f J.. xible mass product ion syst1•m features the manufacture uf lnter-
med".i.ate parts which can L>e interchanged to produce a variety .Jf products ln
large quantity. Just as the Pnd products are standarrliz'!d in rigid mass pro-
duction, the par's ;ire ~t.1nclardized 1n flt>xiblP mass production in order to
make possible a wid1• div1~rsity of product I incs.
 - 7 -

An exampl~ oi the latter type of production is provided by the small-scale

..
tirm :11at lleci<iell to manufacture a ielatively limited range of office furni-
ture. lt specialized in making table tops, and subcontracted the fabrication
of the l"'gs. Each of the several subcontractors involved suppl "'d the firm
.;1th one to ttH"ee different types of leg, made of a variety of matei-ials, in-
cluding chrome-plated steel. The firm then applied the legs, interchangeably,
to the small variety of table tops it produced. The various combinations made
possible in ti1is way yielded a highly uiversified set of product offerings.
Other examples of flexible mass production are provided by small firms that
pt·oduce "comp1etely knocked dol.'n 11 lCKD) furnitui-e pieces for :;ubsequent assem-
bly by subcontractors. Figurt:) is a schematic presentation of a flexible
mass pi-eduction system.

Figure' :i. FlC'xihlC' mass pro<luc~ion system

intC'rchan~cahlc
parts
F 1 ex i b 1 e r: a ~; ~ , . Multinle
.\ l '
Input:------~~ rroJuction
s vs terr: --
,' ,- A)\ 1
rrodl'Ct s
in fairly
laq~c
,. , y ') y
l

,
I quantities
3
,,
I
I
J}
I\
' .... _______ . , I

t
From other subcontractors

Applicati0n oi this system requires an in-depth analysis of product lines

to determine the pattern and logic of the product diversity. This pattern,
once established, wlll iacilitate the production of the m1n1mum number of
standard parts needed to generate the max1mu.11 number of finished products.
Although the flexible massproduction system has not gained wde acceptance by
the smal I-scale furniture manufacters in the developing countries, it can
provide a way in which relatively large firms can complement the <>ctivities
of, rather than compete with, smalltor firms.~/

The choice of production system

It will be clear from the toregoing th2t the production system chosen will
depend to a great extent upon the type, requirements and characteristics of
the markets aimt>d at, as well as the product mix, the processes involved, and
the firm's potential for expansion. In making this decision, it musl be borne
in mind that the systems Jiscussed above can also be viewed as stages 1n the
evolution of a typical small-scale furniture firm. Thus, as may be seen from
figure 6, the job order type involves a rt'1atively low 1Pv0l of !;ophistication
compared with the 1.1.,xiblP mas!> production type.

Tht' ch,•ckl1st show11 1n f1gu1t' 7 •nay bl' found ust!ful 1n choosing a produc-
tion syst.·m 01 rl1t·ckin;'. wh<"thl'r th•' systPm being Pmployf'd is thf' appropriate
Pflf• •
 - 8 -

Figure 6. Production systems as stages in the evolution of the small-scale

furniture :maru.ifacturing firm

Evolutionary
level

LOW

Job order
Rigid Flexible
Organized Organized mass production mass production
Type of by by
production system skill production
or craft stage I

Materials,
Items standardized tools, jigs [ Fina l prod uc t I l._____P_a_r_t_s___...J

Area requiring much

attention from the
owner-manager
Production J l. __ M_a_r_k_e_t_i_·n_g_ __, Co-ordination of
assembly
and
sub-contractor
development

HIGH

Degree of
repetitiveness LOW
of operations HIGH

s---
I

Degree of
specialization
 - 9 -

Figure -

Tyre of production syst.-m

Ripd mass Fl ex ib le mass

Parameters J.>b order producticn production

l. Type of Limited ( local) Less limited Unlimited l l oc a:

market and foreign)

-., . Customer Product variety in Volume ratlw:r Volume and variety

needs small volume pt>r order than varietv

3. Products: Highly diversified. Limited number of Part.:; and cocbination

production Smal 1 volumt· product lines. oi pa rt s. \'arielv ('I!
volume per order Largt. VO 1Ur.It' products in laq!<
vol um~·

... Type oi
machinery
General purpost' 1...orr.h i na l i or. ,, I
gt?ncra! purpcst•
Highly spec ia 11 ;:e,:.
lJ St' oi c ompont>n t
and and special ll'·•:-h1n1•
equipment

) . Tim•' net)dt.•d Rt' lat t\:eiy s li.1 ! ( . Lonp•r [ i l:lt .• \' i' l ,. lonf [ 1r.1t'.
[(I pr ,1d uc e a Li i e eye 1" l ~ l. i fr cv,- ir tends Rt"'lat1velv S ll<H l
nt?""" ~no..iuct \.'(• sh~' rt
!""\.~ to bt> j (';1).' I' r i i ! e cv...: it·

tJ. Capita: i...o\.· ht:dlUr.1 l •' h l~ii Hi gii t c' "'' r v (:I ~·i
requ1remt:>nt

7. Break-even Lo1,o; li q:h 1;,. : ,. Li rl.

points

f, • Materials None to low Ii igh Ve:y high

inventory

9. Cost 01.'ner-manager Part- to i u 11- t i me Cc st estimating i;roup

estimators

10. iypl' of Lrattsmen and Machine opt·r.itors Parts special ists,:' 1

w.it ••·rs ski l l t•d workers subc ont r ;1c r or and
11t:'C'dt'd co-ordinators

11. Product ion No1w to very l 1m1tl'd Staff t'Xpt't i t'llC't'd In Qualifit•d staff,
suppnr t staff function:; t ht' ;m .i I v r. 1 :; ;md inc l ud in~ Pf' I S<HHlt' I
staff co'.'lt rol "f O:"' () !~ t ~ ' t ( l r1ov1df' suhcont t .1c· I or
t im .. , r.:.1l1· 1 la l :; , .l!·!' i St .11\C (' and
\.',ls t ,. :; t'[('. c (1-ord i nation

tr°'
Pt ncluc t 1 on ot an ~ .. nu f ;,.- t 111 111>'. As:.rmbly and or<h•·:.r r a-
onct•rn of t'.nt Ir t' product ! i Oil of •:;1ri011s p;1! t ~
roJuc t 1on or Job "1 dt· r by i;ub.: c•nt r act cio ::
anagp1

:ii l'rr:;,q\n•'.I \.;ho by t1.11n111): or 1·xp•·t 11·11ct' (1·.r. as 111.1cl11rw npr·1ato1:.) a11· .ihlf'
IP r.i1r.r•·:;1 1,o;h1d1 p;111s/com1 .. ,n1·11t~. of .i p111,l111t (<tll lw ··co11om1<";illy r.:.i1111f.ic11111"l l>y tllt'
t1rm .111d wh1d1 :.hn11LI b1· :.ul"onf1.1cl1"ll Pu!.
 - 10 -

The proper selection of a production system is a critical matter as sub-

sequent shifting from one system to another can be very expensive as well as
time consuming. A case in point is provided by a small-scale firm known to
the author which has started on a job-order basis, catering to a local re-
gional market. This firm will require large infusions of capital, managerial
and technological know-how in order to be able to export furniture pieces to
its ultimate goal, the European markets. Eventually, the situation will call
for a "happy" compromise between the firm's short-term goals (limited market,
fast returns on investment, experience gained, know-how acquired etc.) and its
long-term goals (export markets, rationalization of production facilities,
quantity and votu111e as opposed to product diversity etc.). The firm must
likewise consider: which product lines to specialize in; the initial capital-
ization required; the target markets and their characteristics; and the tech-
nology available to it.

Production management problems

Poorly-managed production is responsible for a number of problems that mav

be catagorized in the following broad terms:

(a) Planning-related problems. These result from inadequate planning of

production requirements. Symptoms include persistent raw material inadequ2cy;
inability to deliver on time and in the right quantity and quality; failure to
meet customer specifications; prolonged use of obsolete and inefficient machi-
nery and equipment; lack of room for expansion; and inadequate working capital.

(b) Control-related problems. Lax or inadequate control in production

results in low volumes of manufacture and high rates in: quality rejection;
raw materials inventory; cost of production; pilferage; raw materials spoilage
and improper utilization; excessive energy use; machine and equipment break-
down etc.;

(c) Productivity-related problems. Small-scale furniture manufacturing

in developing countries suffers from the inherent disadvantage of being
obliged to cater to limited, local markets; hence the use of uneconomic scales
of opeL·at~on, the underutilization of inputs, and the generation of sub-
optimal outputs. Productivity-related problems, some of which may be trace-
able to poor planning an~ -:nn~rol practices, include: inordinate dependance
on rapidly depleting indigenous raw materials; excessive labour costs;
relatively low yield per unit volume of sawn timber; low ratio of direct pro-
duction time to total time available for procuction; and low output per worker
compared with that of other firms of similar size;

(d) Organization-related problems. Problems linked to the organization

and direction of the enterprise, as well as to the integration of its activ-
ities, further complicate the already difficult role of the small-scale
furniture manufacturer, who is often not only the general manager of the
business, but its purchasing manager, overall supervisor, financial
comptroller, marketing manager and treasurer. The demands of the production
function on the entrepreneur's time can be reduced or expanded, depending on
how well he organizes, directs, delegates and integrates all the limited
resources available to him. Coiranon complaints that indicate the presence of
such problems include: "l have to explain to all my workers how this job
should be done". Or: "Hy supervisors cannot concentrate .>n supervising
because they, in fact, are our most efficient workers". Or: "Too much time
is spent chasing around the plant facilities". Or: "I don't think my workers
understand my predicamfmt";
 - 11 -

leJ lechnoiogy-Jevelopment-relateJ problems. ln order to ensure sulv1val

and long-tenn viability, the smal 1-scale furniture manufacturt>r must Je con-
cerneJ not only 1,;itn product~vny-relate.i issues but also 1.:ith nei.: tech~o­
logi1..al develcpments in s0ftware lma."lagement know-how) and hatc!ware { ne1o; pro-
cesses, macianes and equipment) anJ the need to adapt to suc:1 <levelopments. A
considerable number of small-scale manufacturers have started out using only
basic manufacturing i;.now-how with the hope of gaining more ex;:ierience ·,.rich
time. That may r.ot be a vi.able strategy for technology development, however,
tor althougi1 furniture manutacturing may be considered an "old" ind•1stry, much
new t<chnological know-how is being e·.rolved in the fiela. Examples include
new wood-printing and advanced gluing techniques, 1npovations in protective
packaging, and the deveiopment of multiple spindle nuchines and low-cost auro-
mation.

A stated earlier, this manual is not intended to provide a cure-a 11 for

these production-management-related problems. Rather, the aill! is t::> su,;.;est
guidelines for avoiding or minimizing the effects of the problefus and to pro-
mote awareness of the options or solutions available to the small firm owner-
canager .21
I - 12 -

II. PLANT LOCATION AND LAYOUT

Plant location and layout represent two other decisions of strategi~ con-
cern to production management. t:uidelines ior arr:.ving at the relevant deci-
sions are offered in this chapter.

With regard to plant location, the following issues are dealt with:

la) How important is the plant location decision to the sm.all-scale

furniture manufacturer?

(b) What factors should be considered in determining the appropriate loc-

ation f0r the plant:

' -.; ) How would the small-scale manufacturer choose between c>lternative
s i te:s'?

In di ussing plant layout, the following issues are considered:

(aJ What ar~ the options insofar as layout is concerned?

(b) What type of layout should be adopted for small plants already in
e~istence or about to be set up?

Th~ location decision

Determining where best to locate is a problem that owner-managers face

periodically since products, processes, markets and even the sources of raw
materials change wirh the passage of time. A firm located in what was once a
desirablP area may suddenly find itself cramped for space or forced to assume
high delivery costs because the markets or the suppliers of raw material have
moved. Since it is so costly to move or relocate, site selection must be a
long-term commitment, like the choice of product ion system. No location can
guarantee permanent success, but certainly, some locations inhibit it. Any
decision regarding location should be based on a critical assessment of the
desirable and unaesirable aspects of the various location alternatives.

Fa~tors affecting the location decision

The ideal location has been described as one where the unit costs of manu-
facturing and distribution are at the minimum and where prices and volume of
sales will gene1ate maximum profit. The various factors, tangible and intan-
gible, quantitiable and unquantifiable, affecting the location decision are
illustrated in figure 8.

These factors 1n general affr.ct LhP. unit costs of manufacluring, and hence
have a bearing on the competitive position of tl1e firm, as discussed below.

l. Proximity to sources of raw materials. The typical small-scale fur-

niture manufacturing firm tends to be materials-intPnsive, but, unlike its
larg<'r counterparts, 1t does not have the wht>rew1thal to sustain a logging
operation and primary sawmilling facilities. ,\site chosen for its proximity
to the bas.c sourc1· ot raw materials in t 1me may te sorely affr.rtP.d l>y thf' de-
forl'station of Lh1· arra. Similarly, a firm using primary sawmills as its
source 0f sawnw0ocl wi 11 t>1· af it>c tt'd as dt'fort'stat ion I orccs th<· sawmi 11 s to
l't' I oc at 1·. 111 :;ucl1 circ11msL.1nc:Ps, raw matt'rial acq111siLion can s11dd1•nly b1·cornt·
1~xpens 1 v1•.
 - 13 -

L0c:1ticn de . .·i~icr. factcr~

! 11 dust '1 :! i
L" :S t ;1 t ,_. s

Cnmmuni t \' Fut u1·t:

faciliri~s ..:· :-: p .:m s i on

Comp et i t i on Corr;r.:1 mi t ·:

Cnrnr.nm it y
s i :'.l'
l'n.;.: i:..i r v to
:; 'l tll" c (: s - (l f

Taxf's and r ;n: n:a t (: r· Li l s

Land ;inc! :on in~

r eq u i r c-rr... ·n ts
ri·oxir:ii ty
t o n:l r kl• t

W-'lstc
disr.osals

l'nwer, fuel Ti·;insport at ion

and ut i I it ics fi1Ci1itil:S

I .a J.our
 - 14 -

:::. Proximitv to market. lii1s fac~or greatly atfects tt:e costs ot ciistri-
buting the finished product. In developing countries, the "centrt: o: gravity''
oi the small-scale furniture manufacturer's markets is corst.1ntiy changing,
and at a relatively fast rate. Construction activities, 011 whicn the market
f:;,r fl·rniture pie.::es may hinge, tend to move from developed to underdeveloped
areas, trom heavily urbanizea to rural areas. In this case, the flexibility
allowed by the ~irm's smallness may prove to be an advantage.

J. Transportation facilities. This factor has t10rJ major components, i.e.

availability and costs. One advantage of smail-scale industries in general is
the relative ease in locating them in the rural areas of developing coun-
tries. Initially, the question ot transport.ition facilities may no!: pose a
problem, ~f the market coverage radius is small; it may become one, however,
as market coverage expands., The c.:i~;t of transporting raw mat~rials and fin-
ished products can greatly affect pricing schemes and hence the competitive-
ness of the firm in the long run.

"+. Labour. Labour costs, 1o;hicil may vary from place to place 10ithin a
counlry, are certainly an important factor in the location decision. As dis-
cussed earlier, the job-order type of production system tends to be labour-
intensive, i.e. the labour conq·onent of th~ total production cost is rela-
tively high, hence the importance of this factor. Labour aspects that must be
taken into account include training costs, recruitment costs (in some areas
whe!'."e ti.e skills needed are not available, even the relocation costs of labour
must be considered), attitudes towards work, and working habits.

). Power, tuel and utilities. The costs oi these also usually vary
within a country. Related matters to be reckoned with are reliability, fre-
quency (in rural areas in some deve!oping countries electricity is available
for an average of only 4 hours in the working day) and quality (~he voltage of
electrical supply in rural ar~as can fluctuate by as much as + 30 per cent of
Lhe rated values).

o. Waste disposal. This factor looks deceptively insignificant, but

smali.-scale furniture manufacturing operations can incur considerable expense
in :r.anaging (e.g. installing a dust collecting system) and disposing of wood
wastes. Present-day concern with the quality of tl:le working environment and
pollution control also make this an important factor in site selection.

7. Land and zoning requirements. The availability, cost and quality of

land for plant site is another major factor. Zoning legislation recently in-
troduced in some developing countries must be reckoned with. A firm estab-
lishing itself in what appears to bt a good location for the purposes of manu-
facturing may hn<l itself in a residential zone after five years. Relocating
in this ~ase w1 l l be very expensive.

I). Taxes an<l permits. The types and costs of the taxes, licences, and
permits needed to operate a small manufaLturing oncern generally vary from
place to place within a country.

'J. CollUllunity size. The firm should l'e located within or very close tc. an
ex1stin"·' suitably sized community in order to keep thi: expense of providing
housing tor the workers, transportation services etc. to a minimum.

LU. Competition. One distinct and negative characteristic of the small-

scalt> furi:iture manufacturing firm in drw•lop1ng countri1•s 1s thf' tPndenc~· ~0
locat•· in areas in which thPrP is alr1•,1Jy too m11ch competition for thf' local
mark .. ts. It should tw rPmPmbert•d that wl1iJ., a certain amount of compf'tition 1s
n~·eded to sharpPn 111an;1g••rial ~kills, .1n ovf'rdo:;c may be dPtrimf'ntal to lnng-
t1·rm survival. Locat1n>; in an ;ir1•a t11.H ;ilr1•ady has a snrfr-it of compPtit1on
mPans additional 1•xp1•nd1tur1· or. promotional, advt·rt1s1n~ and oth1•r mark1·t1ng-
r1•!,1tl'd ;JCtlVltlf'S.
 - 15 -

11. (0:amunitv t;;..:iillies. ihe t...<..:ii1ttt'S ;.i\·atlable ._.itllln a i;1v.:n .:1.ir.i-

munity must I i~ewise be c0nsiJered. Ihese incluJe, ui additiun to !1avu1g f.:ic-
ilities ~ ..ir m.:di..:.:.;l ;:issist;;nce \i1010 f.;;r is the pi-.nt tr0m tilt' ne;;r.::st f1rst-
aid clini..:), recreation, practice ·~t 1·ei1;;iun, eJuc.:ilicn, anJ t>nteitainmt>nt.

l.:. industrial estates. As a rule, the small-scale entrepreneur should

favour lucating within or close to an industrial <:'state. An estate is ;:0m-
posed of plots ot lane ~construction sites! Jr ready-built t.:ictories equ1pped
with all ne..:essary se1·vices .nd facilities. ln the latter instance, the en-
trepreneur can sett le in, hire staft on the spot, set up machines anJ start
co11UUercial production. Location within an industrial t'State hastens the
installation process and oifers the added benetit ot "linking" with other
manuf~cturing plants in the area. Policy-makers in many developing countries
are contemplating setting up specialized zones for their small-scale indus-
tries. With respect to the furniture manufacturine industry, the idea of
setting up "furniture villages" is being exair.ined in certain areas.

lf a country or area has no indu:;tr~al estates, the available infra-

structural !'.:tcilities should be thoroughly investigated to ensure that they
are sufficent to suppo1·t a furniture manufacturing c1perati0n. By th~s is
meant the availability oi potential subcuntractors, smail workshops for the
maintenance of equipment and tools, suppliers of hardware and other materials,
c011UUunication facilities le.g. telex) anJ the like.

13. Future expano;ion plans. ln <lecidinb un pl.1nt location, allowance

should be made for future expansion.

Community attitudes.
These refer, in this instanct', tu tiie pr.edis-
p0sition ..:if a given community to .J business und.eitaking, sometimes based on
traditional v:dues 01 mores. This may be negative \"'.>e con': w-ant a cotfin
manufacturing company here; it brings t>aJ luck") or positive l"Yuui project is
just w11at 1o·e neell in order to turn our waste material into cash").

The aim of tiie small-scale furniture manufacturer in st>lt>ctinb .J pl.int

site shuulo be to minimize the sum •)l all tht' costs involved w1th1n a specific
locatiun, not only ior the immediate future but also for ti1 .. long run. In
this respect, some ot the lactors listed above may be intangible ;,ncl J1fiicult
to quantity objectively 111 terms of immediate cost. They should, huweve r,
influence future costs.

Checklist for deciding on plant location

A simpl" checklist a11ay1ng all the important iactors appl1cilbie tn ,·;ict,

alternative site can be an eff,•ctive tool in deciding on plant location. Th ..
fol lowing considerations sh,iuld b,• kt•pt t.irt•m1.1st 1n mind.

laJ Exchanging ont· sit•· for anottlt'l, p .. rhaps mort' appr.1pri;1tt', ollt". !n
some cases, th .. entrt•pr .. rwur m.iy ;dr .. ady own ;1 piece ot lt•al t'Statt>, ··1th.•r
through inherit.1nce or by direct purchase. It would o.~ nvf>r-s1mplifying tht>
pr1iblem 1>t plant lo.:<1t1on, hoWt!V<'r, if he wert> to set up a pl.int on this pr<>-
pcrty without ,·xplor1ng tht' possibility ol sf·!ling or r'xchang1ng 1t for ;1n-
oth .. r th.it m1~hr 1> .. r.11Ht: apptupt 1at•· to 111s iuni:-t•:rm il•'•"i:.;

( b) Vert 1ca l t•xpans ion. It may ;11su b1· possible to rt>ma1n 1n an ··x1st-
1ng, but cr.impt'•>, location ;i1.d to 1•xpand 11pwards, .1d<1111r. .t St'•nnd tloor. As
cl1scuss .. d latt!r 111 t!i1,, chapt<'r, undt•l pl.i11l layout 1n th1• cont•·Xt ol r11rn1-
t11rl' mar1utactur1n,;, this alt(·r11at1v1· m;iy tJt· ;i pail1at1v1• 1atiwr th;111 a 11•m1·-
dial ml'asur1•, ho•...-1•v1·1.
 - 16 -

le) Expanding subcontracting acti.,.ities. If a business is periodically

defined in veq• specific terms, it will be observed in time that it has accu-
mulated certain activities which are n0t really its concern. Instead of ex-
panding to house these additional, and maybe unnecessary, activities, it may
be worth considering remaining in the prPsent location, be it a trifle
crampeJ, and utilizing the sub-contracting option.

(d) An entirely nel.' location. This point is best illustrated by the case
of the small-scale furnitur~ manufacturer who specialized in woodworking ope-
rations. He located his firm on a site owned by him, thinking that owning the
property would automatically lead to cheaper operating costs. In the mid-
1970s, he decided to take on tl 1 e production of cane furniture, in spite af the
fact that he was located a considerable distance from the port where the cane
materials were landed. Initially, this did not present much of a problem, but
as the volume of production increased and fuel costs rose he was obliged to
look for a more appropriate site. To avoid such a situation, the factors
affecting plant location must be considered in their totality, using a check-
lisl such as the one presented in figure 9.

ln figure 9, the factors involved in the plant-location decision have been

subdivided into quantifiable (where numerical data can be obtained to sub-
stantiate the decision-making process) and non-quantifiable (where subjective
approaches are needed to arrive at a decision) factors. The former, for con-
VP'.1ience, have been divided into two components: fixed capital requirements
a.'d unit production costs. The user should make his own assumptions in esti-
mating the items involved in the unit production costs. In dealing with the
non-quantifiable factors, the following subjective criteria may be used to
rate the desirability of a location: A = Ex~ellent; B = Very satisfactory; C
= Satisfactory; D = Fair; E = Poor; and F = Very poor. It should be noted
that sometimes just one criterion even a minor one may outweigh all
others, depending upon the degree of specialization of the firm tir. terms of
products, markets and raw materials), and the manufacturer's viewpoint.

Criteria for effective plant layout

As soon as it has been dee ided where to locate the pl ant, the next impor-
tant tas~ is to arrange its facilities. This entails the provision and plan-
niP.g of working space for machinery, other equipment, production and other
personnel, support services, anr' storage. Activity aimed at attaining the
most efficient and economical physical arrangement of the plant is known as
plant layout. A good plant layout:

- Provides the most advantageous and economical work flow.

- Re<lu~es materials movement to a minimum.
- Ut1l1zes all available space etfect1vely.
- Is flexible and allows room for adjustment.
- RP<luces delays and work stoppages.
- Fac1l1tates the maintenance and repair of machinery and equipment.
- Makes for im~roved control and supervision within the ~hop.
- ~:aximizcs the job satisfaction and safely of the workers.

An t>Xample ot ttw consequences of poor layout is provided by the smal !-

scale furniture manufacturer who St>t up a plant to man11facture cheap, low-
quality housd1old furniture and latt>r <l1verslflf•d to include the 1nter-mittent
production of rloors, Ja!"bs, cab1n .. ts and similar article;:;. In so divers1-
fy1ng, ht• forgol to makt> thP nf'u•ssary physical adjust·,onts to his production
lacilitiPs. It took two small-1nd11stry .-xt••ns1on of1ic .. rs to rl1agnose tht>
c<111Sf' l>f his persist1·nt low prod11ct1v1ty.
 - 17 -

Figure 9. Plant location checklist

Location alternativ~3
Factors Remarks
...' B
I
I D

l .... ) F1xeJ capital requirement~:

:
L<ind costs
Bu1ld1nb .:ma other stiuctures
Groun~ improvements
u Rigilt ot lo'ay
Equipment
Uti1t·I fixed ccst eier:l<:nts
I
Tot..i l
I
-r-
lbJ Lln1t production costs
Ra\.· material:· .:
Dtr•·ct l.ibnu1 a
1 '\"t'?'Lt·:~u cu~l s .:.i

Transp.,rt:,c 11;t.
t l t'C t: I c l t '.
l l1mr::un 1c.:.it iu;·.~

:.-1 c:i l .:i r i ~~ s , "'-...1 l: t • L.

\\<:it,, r
1·axt>s, permits etc.
lJPprec1at1on
Ot ht:·r s
----~ ~--..- --~

1IIt;i1 ' I
I

q
\l I (1)

Ii
\ () ...... J::.~)t-~l l t l l 1
Il.

..
b

,.

I I
 - 18 -

An .1 ppropriate plant layout can contribute significantly to enhancing

productivity and reducing unit production costs. This is because the physical
arrangemc1t of the manufacturing facilities will determine the movement of
materials, semi-manufactured products etc. inside the firm. It must be remem-
bered that such movement only adds cost without improving the vabe of the
product. Hence, materials back-tracking must be minimized if not totally
eliminated.

Plant layout development in small-scale furniture manufacturing firms in

developing countries is at what may be considEred the evolutionary stage, per-
haps because of the limited start-up c:.pital available in most cases. The
owner-manager will initially, as a rule, purchase a ~and saw as his basic
piece of machinery and start producing saleable products. At a later stage,
say after two years, he may add another type of machine - e.g. for stock pre-
paration - and so on. The resulting layout, therefore, is not systematically
planned but evolves depending on the circumstances of the firm. This practice
usually leads to problems related to low pro:iuctivity and high manufacturing
costs and thereby eliminates the distinct low-overhead advantage 0f the small-
scale operation.

Types of layout

Layouts for small-scale furniture manufacturing operations are basically

of two types; process and product.

Process layout. In a process layout, all machines and equipment perform-

ing similar tasks or used for similar processes are grouped together in one
area or department. A firm employing it may, for example, lay out all stock
preparation equipment in one area and all ssembly equipme~t in another.
Firms using the intermittent type of manufacturing operation usually favour
this layout. As a rule, it is chosen where a great many products share the
same machines or where a p-roduct is ::ieing manufactured in relatively low
volume. Moreover, when a standard product is not being produced in l:irge
quantity, process layout is usually more desirable because of the flexibility
it allows. Figure 10 illustrates a process layout.

In intermittent production, process layout offers a number of advantages.

These include reduced capital investment (because there is less duplication
and maximum utilization of machines and equipment); greater flexibility in
terms of tasks per:ormed; more continuity in manufacturing activity, even when
a machine breaks down; and generally - for small firms producing several pro-
ducts in relatively small quantities - 1 ~er production costs.

Process layout, however, also has the following drawbacks: difficulties in

scheduling, routing and controlling manufacture (since almost limitless com-
binations of sequences can be used in processing similar items); high mater-
ials handling ccst~; and problems of co-ordination and control resulting from
the wide range of variations in manufacturing.

Product layout. This type of layout is not often fout'd in small-·:.cale

furniture manufacturing opera•ions in developing countries. According to this
layout, all the machines and equipment needed to make a specified product are
set out in the same area and in the sequence employed in the manufacturing
process. It is used mainly by firms having a high demand for products that
are more or less standardized. It is very useful therefore in firms using the
continuous type production system. Figure I I shows a product layout in a firm
producing flush doors and door jambs.
 - 19 -

!' r c 1.: l' ::: s 1 a \" o u t

Finishin~>'varni:;hin~~ I t'r'.:1.'l :::ter~· Sl'1..·t icn

sect!.on
Sanding section

I
I
l.2l----- - - - - - - - - - - - ... -----6
············-· shl:1.~
Fini 1.:arch1.)U~t:
product

Plailt office room

Assembly s~ction
Stock preparation

L
section

~--··

...
~Posts

lrnap,in<1ry
dividing 1 inl' Th<:o rL' t 1 cil (}<lW (1f

m<1 t t • r i ;1 l ~;

Note: Not drawn to scale.

 - 20 -

Figure 11. Product layout

Lumber yard

Common material area

I
I
I
I
I
I
---~---
1
I Door ,iambs area
Fl~sh doc r are~" I
I
I
I
I
~
I
I

Office and
display area

Posts

Imar,inary
djvidinp, 1 inc
-----~•• Theoretical flo\o: of
materjals

Note: Not drawn t o s ca : ~ .

 - 21 -

i:'roJuct layout makes automation and mech~inization r!lore feasiblt>; encour-

ages labour specialization; eliminates product routing problems; ma"-es !about
and material flol.' more easily controllable; reduces the need tor atea inspt>c-
tion (.because machines pertorm distincL o~erationsJ; permits better utiliza-
tion of floor space; and r.iakes tor fel.'er materials hand:in)?: ptoblems.

On the other hand, it has the following disadvantages: it is relatively

inflexible; it is economically feasible only when r.unufacturing in exu·emely
large quantities; it is useful only for a given product where the balancing of
production lir.es is possible; it may he costly for products ti.at ar.e suscept-
ible to changes in trend, technology and preferences tbecause of the need to
modify and replace special-purpose equipment); and it requires higher capital
investment tbecause of the machinery duplication involved and the high cost of
special-purpose equipment).

There are two variations of the product layout, namely: fixed layout and
group layout. In the former, the raw material remains in the same positiou
throughout the processing, the machines and equipment being moved into place
beside it. rhis type of layout is used when the product under manufacture is
bulky and heavy or when only a few units are being made at a time. \.;ooden
carvings, statues or boats are some products for which this type of layout is
used. Group layout has only recently been introduced, as a result of increas-
ing concern with the working environment. ln this layout, all personnel en-
gaged on a given product or part of a product are grouped toge:her as a team
and provided with all the machinery and equipment needed to complete the work.
The workers are encouraged to divide and di.>tribute the work arnong themselves
and to interchange jobs to the extent possible.

Concepts in improving plant layout

Whatever layout is adopted, the objective should be to ensu"."-2 that every

square centimetre of the plant generates profit. To attain this end, tht> fol-
iow1ng may be useful:

1. Concept of shortest travel distance. The building housing the manu-

facturing operation should be on one level only. Partitions or walls between
sect ions should Lie avoided (with the except ion of the sand ir.g, finish i ni; and
varnishing sections). Likewise, pillars, posts and corners should be avoided
whenever possible. This facilitates the unhindered transport of timber and
other materials from one process to another.

Concept of tt.ree-dimensional spacf'. Maximum economy is obtained when

all available space 1s effectively utilized, vertically as well as horizon-
tally.

3. Concept of one-way flow. The best layout i.~ on!' in which working
areas are arranged in the fol lowing sequence; stock preparation; parts pro-
cessing; parts assembly; finishing; and packaging of finished products.

4. Concept of satisfaction and safety. The best layout is one that

al lows for future expansion or the rearrangement of manufacturing f ac i 1 it i es
with a view to accident prevention, .:it the lowest cost and 1.uth the least
l nconven i ence.

). Concept of total integration. The best layout is achieved when man-

power, materials, semi-manufactured products, machines, and other diverse
eleme11ts are so integrated th<:t they form a w.dl-arranged and functional wholf'.
 - 22 -

Checklist for identifying plant layout problems

The simple checklist given below may be found useful in evaluating an

existing plant layout or preparing a ne• one.

Materials handling

l. Are tool cribs located in such a way as to save time in exchanging

tools?

2. Are materials, jigs, fixtures, patterns etc. easily accessible?

3. Can materials handling cope with the entire range of sizes of timber
for new job orders?

4. Do new materials or parts purchased for a new job order require spe-
cia_ storage facilities?

S. Can materials handling be further improved?

6. Is storagl? space for inflaanable finishing materials properly con-

structed?

7. Have ramps been installed to facilitate movement of materials?

8. Are door clearances adequate for manpower and materials movement?

9. Can pallets be used to facilitate movement of materials, semi-manufac-

tures, parts, finished goods etc. from one work station to another?

10. Are concrete floors in suitable condition to accoDl!lodate the use of

pallet transporters? (I.e., are they clear of cracks and other defects?)

Maintenance

1. Is the space around each machine sufficient to permit storage of com-

ponents on pallets before and after machining and still leave room for the
proper operation of the machine, fully extended?

2. Are machines and equipment installed with a view to facilitating main-

tenance, repair and servicing?

3. Are power connections easily identifiable?

4. Are measures being taken to deal with such "house-keeping" problems as

accumulation of dust and wood chips; ineffective storage of semi-finished pro-
ducts; or difficulty of access to certain floor areas?

S. Are all power, lighting, pneumatic ventilating (especially in the fin-

ishing area) and other service controls accessible?

Personnel facilities

l. Are lavatories, locker rooms, washrooms and drinking facilities ade-

quate and centrally located?
 - 23 -

2. ls the plant properly painted ti.e. relaxinr. to the eyes of the work-
ers)?

J. Are lighting and ventilation sufficient to allow employees to wo~~ in

comfort?

4. Are the fumes of the finishing department and the sawdust in the st~ck
preparation and sanding areas properly contained?

S. Do rhe dimensions of the aisles conform to safety regulations?

6. Are entrances and exits properly located?

7. Does machine travel extend into the aisles?

8. Does the width of the aisles permit two-way traffic of personnel?

Production control

l. Will current production volume meet sales targets?

2. Is there enough space around the machines to permit loading and un-
loading of raw materials and semi-ma~ufactured products?

J. Are stock rooms of adequate size?

~. Are inspection booths and stations located where they will be most ef-
fective?

S. Can inspectors carry out their tasks without feeling cramped or con-
strained?

b. Wi 11 major desi: 11 changes seriously affect product ion operations?

7. Is the concept or production flexibility being given proper consid-

eration?

8. Are all personnel concerned co-operating in whatever e1forts are being

undertaken to improve the plant layout?

9. If a new layout is envisaged, have all the costs been properly esti-
mated?
I - 24 -

Ill. MATERIALS MANAGEMENT AND INVENTORY CONTROL

Mate1ials management problems

The typical small-scale furniture manufacturing firm in a developing

country is usually plagued by a multitude oi problems related to materials
management and inventory control. These affect not only the main areas of
production management, but other areas as we 11, and sometimes threaten the
very survival of the firm. The problem ot unavailability of raw materials can
be compounded by too much dependence on trad~tional raw mate•ials. In
addition, research in developing countries on possible substitutes for trc.-
dit ional raw materials for furniture manufacturing ha.> been relatively
slow, as has been consumer response to such substitutes. One area that the
small manufacturers in developing countries often overlook, however, is the
possibility of collective action to promote acceptance of non-traditional
materials.

Furthermore, furniture manufactured by small firms tends to be too mat-

erial-intensive - rather than labour-intensive. The average small firm in a
developing country can attribute 40 to 60 per cent of its total production
costs to raw materials, whereas th~ •.ol::~:.·-·::l~· low cost of the labour avail-
able to it is an advantage that it can use in its favour when competing in the
world markets.

Another icportant area of concern is raw materials inventory control. The

small-scale furniture manufacturer as a rule stores either too little or too
much raw material. Too little raw material in stock results in unnecessary
work ~toppage and expensive delays in delivery. On the other hand,
over-stocking of raw material leads to an unnecessary drain on working capital
and if done on a large scale may push prices upwards.

Scope of materials management

This particular area of production management involves managing the acqui-

sition, utilization, movement, handling and distribution of various inputs to
the manufacturing operation. These include; raw-materials, work in process,
semi-finished goods, offcuts and waste, finished products, auxiliary mater-
ials, tools, jigs, fixtures, and full-scale patterns.

Materials management also covers production planning and scheduling; pur-

chasing; materials handling; warehousing and storage; and inventory control.
It normally begins with the production planning stage of the operation, where
materials are generally specified in terms of quality, quantity, time needed
to finish etc., depending 0n the design of the product :ind the job orders in
hand. Here, materials management ensures that materials ~ill be available for
processing when they are needed, as specified in the job ~'rder or production
plans. (The mechanics of production ;>lanning and scheduling are discussed in
chapter Vlll below.)

Materials procurement, which should allow some "lead time" (the interval
between the time the materia! ~s ordered and the time it is received by the
firm), is the responsibility ot the purchasing 11nit. This unit locatps sour-
ces, negotiates prices and arranges for deliveries.

As soon as ;:he materials havt• heen recc1vt•d and 1nspt•ctcd at th., f1:-n:, tli.~
materials handling unit takes over and sc+~s to it that they an• transf,..rrr·d
from one work station to ;inoth•~r in tl11~ m<Jst 1•xped1tious way.
 - 25 -

Figure 12. Scope of materials management

~
Production
p lannin!'. and
'
I
Sp,:cifies raw materials in
terms of quality, quantity
schedulinr. anJ time needed to meet
t ,.
customer requirements

Buvs the raw materials

- Purchasing necdt·d bv the firm at the
riyht co~t and time anJ
from the rirht suppliers
lnvenlorv
-:-ontro1 - ~

II;, r hi I es I r ran s fer s I mo v t: ~

- :·b t ._. r
h:mJ 1 ing
i ~ l :; rla.: r-a'..: m:ilL'rials within
t Le firm's prcrr.i ses to
attain cfficicncv anJ
lower COSLS •
\.

- Wa rehou sin;•.
~
Provides space for the
raw materials in stock

, ..
RL'f'.t1lates the: investmc.·nts
tie:d-up in r.:iw materials
in stock
 - 26 -

Warehousing ~s that part of materials management responsibie for providing

space for incoming raw materials, iP-process goods and finished goods, as ~ell
as the drying area.

Inventory control monitors the financial investment tied up in stocks of

raw materials. Figure 12 is a schematic presentation of the scope of mater-
ials management.

In many small-scale furniture m••nufacturing firms, all these materials

management functions are performed single-handedly by ~he 01o-ner-manager, in
:iddit1on to his other day-to-Jay tasks. The concern of materials management,
in brief, is to fulfil tile i irm' s needs for materials in the most economic
manne1·, balancing all the factors involved, in order to obtain the most effec-
tive results. This includes the judicious purchase of the required materials;
h;indling and accounting for them through temporary and final storage; and
planning their movements through drying, stock preparation, assembling,
finishing, packaging, warehousing and distribution.

Symptoms of poor materials management

Small-scale furniture manufacturing firms often experience problems

resulting from poor or diffused control of the raw material input to the
production operation. Some of these problems, which demand materials
management-related solutions, are:

- Pilferage and other inventory losses;

Failure to account for materials lost through the kiln or air

drying of sawn timber;

- High materials cost relative to total production costs;

- Under-~tilization of machinery and equipment;

- Considerable losses in direct labour time;

- Frequent delays in delivery;

Too high an inventory of raw materials, semi-manufactures and

finished products;

- Frequent running out of fast-moving stock;

- High obsolescence rates of basic raw materials;

- Congestion in manufacturing areas.

The purchasing functi >n in materials management

The purchasing unit is responsible for buying the raw materials required.
Specifically, it attempts to provide the firm with the required raw materials
in the right quantity and quality, at the right time and price, and from the
right source. In a typical small-scale furniture manufacturing firm, pur-
chasi.-.& can function in a close-loop manner, as shown in figure 13. It in-
volves the following phases: (1) Requisition from using department; (2)
Selection of suppliers; (3) 1-;suc.nce of orders; (4) Receipt of materials from
suppliers; ()) Checking of suppliers' invoices; (6) Quality inspection of
materials; (7) Issuing the matt>rials to using department.
 - 27 -

Figure 13. Basic purchase cycle

To inventory
contra~

Issuance to using department

0 Checking of supplier~·
invoices

Requisition from
using department _____ Purchasing .._____.._____...,. Receipt
orders of
\\hen ncc>Jed
Qu3lity specifi-
0
unit
cations
Qt: ant i t y d cs i r cd
©
Quality
inspection

Delivery
delays

Suppliers' file,
including past
performance - -....~· Selection of
supplies

Issuance of
orders
Detailed material
specifii::ations

Suppliers' .__,,_~
system

Key: - - - - - -....9'• Seq 11 enc e ~ Phase indicators

 - 28 -

F i p1 r t..' 1 .1 .

-
!'>ame of firm

Quantity Unit Description Unit cost Total cost

~
~
- - ~~

Remarks

Authoriz.-c! sibn.:ltures Apprtw.:>d tor production Materials

Datt•:: rt•C t· i \tt·'i bv;

S.:; lcs
--- il.:i ( ,.
j
[Jt.-s irn,·r
- - - --- At>P :-(~Vt·,: f \' ~ (:,. I !
Sh<>? " l Vt· I ·:

Pruduc t. ll'n
--- I

iLi t,
--

IL Purchase order~
-
Rt•qu 1s1t1011 ~l).
1'.imc oi firm
Pu re Last· Order r.;o.

To: c of I SS \II';
[J at
of dt·livery:
[).it·~
---- Term:;;
---
PI t·;ist· dt• i IVt•I tht• t (J : I (l\O 1 ll;'. l t •·ms accnrd1ng [ (l t ht: spf'r if icat 10115 d..railt>d
be I m.r:

it em Un 1 t Total
Part 1 cu I a r :. pr IC 1· amount Otlll'r

----
t'o. Q11ant 1 t y Units

_._ ___
~
---~
-
Aiw.i;·:. in111c.1t1· 0111 l'.(I. r;11111l><·t Ill your lllV<•l<"<' (OVt·[ lilt".
:.h1pnw11t'.; and attach th1:; purch.-tst· or<11·1 !CJ yrn:t l>1ll
<""Vt·!tll/'. 1h1~ nrdt'r to L1cil1t;1t1• pa:;m••lll •

.11 "lh·· c1111d1l1<111:. 1>! p111ci1.1:.,., 11onn.-iliy :;11p11lat1·<! by tl11·

11rd1·1111;-. 1rm, ;111· ll'.;11.illy pl;i,·,..j oil !lw 1> ... ·r: ol tl1t· p111cha'.;1· nrd•·1
t <·rm. I 11 ·"''"' 111:.(;111ci·:., otlwt C011d1t111n,; \pile" •·~c.1L1tl<>ll ,·l;1·1~.1·:.
I'll.) m.i·,- '". l 111' I 11<lt'd.
 - 29 -

Name of firm

Unit:
Stock No. Description: Acct. No.
---

RE c E I VE D I s s uE D B A I. A ~ c E

P.O. Unit Req. Job Unit I Unit

Date No. Qty. cost Amount No. Date No. Qty. cost Amount Qty. co~~ Ar:iou•ll

- L----
--~

D. Finished products delivery receipt

Name of firm

Delivi:•ry recnpt
Delivered to:
D.R. No.
Date

Quantity Description Ut-.it pric•· amount

r---_----t----~--~~~~----~~-r~------------
-·------------ __.__________ -------··
Prepared by; De 11 Vt• rt>d by; H1·ct•1v1·d tii .. ai>"v'·
ltPm:; lU f.Pnf! otdt•l
Date and c<1nd1ti1111:

Ch<'Cl-J•d by; flat e

fl.ii"

----------------------·-------· --------- ·--- . ·----- - ··- - ·--· ·-· -·· -

 - 30 -

ment within tia· :1rn w·1li tadi.1..".'...:.l«" it:-: :lu;)ply :~"-.,.,L_~ :r! .. 1 "'tlh.:" r .. ·c~111~i.t1lit:
torrn 1..Jt J puti.:L .. i!=-t.· t"1.._'\t;u1~itltln !l'~~. The f,itr."!••! l!i- ust·•....i. :1..1.t :·t·<~t~i.Sllh'itllil,:
r.l~ltt.•:1.:i~s tL ..1t .itt.· tt! :-.tlh:~ (1.t•. 'w'tit·:t . i:~ . irt· :-,~t~ut~i:ly ·'tJt·rt: .. .!.:!1.:
c .. 1tt..·r1
m~1nta11h•1.: tn LtlVt•!':lL'ryj .. [ills :1.1rr:: ;_di'.'.:> ,ii.t•·1.._t t\\ tt.,· ~tvrt·~ .:ep ..t:t~··nt a.:1-.:
tLe f"t~4u1rt._·t:it•nts are raet t t l 1tr-. tlit.•te. Th,· p1!t1...·L~1~ .. · lt.'<iu~si.ti.1..)r: fll!""~! (s~lr:'lt'tli::•'S
referr'2'<l ::.o JS .l th.H1-sto..:k f\': 0bt.:11nint: matt•r1als
rt•qJiSltllHl rurl.!J l!:> used
that ;-,rt._> nut l\.~pt tn 1.Jnly tntrecti~··ntiyJ.
stoci-:. \t:iJtert.:iis ·:·:~ts tll.:Jt ..:ire ust·-i
tlH:!! g.·111::1-~lily .:ails tur mor~ dctailni spcc1t1..:;H1,n1s ot ti:.· m.-lt•·•·i;ii" tl•'•'<:eC.:.
On tl•t! Lia.sis ul thcs<' ~riecit lcat1.<1s, 1i .. • st0r-es J.-partm••nt i»catcs tr. ., ap-
propriate· ><uppl1ers .:ind lSSU•'S the llt'C•'S""ry purcha::.c .,r,h·rs.

Sum•· I) t furms used inti1e purci1~s1ng cy~ le Ir: 1,;u:·c ~ .....

The purd1as,• orde1 ~ B1 is the form used by tiit· t1rm to speedy tu a potcnt ial
supplier tnc r .:;w ::•at er la is This I " tile 1 nter i ace bet••t>t>n t b.. sup-
pl 1 ... rs tiie i1rm.
a n<i 1he st,1ck carJ 0r mat<"r1ais ledt;c•t card \LI is used to
mon t tu r .d i tt...11is.Jet10ns concerning ,;pec111c matt•r1 •.ils in stllck. Tne de 11 very
rec•' i pt \DI 1s useJ tu acl,.nowled;.;c r ... c.•ipt <Jt the f 11ushed pr0duct.

T11e putci:.:ss1n,; tunct1un ::n;st assure .i cunti:H11ius tiow 1Jt r.:i•.,; r.iaterials
tr,>i.• t11e r1...;i1t :>11ur..: ... ri.is lS best ;;d•i··vc.J by keeping th<' follow1n); tactur::.
1n nand wia·n purch.:is1n;.;: la) ..:ur:unterc1.:ii ava1iabd1ty ot th•· m;-,terial; lb)
qu.lnt1ty requirements uVt~I a c .. tt.:iin per1uw oi prodnc-t1on t1m .. ; \CJ t1nanci.:il
resource" ..,•••.11 labie; \di spac.- Jv.:11 l.:ibt._. \it m.:itt•r1als are bulkyJ; (el •he
time t<Jct.Jr 1nvolveu; anll l l l tile t::p•' oi the purchase, 1.e. i~ it is a one-
1t .. m .it muil1pl._.--1te•.1 p:.nchase lono> time put..:i.ase 01 a number ot items frum a
::.1ngl .. suppi1er1.

Inventory cuntrul systems

T!1t· ,,tL.·1 lmp1irt.:int aspect 1H mater1;:,ls manager.wnl is tt1e control or regu-

iat t.Hl •JI tht- t 1nanc1.:i I resources t ieJ up in stocks oi raw materials. This
contr.ii, 1t pr•>p•·riy .ip;:ilieJ, will helr, to rq;ui.1:e .nv.·stments 1n raw mater-
ials while assuring that ther•! is an optimum level ot materials in stock for
th•· •·Itect1ve 1mplemt'ntat1on ot production plans ut meeting requirements for
3ob 1Hders on nand.

In tli.· ,,mall-scale turn1tui-.' manufact11r1n1; t1rm, the t••rm 1nv .. ntory nor-
mali; r•·t•·rs to ti"is•· articl .. s and s11pplies dt•scribt'd bPlow.

R.1w mat•'r1.sls. These 1111<it·tg" pru..:t:,;s111g or rt·p1ucess1nA 1n order t" be-

comt' a "patt" •>! t:w prdduct. Ind firm manutactu1ing r.•pruductions of an-
t1qu•· \O<;o\lt•n c.ii•1n1·ts .ind cht•sts, fur .. xampl•', tiw 1aw mat.·r1als wuuld include
plyw<H>u aw.J ,,,1wnwuod, v;J1n1,,11, ,,,..alets and p.;ckag1ng materials.

Purcha::.o!d parts. 11ws1· are ptvciir .. d to b .. a part 0f the p 1 od uc t and do

ll'Jt req111rt· any form ot r...-prOC•!Ss1ng (e.g. hardwar•-J. The purchased parts
1nvent-,ry tt·nd;, to be high 111 firm,, 11s111g th•· serv1c .. s of s.,vera l sub-
cont:actu1:i. As 1n th•· ca-;e of raw mat•·r1als, purchased parts should a 1 SI)
hav., a iu11ct1011al classd1cat1on whil1· 1n inventory.

~eratinc; ,,11ppl1•·». Sanding .. 1.. m1·nts, oil and lubricants are examples of
op1·r.1t1ng supplies. lh1·y aro~ ust>d 1nd1rt'ctly 111 th•· procc':sing of f 1 ni shed
products, but ar<! not sp1·11 ln thf> fin1stwd product.

Tools. Jigs, t1xt1ir":., tool r>1ts, patt•·rn;, and I u 11-s I Zt•cl mod,. l s a rt•
exarr.plt'S of the tools nPt'cit•d to kt•t•p tlw madiin .. ry and P<Ju i pmPnt ol th<' com-
pany 1n good opt'rat1nK cond1t10".
 - 31 -

_Jr. i l~t: t>qu1pc:1~r~t J:1c.: =>u2p ! t.es.

day aumunsr rat Lon ol tt•e l Lrm.

Parts or: ,,.·ori.:-Ln-pr,,cess. Tiles.:- in.::lu..ie faori.::ate..i, sub-._;ssemble..i or

semi-manufactured parts in various stages oi processing.

If Lt LS ti:, regulate Lnvestment Ln inventory, the purd.asing arm ._,I the

firm should be guided by some form of inventory policy. This policy wili nor-
mally relate to t~e 1,;.:y in wi11ch the fii:-m responds to the basic
issues oi inventory management:

<.aJ In terms of control, wLich items of the firm's inventory should the
owner-manager concentrate on?

lb) i.ihat quantitv oi raw material "X" should be bought at the most
economic prices'!

(c) Assuming that the second question has been successfully dealt with,
when should the first purchase of "X" be made •.. The second purchase, and so on~

These questions assume particular importance if the firm is approaching or

has already a~tained the stage of rigid mass production. As discussed in
chapter I, the small firms engaged in purely intermittent or job-order pro-
duction need not maintain the high volume of inventory that is essential Ln
rigid mass production. In an intermittent operation, the normal practice is
to purchase the necessary raw 1-.iaterials when the job orders are on hand.
Thus, only a relatively simple inveni:ory control system is required. In light
of this, the first basic issue (a) ;an be examined, using what may be termed
"the ABC classification of mate!"iils".

First ~asic issue: classification

The ABC classification will help the owner-mmager determine which are the
few vital materials in his inventory that require his personal attention and
which are the non-vital opes the control of which can be delegated to a trust-
ed employee. Here, the use of the Pareto Principle LS imperative. Vilfredo
Pareto, an Italian economist, while stJLying welfare economics, postulated
that in most cases, 20 per cent (the vital few) of the inputs tended to create
80 per cent of the outputs.~/

In inventory management, this 2u-80 principle can be applied to the ABC

classification by answering the question: Which 20 per cent of all the raw
materials carried in inventory absorb 80 per cent of the total investment Ln
inventory? The mechanics of constructing an ABC classification are ~s follows:

l. A list is prepared of all raw materials in stock, with th1>ir cor-

responding use rates (volume required per unit time) and un~~ costs.

2. The total investment for each type o: raw material is calculated by

mu•tiplying use rates by unit costs.

J. The percentage of the total investment represented by each type of raw

material is computed.

4. The original list of materials is rearrang1>d, in desc1>nding orcler of

the materials' percentages of total investments.
 - 32 -

5. The percentages in the list are ummulatively added until a sum of at

least 8U per cent is reached. At this point, 311 the raw materials classified
as absorbing bO pt>r ct'nt of the total inve::;tment in inventory can be termed
"A" items, meaning items with nigh use rates (fast moving or high volume) and
high unit costs lhigh values).

t>. Cumulation is continued until 95 per cent of the raw material invest-
ment nas been attained. All raw materials within this category, excluding the
80 per cent "A" items, are referred to as "B" items. These tend to have
medium use rates and unit costs.

7. The raw materials accounting for the remaining 5 per cent are referred
to as "C" items. They tend to have low use r.ltes and i.:nit costs.

·.::he following simple example may facilitate application of the ABC clas-
sification.

The Tropical Furniture Company is a hypothetical small-scale firm in a

de-,..eloping country manufacturing "antique" chests and cabinets. Tht: raw
materials it has beec using since its inception include: wood, hardware,
decorative materials (bone, semi-precicus stones etc.), varnish, chemicals and
packing. The wife of the owner-manager act~d as materials manager for all
types of material except wood. She also doubled as the firm's treasurer, pay-
master, and chief clerk. One day, however, she complained that the management
of the firm's hardware materials had become too taxing for her. Since the
firm began to export products tJ the Middle East, some six months previously,
the volume of hardware-related work had increased considerably. The owner-
manager was in favour of hiring an additional stock clerk for the task, bJt
his wife worried about delegating control of the hardware materials since they
constituted approxima:ely 25 per cent o: all the materials in inventory.

A small-business consultant (industrial extension officer) called in to

advise on the situation suggested use of the ABC classification to work out a
step-by-step process for delegating control of the hardware materials. To-
gether with the wife of the owner-manager, the consultant, using the form
shown in figure 15, drew up a li.:;t of the 36 different hardware items in
inventory. To this listing they applied steps 1-3 of the ABC classification
process, as outlined above. They proceeded by rearranging the materials
(first column) using the ranking obtained (last colum~) in descending order of
magnitude. This led to the classification format shown in figure 16 which
permitted the consultant and the wife of the owner to apply steps 4-7 above.

The ABC classification showed that only 7 of the total inventory of 36

hardware items accounted for 80 per cent of the total investment in hardware
materials. These 7 items of hardware (Lazy Susan-;; c<tches; ball coasters;
5-in. strap hinges; 2xl2 woodscrews; brass padlocks; and imported bra!>s rods)
were then classified as "A" items because even though they had relatively low
usage rates their unit costs were generally high. The owner's wife decided
that she wouJ,J delegate these items last of all to a stock clerk. Of the
remaining items, lJ could be classified as "B", and the other lb, which ac-
counted for only 5 per cent of the totai hardware investment, wi>re cla~sified
as "C". The wife decided that these latter, which tended to have high usage
rates but very low ppr 11n1t costs, would be delegated first to the stock
clerk. She also d1.;covered, t<; her amazement, that some of the items she had
intuitiVE·ly worried about in thP prsst wpre r<':illy oniy "C" items and need not
havp both1~rt~<l 1i .. r at a 11.
 - 33 -

l .
.... •.

- Desc..:t1ptiun of Estimated usagr Un tt Total t'e r c rnt a[:c· Rani<. i 11g l L>aser.i er.
mater1als.'..1; ratt>s/month CUS[ cu st o! t v t :ii Petcent.ir .. l>l t nt..;:

~
L----

a: ~:;1t.:1.1is
;i!e 1wr 11slt·J in any p.:irt1cuiar ur.Jer, exu·pt, per!ia;·
by tii~·11 nature le.g. sere·..-,,, iang•~s, sanJ1ng mater1.ai:,J.

Fipirc lti. R.1"-· m;ltcrials listinr rcarran~('(i for AHC classific1t wr;

kearrant'.ed ra1o: Percentage of Cumulative Class1f1car1on

Rank matt·r 1a I total, Ill sum of of m.1 t t' I l ;, 1S USlrlf
1 i s l l llf. descending ordPr percrnt agt· t hi' A!K ru 1 t'

I
I
_. ____J__
I
--
---~
 - 34 -

Thus, the ABC classification helps to focus attention on invertory that

really matters. It should be periodically updated, however, to keep abreast
of the ever-changing times. In the example given above, the classificatic:•
system was ·employed for only one set of materials, i.e. hardware materials.
In the case of very small firms, all items, rather than segments, should
perhaps be considered.

Second basic issue; the economic order

Following the orderly classification of raw materials, the second question

arises: How much of raw material "X" should be purchased as economically as
possible?

To answer this question, it is necessary to analyse the costs of various

items, then the degree to which they can be controlled. In general, the costs
involved in the purchasing transac:tion cover the price of material; procure-
ment costs; and inventory carrying costs. (See figure 17).

The price of materials may be set aside for the moment as, in generc•. l,
small-scale furniture manufacturing firms have little influence over the
prices of their basic materials, owing to their relatively low consumption
rates. Of first concern are purchasing costs that are internal to the firm.
Figure 18 shows the behaviour of procurement and inventory carrying costs for
•1arying levels of material quality. As may be seen, procurement costs per
order tend to decrease as the volume of materials per order increases. The
inventory can·ying costs, on the other hand, tends to increase with the
quantity of materials pu~chased. If the inventory carrying costs and the pro-
curement costs at varying quantity levels are added, a "total incremental pur-
chase cost" curve can be developed. This total cost does not include the
price paid for raw materials. The lowest point in the curve represents the
economic ordering cost (EOC) and the economic ordering quantity (EOQ). It may
be observed that if less than the EOQ is ordered, the total incremental costs
are relatively high, while if more than the EOQ is ordered, the costs are
likewise high. This observation is useful to the small-scale furniture manu-
facturer as it provides him with a guide to determining economic levels of
mate1ials inventory. It can also be discerned that processing fre~uent orders
and carrying excessive inventory are expensive.

Determining an economic order quantity for specific raw materials main-

tained in inventory can be accomplished by means of (a) a tabular method; or
(b) a formula method. Application of these methods is best illustrated by a
return to the hypothetical Tropical Furniture Manufa~turing Company.

The wife of the owner-mana~er, in her role as materials manager, wanted to

know how man; pairs of 3-ia. hinges she should purchase in order to att.?.in
cos_ eco.•omy. Her record" told her that on average the firm required 10, 000
pair> per year. With the aid of the extension officer and the firm's part-
timt '~countant, she was able to establish that for every purchase (N) of this
item the firm spent IC 20.00 ("International Currency"), irrespective of the
volume ordered, and IC 0.20 per unit of material ordered in carrying costs.

Thus, the annual material requirement (A) is 10,000 units. The procure-
ment cost (P) is IC 20.00 per order. And the inventory carrying cost (C) is
IC 0.20 per unit. The problem is first tackled using the tabular method.

Tabular method. This features a i:rial-and-error apvroach to determining

economic order quantities. In the present example, the task is to determine
the number of times the firm should order the materials, at the lowest cost,
after inventory carrying and procurement costs have been considered. Here,
 - 35 -

Figure 17. Costs involved in materials purchasing

Units of
Type of cost Characteristic Controllability measurement Examples

Price External to Uncontrollable Monetary

the firm where small
firms are
concerned

Procurement Fixed costs Controllable Monetary Requisition costs

cost per order unit per Analysis and selec-
(internal) order of t ion of orders
material Preparation of pur-
chase orders
Receiving of
materials ordered
Updating inventory
records
Inspecting materials
Other paperwork

Inventory Variable costs Controllable Monetary Taxes paid for

carrying per unit unit per materials ordered
costs (internal) piece of Interest expense
material Obsolescence
Deterioration
Shrinkage
Insurance
Shipping costs
Handling
 - 36 -

Figure 18. Procurement, inventory carrying and total

incremental purchase costs

COST '
'' ' 1
• Total incremental
' / purchase cost!/
' ......
,,, ,,,
~

' '
Economic Inventory carrying
ordering ==,-- cost
cost
'

Procurement cost

Economic ordering
QUANTITY
quantity

a/ ThP sum of inventory carrying costs and

procurement costs for orders of various ordering
quantities.
 - 37 -

the tabulat· meli10d proves to be a laborious exercise, however, as there are

actually 10,000 options to choose from. One option is to order the 10,000
units required in one year one at a time, hence the number of ordering times
(N) per year would be 10,000. The 10,000 units required for the entire year
1.:ould be ordered only once, in which case N would equal 1. Each of these
options have consequences in terms of purchasing costs.

This example of the tabular method may be further simplified by limiting

the N options to only seven, i.e. order the annual requirement: (1) 20 times;
(2) 15 times; (3) lU times; (4) 5 times; (5) 3 times; (6) twice; and (7) once.
Figure 19 shows the economic order quantities achieved by applying the tabular
method to these options. The following notes are made concerning the figure:

Column A - This represents the firm's annual requirement of hinges

i.e. 10,000 pairs for any option considered.

Column N - This represents the ordering options considered. In prac-

tice, as many trials as possible should be carried out.
These may range from N=l to N=A. In the example given, the
process has been simplified by assuming only seven options.

Column Q=A/N - This column indicates the quantity of hinges to be pur-

chased per order.

Column PxN - This is the total procu~ement cost column. The procurement
cost P=IC 20.00 does not vary with the number of orders. It
will be observed, however, that the total procurement cost
(P x N) tends to decrease as the quantity (Q=A/N) increases.

Column CxQ/2 - This is the column that defines the total cost of carrying
the inventory. The values of CxQ/2 increase as the quanti-
ties per order increase. (This is further illustrated in
figure 20.)
Column TIC - This column shows the total incremenLal cost, which is
equal to the sum of the total procurement cost (PxN) and
the total cost of carrying the inventory (CxQ/2). It
serves as a gauge in determining the minimum unit purchase
cost, after all other costs have been considered. The low-
est figure determines the most eccnom~c order quantity
(EOQ) and frequency (N).

Figure 19. Dctennining economic order quantities using the tabular method

A
A N Q= /N }' x r; Q/2 c x Q/2 T I c Remarks

10,000 20 .500.00 400.00 250.00 50.00 4 50. 00

10,000 1) 300.006b6.60
333.30 66.66 366.66
,------ --- ---------- -------- -------- ~-------- -------- [)ct crm1111111;
I 10,000 10 1,000.00 200.00 )00.00 100.00 300.00 Cl OS(' r
I
:L 10,000 ) 2,0J0.00 100.00 1,000.00 200.00 300.0,) <1pproximat1·
______
- - - ---------- -- -------- -------- -- - - - -
10,000 3 3,333.30 60.00
··--------
1,666.60 JJ).)] 393. 33 I m1111m11m v.11111·:.

l () • 000
10,000
2
1
),000.00
10,000.00
40.00
:.rn. (JO
2,'.>0U.00
'.JI 000 • {){)
)00.00
I , 000. 00
' •0.0(1
1,020.0~
I ,_
Nedi·; Cr>i1111111:. I' x r., ( x (,1,/ .111<: 'Il1 ;.r • .iii'''-!':"''''"': 11. !11t1·rr:.ot1n11.il
l.ur r1·n<'y ( ILJ.
 - 38 -

Figure 20. Behaviour of inventory carrying cost and

inventory carrying period

Cost

P/2 I'
Per-1od

Thus, in this par-ticular- example the economic or-der- quantity lies between
1,000 and 2,000 units, the minimum being 1,430 units as the incr-emental cost
of pur-chasing wi 11 be found to be at its minimum (IC 283.00) if the item is
or-der-ed 7 times per- year-.

For-mula method. This is another- simple a~d dir-ect way of deter-mining the
economic or-der- quan~ity (EOQ). The fir-st step is to establi$h the r-elation-
ship between the pr-ocur-ement costs and the inventor-y car-r-ying costs at the
economic or-der- level. This r-elationship is depicted in figur-e 18, which shows
that at the EOQ level the values of the two costs ar-e equal. Hence, the
r-elationship:

Pr-ocur-ement cost = Inventor-y car-r-ying cost Eq. l

Using the definition of the pr-ocur-ement and inventor-y car-r-ying

costs given in the tabular- method, equation l can be r-ewr-itten as;

P x N = C x Q/2 Eq. 2

But the value of Q is A/N; substituting this value for- Q in equation 2,

will yield the following:

P x N =C x A/2N Eq. 3

The order-ing frequency (N) is:

N =vCA/2P Eq. 4
 - 39 -

The economic order quantity can now be found by using the relationship
Q = A/N.

These equations may now be applied to the prcblem on hand, wherein it is

known that:

A 10,000 units

P = IC 20.00 per order

C IC 0.20 per unit or~ered

By substituting these values in equation 4, the value of N will be found

to be
N = ,'io,ooo x 0.201<2 x 20) = ,'50 = 1

Thus, the economic order quantity is found to be; 10,000 7 7 1,429

units per order.

Before leaving the hypothetical Tropical Furniture Company, one further

extension of the above arguments is worth considering. In this instance a
hardware supplier has offered to sell the required hinges at IC 8.90 if the
finn agrees to buy 1,600 units per purchase - as opposed to the IC 10.00 in
the case of 1,429 units pe~ purchase (the firm's EOQ level). Should the finn
take this discounted price? The estimates of the relevant costs are outlined
below:

Option 1. Buy at the EOQ level = 1,429 units per purchase.

Amount (IC)

Total purchase cost at IC 10.00/unit 14,290.00

Procurement cost per order 20.00

Inventory carrying cost (IC 0.20/unit) 285.80

Totai 14,595.80

Option 2. Buy at the discounted price. Discounted volume = 1,600 units per
purchase

Amount (IC)

Total purchase cost at IC 8.90/unit 14,240.00

Procurement cost per order 20.00

Inventory carrying cost (IC 0.20/unit) 320.00

Total 14,580.00

It is clear from the above that in the short run Tropical Furniture would
benefit from the transaction. This case has been highly simplified, all cost
items involved in procurement and inventory carrying having been assumed as
beim~ almost constant. In most cases, however, some cost i terns change with
respect to the quantities ordered.
 - 40 -

lt '"'ll i be v~scn.·ed tr:Jm tilt> t1.negolnb that the t0rmula t:1t>th0d lS simpler
and more di1·ect th<1n the tabular mt>tho<l. It should be borne in min<I, i10weve1,
that the tlo'.O methods a1e at i>est guidelines and shuul<l never be use..i as a sub-
stitute iur experlence.

The quesr1uns uf inventory classification and economic ordering having

been dealt lo'.ith, the final basic issue in inventory management concerns calcu-
lating the points at which to re-1.H<ler. There are four principal factors in-
volved in making this calculation;

1. Maximum inventory level. This is practically the equivalent to the

economic order quantity, except that the minimurr. stock level is added
to the economi: order quantity.

2. Minimum inventory level. This is the reserve stock level. In gen-

eral, this should be kept to the minimum.

3. Usage rate line. This is the average amount of materials consumed bv

the firm over a given periud of time. For the purpose of the exampl~
given below, the usage rate is taken as constant, although in reality
this is seldom the case.

4. Procurement lead time. Ti.is is the time involved in purchasing mater-

ials and parts - from the s1gn1ng of the requisition slip to delivery
into the firm's stockroom.

Figure 21 shows how the interrelationship of these factors int luences

the determination of re-order points. The first step in fixing these points
is to estimate th~ usage rate of the materials. The usage rate line can be
determined as follows:

Usage rate Maximum inventory level - Minimum inventor level

Num er o days needed to consume stock

Then, tLe re-order point is calculated, using the relationship shown below;

Re-order point (Usage rate ~ Procurement lead time)

+Minimum inventory level

In practice, there are many variations to the concepts of economic orders

and re-order points, two of which are:

The two-bin system. The manufacturer procures raw materials 1n ade-

quate quantities and stocks them in two-bin containers. Whl'n one bin
has been emptied, it is time to re-orJer. The decision how much to buy
and what volume bin to use may be based on the manufacturer's experi-
ence in the trade or on some form of estimate.

The dollar-limit system. Another version of the two-bin system, this

features the dollar value uf the available raw materials as the pur-
chasing indicator. A variation on this would be to use a quantitative
insteacl of a monetary l im1t, as is co11UTion in the inventory control of
wood materials ln medium-sized firms.
 - 41 -

Figure 21. Four factor~ in determining r-c-01·dcr points

Quant lty

Maximum
inventory Maximum inventory
level level (EOQ)

Re-order )Jt
point f
-----1-
1

inventory I~ to LOnSUC:>:
l ~·ve i orcier

Procurement le~d tim~ Time

Dcsign1ng an effective inventory control system

Proper inventory control callE for the following steps to bt' taken:

(a) The performance of the existing stock monitorin7 system should be

reviewed. This system should show at a glance what raw materials are in stock
and the extent tu which they wi 11 cover future production. In all situations
invclving raw materials purchasing, it is vital to know ~hat is on hand. The
stock monito; 1ng systt•m can best bt> rl'viewed by focusing on keeping the in-
formation contained in tht> scock cards accurate and up-co-date.

( b) ,\ iunc t 1 ona l materi a 1s cl ass if icat ion syst .. m should bf' es tab 1 i shed.
This will facilitat!' sorting all th.~ 1·,1w materials in stock:

I\y typP. (Wood, ha rdwa rt· ,. tr.)

 - 42 -

le) "A" items should generally be ordered for specific production runs,
basing the size of the order on the quantity needed (i) for the production run
and l ii) to maintain the minimum inventory level required. Here the EOQ
levels will serve as a guide. It should be borne in mind that the primary
objective is to cut down on inventories of these item:; (e.g. through motiva-
ting supplie~s to stock tht materials fo~ the firm).

(d) "B'. items should be subject to a "dollar" or similar type re-order

system. The key element here is ::he accuracy and currency of the information
contained in the stock cards. The purchase of certain "B" items from a c;ingle
supplier is an idea also worth considering.

(e) Re-order limits for "C" items should be established on the tasis of
double the normal safety stock, since these items add little to the total cost
of the inventory. Paperwork costs related to "C" items should be kept as low
as possible.
 - 43 -

IV. QUALITY MANAGEMENT AND CONTROL

To proviJe a glimpse of the quality management and control carried out in

small-scale furniture manufacturing l.irms in developing count•:ies, the o,.-ner-
managers of two typical firms lA and BJ were interviewed regarding their prac-
tices.

Company A. This company, which was started up in l'J7), prcduces mainly

hand-carved mahogany doors for local and export markets. It also mJnufactures
plain-panel doors, jambs, lattice work, and wooden pieces (e.g. tiles) for the
c..:mstruction trade. Al 1 incoming wood materials are inspected visually for
quality, and using an electric moisture meter. Defective materials are re-
turned to the suppliers. Quality control is also employed throughout the
manufacturing process. At each work station the machine operator involved
inspects all materials reaching him. Finished products are inspected at the
assembly area, after final sanding, by either the foreman or the production
manager. Major defects seldom occur. Minor defects reported by customers can
11sual ly be re:'ledied without affecting the firm's image with respect to the
quality of its products. Customers are guaranteed free repair over a certain
period of time. Moreover, products that don't conform to the customer's
specifications may be returned.

Company B. This company manufactures tables, desks, upholstered chairs,

c~hinets and shelves on a jo~ order basis for institutional buyers. Raw mat-
erials and finished products are inspected visually. Quality control in the
manufacturing process is informally delegated to the workers involved. One of
the duties of the production manager is to check the quality of incoming mat-
erials. Wood is meticulously inspected for the number, size and distribution
of knots; end splits; rot and other faults; colour or shade; grain structure;
and physical dimensions. r;o precise definitions of "defective" raw mate?:ials
are usE"<l, as variations are quite natural and cannot be avoided. In any
event, if "defects" are found in incoming materials, the materials can be re-
turned tu i..i1e supplier or used to bargain for lower prices. Inspection of
finished products involves checking for variations in shade (i.e. in the ap-
plication of colour coati.ng) and smoothness of surface. The company believes
that experienced carpenters can be relied upon to turn out a quality product,
and underscores this belief by insisting that it hasn't disappointed any of
its customers so far.

The following flaws are immediately apparent in the q•.1ality management and
control practices ~escribed above.

1. Responsibility for quality control in the assembly area in both companies

is vested in the machine operators or workers. Unless the management of the
companies take it upon themselves to learn from their workers what constitutes
"quality" in their own products, they will always b,· at a loss when workers
decide to look for better jobs.

2. Both firms' definition of quality is vague. They seem to operate accord-

ing to a rule that states: "I know a high quality piece of furniture when I
see one". Although this rule may be sufficient when a firm is just starting,
as time goes by it becomes necessary to evolve a definition of quality. This
will not only make the firm's quality control practice precise, but also
provides a definition that can be used in marketing the prn<lurts more aggres-
sively

J. Company A u5es a rn0i~ture tester on its raw materials but docs not docu-
ment the quality performance of the s11prliers of those materials.
 - 44 -

4. Both companies accept the need to do repair work on their finished prod-
ucts; obviously, they have not recognized that this involves unnecessary costs.

5. Both firms have established certain quality control points, e.g. prcduc-
tion managers for incoming material~. machine operators in the assembly area,
general manager for the finished products. This diffusion of 1uality control
may prove ineffective unless the fit·m has its o•-n definition of quality,
evolved in the light of the market aimed at.

Specifications of quality

Where small-scale furniture manufacturing plants are concerned, "quality"

is viewed in many ways. One is from the point of view of the manu-
facturer: "I'll produce whatever I think is best for my client". Another is
from the point of view of the customer: "Manufacturers should produce the
product in this manner, because we like it this way". Since, however, the
definition of quality emanates from the customer, and is then refined or re-
interpreted by the manufacturer, there is a strong argument for viewing qual-
ity from the customer's angle.

Figure 22 shows a general pattern of how quality definitions emerge.

Figure 22. How quality de''1itions emerge

Manufacturer's
,,,.,.
environment
----,
I '\
I \
Customer's I
, .....---- environment --- .....
I
I
' \
I
I I

Sales personnel

Reinterpreted to

NePds Design pPrsonnPl

and
wants
Transfenco to

J'q>(' • I
Manufacturing personnel
.(.sf. :
.((;> I
(/ I
o,. : Transformed into product
O'.i and returned to
.r.s-

~~~ ~~n':_1_]
"'t.
I .( .S
I FJ 'I
I <·v I
\ I I I
' / I I
" ' - - · - - - - - - - - - - - - --- - - - - _,,, I I
I I
I I
I
I
\ ..... ________________________ _- - _,. /
 - 45 -

F1·om t!:'.e 1.lLagram it 10ill bt' tll'tell that tl:e dt>finiti0:1 1.1t quality centres
around the physical propet·ties ~'i the proJucts that cunt'onr. tu or match the
requirements of ti:e cust0mers. This definiti,1n must never be c,,nfused, how-
ever, with that of "perfect products". It is impurtant for the small-scaie
manufactur~r to evulve a definit:.on '-'i quality fur his products since ~his
will aiso serve a~ a measure 0f hulol ::lusely he knows his target buyers. In
evolving this deiinttton, considerat10n must ~e givec to the physical
characterist1c;:; of furniture products wi11ch ;ne directly measurable \length,
width, thickness, rigidity, elasti::ity, strength etc.) as well as to those
attributes which are less easily measured lbeauty, smoothness, appeal etc.).

How quality standards emetge

The::e are twc basic ways through which definitions (hence standards) of
product quality emerge. One is when the manufacturer is asked to conform to a
certain set of standards, e.g. lolhen operations are geared to export r:iarkets,
or when the company is a part subcontractor for a larger firm. The other way
ts when the firin, in time, evolves its 01o.-Y1 standards, having ma<le it a point
to m1n1mize vari1tions in the finished pro~ucts.

Contact with customers gives the owner-manager an opportunity to define,

in terms oi quality, their needs and wishes. T111s definition will become mor2
and more precise as the number of customers, and hence the degree of contact,
increases. Naturally, the system of checking of raw materials, sub-assemblies
and finished products will also benefit from this approach. In measuring
dimensions for example, at the early stagrc,;, tape rulers with a millimetre
scale may be used; then, after \say) two 1ears, vernier calipers (reading by
steps of li lU mm or l; 20 mm) may gradually be introduced, and so on. One way
to ensure the evolution of the quality definition is to use a checklist ~ov­
ering those items that the operators should check at various stages of the
manufacturing operation. Initially - when confined to checking incoming wood
materials - the checklist may contain as little a:; 10 items. As experience
grows, however this number will gradually increase to (say) 25 over a two-
year period. This process of correcting and improving, together with invol;e-
ment with the target buyers, will ensure that quality Handards develop as
experience is gained.

Quality of design and conformance

Other aspects of quality are quality of design and quality of conformance.

The former is concerned with deciding which product design will most satisfy
the customer, while the latter implies a continuing process of measuring,
testing and adjusting to ensure maintenance of the i;uality level stipulated at
the design stage. Both aspects ar·e important to firms employing the rigid
type of mass production.

Quality control systems

Quality control means identifying causes or variations from set standards

or specifications and corrt•cting any deft·cts resulting therefrom. Every qual-
ity control initiative should be both prt•v1•ntivl' and rr>mt•dial in objective.
Prevention is concenwd with determining at various production stagt'S the
reason why <lef1:cts occur, in order to ke1·p them to a minimum at the t1n.1l
stage of production. Thi• r1•medial aspect involv1•s sorting out the <lPff'ctiVPS
at th1• final stag1•, to .. nsure that only acct•ptabl1· p1·oducts reach th1· c·.. .;tom-
er. A common way to e11s1ir1• 'lllillity is lo conduct insp1•ctions at varicJ11!: points
1n tht> manufacturing procf•ss. Th1•s,-. i11sp1·ctions, which shoul<l fPaturt• tlw
app I 1cat ion of tl'St s and thf' use of mf';1sur 1 r;g d1•vic1•s to compare products and
performancP with sp•cifit•d standards, will f;1c1litatp tilt> idi>ntific;1tion ot
d1·f<'ctiv1• products.
 - !,(> -

Tne pro..:eJurt's outlined ~n tiguce .'.J may be found useful in controlling

quality. The t:irst step involves Je..:iding on the standa!'"dS to be adopted.
Tht'St' sh,,ulJ bt' de..:1dt'd between the manufacturer and ti1e customer, with both
sides concentrating on the "traJe-oft:s" involved: in other wurds, they should
cumpror:ase ur meet mul-way. l i the Ulanutacturer givt·s in too much t.:> the
wishes or the custc1mer, the final proJuct may turn out tu bt! more expensive
anJ take a lunge1· time tu p1·uduce than was an::icipated. If, on the other
hand, ti1e customer a..:..:epts too rna;1y of the rhanges suggested by th.:: entre-
preneur, the product may turn out to be inappropL;ate to his needs.

D<:termining the level of acceptability or tolerance is the second step.

Here, the manut<:tcturer lS concerned with permissible variations in the basic
criteria agreed upun at the first stt!p. Again, in the furniture manufacturing
industry, this is expressed in terms ot the basic criterion plus or minus an
acceptable tclerance limit; for example, the length of part "X" should be
2.00U O.UU~ m. Tulerance limits should be broad enough to accommodate
"chanct> va:iations" or variations caused by factors inherent in the production
processes.

Th~ next step is to determine the manufacturing sequence. llhis procedure

ts also followed at the production planning phase where the necessary proces-
ses, machinery, equipment and workers are decided upon.) From this sequence,
the manufacturer should be able tc establish, with the aid of the customer,
those critical points where quality standards should be strictly adhered to.
These wi 11 constitute checkpoints where inspect ions wi 11 be made to ensure
conformity with standards.

The next step involves listing the procedures to be followed by workers or

inspectors in checking adherence to the quality level established at the first
step. The tools or "hardware" used for inspection checks 111 a small-scale
furniture manufacturing rirm will include rules, cai.pers, straight-edge
rule1·s, fixed and angle gauges, thickness gauges, snap gauges, "go/no-go"
gauges etc. t';ormal inspect ion routines include: ''first pr0duct inspection";
"random sampling"; "inspection by batch"; and "inspection of all products".

Finally, the inspecti-:rn system must be activated. At this stage, the

manut;!ctult!r should ask questions like: "Who is respor.sible for ensuring the
quality ot raw materials used?" "Who is responsible for checking at the
tirst, second, and third critical points in the process?" and "Who will check
the final products?" Once these and similar questions have been satisfactori-
ly answered, the system can be implemented, the proper corrections and ad-
justments being made when and where nec~ssary.
 ~ ··~. t /, : - ~ ... 'i : l"
: r::: :'

I Decide on the stanJards : o Custo:;.t·:--~.

: - -- - - - -,LI_____b_"__u_s_-_P_c1__1_1_1_.,__..,.....r-1_"_'_e_1_1_r_r_o_'1_·'_'_c_r______. l'!anutacturt'=
I

r·-
I

IL_______ Pt•tfrm1n1· ::cnl· of accf'ptab1l1ty ••

_____ ----~ Cl>lt'ranct· in t>:icii cr1t ic;d p.1rt
1
I
I
I

~-------~ l1ett·11:;t11t· tr1t:

•
i

r.:.111ul<:ctu1111:
r - - ----- -~
1
I
L__~~~~~~I~~~~~~~
I

t
E!;tabi1sr: points 10bt'rt> cht'ck1n;-
r ..:tt·r1al:.., cor.:pnnt·nt p:irt:-: ~1r1 .. :
r-------~ r':'(1~~u,-ts .:::t• TH"l"(!t'l~ lhitl~!,:.•t1Put
th.· proc1·:::
IL __
-------- -~ --- ----

y_
~ t •...

- -----~ ; .
:,,
\ .. : ti. .:; '
IL___ _

-r I
y_
I c· ~ 1 l , ·i;,, · n:
\...:.t 111 ....,.,. : ! ~ I ( ~ ' :
i ,.,

f', ; : .. •.,:
]
r·· .,.
• l·· ,
1
, : t , !, ~ I , , , ·:.
 - 48 -

V. METHODS ENGINEERING IN SMALL-SCALE FURNITURE

MANUFACTURING
Low productivity

Low productivity is by far the most common production management problem

confronting small-scale furniturt> manufacturing firms in developing countries.
Following a visit to a typical household furniture manufacturer, an industrial
extension officer filed the observations set out below.

(a) 7he machining section needs to be laid uut anew, since the moulding
machine is :nl metres from the finishing area. Modifying the layout would
reduce the distance travelled by workers <lnd L·aw materials. In gineral, the
distances travelled by materials lmanually hauled by skilled workers or
machine operators) are unnecessarily long, owing to the lack of logic in the
layout of machinery.

(b) In the fabrication of door panels (one :>f the firm's products), two
cutting operations are rerformed, owing to lack of thorough inspect ion at the
first cutting. This contributes much to delays in production schedules,
especially at times when the firm has many job orders pending.

(c) The firm minimizes raw materials wastage by using off-cuts rn the
manufacture of wooden tiles, toys and the like. Wastage generated by the
radial arm saw is about one inch; at the table saw, it is about one-half inch.

(d) On average, only 27 per -::ent of the available machine time lS used
productively; b per cent lS used for indirect productive activities; 15 per
cent for what could be classified as non-productive activities; and the re-
maining 54 per cent of the time the machines are idle.

(e) The 3U workers and machine operators spend 24 per cent of their time
rn direct productive activities; 25 per cent in indirect productive activi-
ties; 5 per cent in non-productive activities; and 46 per cent idle.

~f) The total working area is approximately b70 m2, of which an area of
90 m , or 13 per cent, is not utilized.

Low productivity, although the most common problem facing small-scale fur-
niture manufacturing firms, is also the least understood. When problems are
traced tc.; low productivity, it is immediately presumed that increased profits
will come from co-ordinated and sustained efforts to increase the operating
efficiency of the entire firm. Worse still, it may be considered that the
solution to all the firm's troubles lies simply in increased activity
(increased sales volume, expanded product lines etc.). This approach m::iy suc-
ceed, or it may not. Some firms have subst;rntially increased production only
to discover later that such increase ha., not automatically brought about lower
costs. Th1s is normal: lower costs never come about hy themselves. ff a
small firm is tunf>d to operatf> econo.1.ically at a certain level of production,
a S•Jdden increase ln output may bring into play so many unanticipated and
expensiv1' factors that the expendit1ire :nvolveci will far outweigh the savings
resulting from the incr1~aseLI vol11mP.

Nowadays, small-scalp furnit11re man1Jfacturing firms arf' concern1~d not only

about incr·~asing manufacturing co:-,i..s, they are also discovPring that customPrs
are demanding higher standards of q11al ity th.in l'Vt·r b1~forf'. ll11y;•:-s arf' bPcom-
ing more critical. They 1•xami11r· .. v .. ry prod11ct lo makf' s1irP tl11~y art> <•etting
tlw gr1•atPst pw;sihl·~ valul' fur tlH·1r mnnf'j. As a rul .. , thf'rt•!or•.', y1•stf'r-
d ;i y ' :; f] ll ;i l i t y st a!' d ;i rd s w i 1 1 not d CJ I. od ;i y •
 - 49 -

It will be recalled that in chapter I the furniture production system was

likened to a "black box", which essentially converts a set of inputs into a
set of outputs. !f the inputs and outputs of a firm can be qualified and
reduced to tera:c; of a single unit, then it will be possible to determine the
efficiency of thP conversion process. As this efficiency ratiP• is synonymous
with productivity, the overall productivity of the firm can be determined,
using the following relationship:

Productivity (expressed in percentages) Output x 100

Input

Improvements in pr0ductivity, then, may be described as the use of fewer

and fewer inputs to generate morz and more outputs for more and more customers.

The process of systematically improving the productivity level of a firm

is not new. It is embodied in a discipline variously refened to a~ "work
study", "industrial engineering" or "time and motion study". This discipline
is used in investigating human work in all its contexts and leads systema-
tically to the identification of factors affecting efficiency and economy in a
given si:uation with a view to bringing about improvements in that situation.

Work study is a valuable productivity improvement tool primarily because

of the systematic approach used in investigating problems and developing solu-
tions. Its employment requires that all relevant facts be available in order
to ensure that suggested alterations in pro-:edure will be based on accurate
information. Where human activities a!"e involved, there has always been a
tendency to accept opinion in place of fact, with the result that decisions
are often based upJn what is believed to be true, rather than what is known to
be true. The function of work study is to identify facts that will explain
low productivity, and on this basis to point to various means of affecting
improvement. Work study, in short, is an effort to replace guesswork by facts.

Work study procedures

Although work study covers a wide field - dealing as it does with such
basic questions about work processes as "How should a particular job be
done?", "How long should it take'?" and "How much is it worth?" - it generally
follows a five-step pattern, viz:

~a) Selecting an important job to study. This first step requires

weighing the complexity of performing the work study and the potential im-
provement in productivity. Perhaps in the short run, the concern will be to
do "old" jobs better, but in the long run, the focus should be on doing "new"
jobs better, where improvements may be more marked. To provide a general
guide, all aspects of the manufacturing operation that waste time, energy,
materials, manpower, space, or machine time should be thoroughly scrutinized.
The workers should be involved in choosing the area to study. This will mini-
mize potential resistance to eventual change. In this respect:

( i) All workers should understand the purposes and objectives of the

study and be aware of the benefits th~t may be de~ived from it,
such as lighter workloads and enhanced safety;

(ii) The workers should be allr;;.1ed to do most of the talking when the
choice is bei.1g made, and the importance of their r.:ontr1bution
to the potential success of the exercise should be emphasized;
 - so -

lii1) The workers should be encouraged to suggest changes them-

selv~s. Experience shows that changes originating from workers'
suggestions tend to be sustainable over the long run;

(iv) The ideas put forward by the workers should not be criticized 2t
this stage. It must be borne in mind that the goal is to gener-
ate facts, not to criticize or to correct flaws.

( b) Breaking down the job and recording the details. This is a highly
important step as the appropriateness and accuracy achieved in recording what
is taking place on the job determine the success of the whole procedure. The
results of this step provide the basis for subsequent steps, i.e. the critical
exan:ination of existing methods and the development of new ones. Recording
techniques - which may include the use of charts, diagrams, models and some-
tir.tes even photographic aids - vary according to the nature of the activity
being studied and the objectives of the study. As the more detalled tech-
niques call for expenditure of considerable time and effort on the part of the
owner-manager, and perhaps the indu!:trial extension officer, they should be
employed only when the return expected indicates their use to be justified.

(c) Questioning every detail with an open mind. o.. ce a thorough and
detailed recording of a particular manufacturing activity is available, a cri·-
tical examination of the present way of working may be initiated. This exami-
nation is the crux of the entire work study procedure and should take the form
of a systematic analysis of the nature, purpose, place, sequence, personnel,
and the means involved in every step of the operation. At this stage, logical
and satisfactory answ~rs to the following questions should be sought:

( i) What is done, and why is it done?

(ii) When is it done, and why at this time?

( iii) Where is it done, and why at this particular place?

(iv) Who does it, and why that particular person?

(v) How is it dur.e, and why in that manner?

(d) Generating the improvements. The detailed questioning continues at

this step. Improving on the existing situ;ition will require the application
of a good deal of ingenuity, imagination and logical thinking in dealing with
the following questions:

(i) What else can be done, and what should be done?

(ii) At what other time can it be done, and when should it be done?

(iii) Where else can it be done, and where should it be done?

(iv) Who else can do it, and who should do it?

(v) How else can it be done, and how should it be done?

The answers to these questions will lead to the selection of the best method
of dealing with the situation.

(e) Introducing improvement. This is the final step, after an improved

method of doing a particular task has been developed. At this stage, the most
important factor in the work study exercise ts to t::ilist the whole-hearted
 - 51 -

participation of all the employees concerned. Only their complete understand-

ing of, and full co-operation in implementing, the proposed changes will en-
sure the long-term success of the improved methods. A negative attitude on
the part of the wor~ers is a deterrent that must be overcome if the positive
results of the work study initiative are to be harvested.

The work study should preferably be conducted by a qualified industrial

engineer. If the firm cannot afford to hire an engineer, the assistance of an
industrial extension officer might be sought. The important thing is for the
l ·ner-manager to have an "eye" for the low productivity situation in his firm
and the proper attitude towards dealing with it. Work study tra~ning program-
mes are available in most developing countries. The owner-manager should take
advantage of them. His fore:nan or chief supervisor could also benefit from
them.

If an industrial extension 0It1cer is cal!.ed in, the owner-manager as well

as the officer concerned should remember that there are certain difficulties
to be overcome at the initial stages of the work study. Valuable time and
goodwill can evaporate unless the proper spirit and attitude are generated at
the introductory stage. The level and range of difficulties will vary ac-
cording to the size of the firm. The larger the firm, the more complicated
its structure is likely to be, and the more st3ff grades and departAents will
be affect1;;d by the introduction of something new. The various categories of
managerial personnel have vested interests of their own and are often dis-
inclined for change. The establishment of a new section - say an industrial
engineering section - may be viewed with suspicion or as an encroachment on
the prerogatives of their own departments. The industrial extension officer
selected must therefore have tact and understanding.

The workers will also probably have doubts concerning work study, particu-
larly if the existing worker-management relationship is poor or if the firm
has a sorry history in terms of employment and prosperity. The worker will
want to know not 0nly how work study operates but why it is necessarv at all.
It must also be remembered that although a trade union leadership (or the
leadership of any informal organization exercising a like function1 may have
given full support to the objective of higher productivity an::! the means of
achieving it, this does not guarantee complete acceptance by individual
members of the union.

When the introduction of work study is being contemplated, every effort

should be made to prevent incorrect rumours being cirrulated. Initial discus-
sions should be confidential, al"d factual information given out as early as
possible to all concerned.

The owner-manager must endeavour to anticipate the difficulties that may

arise and seek to determine how work study can best be fitted into the exist-
ing organizational structure. The approach to be taken to the workers should
also be considered 1n advance. There is no rule-of-thumb procedure for
dealing with this, as it will vary considerably with different trades and
firms. Two points are of paramount importance: (a) middle management and
workers should be approached simultaneously, and (b) pat:ence will be re-
quired in dealing with both groups. It may be necessary to hold a series of
meetings with all parties concerned, in advance of the work study, in order
that prejudices and doubts may be reduced to a minimum bef0re a start is made.
A systematic way of introducing the work study concept into a small-scale
furniture manufacturing firm, 11s1rig an industrial extension officer, is
depicted in figure 24.
 - 52 -

Figure 24. I n t rod u c in g t he ''or k s t u d }" c on c c pt t hr o ugh

an industrial extension officer

Industrial Extension
Client
Officer

Scout

Select an Confer with Che

r-------t~
impo1Lanl job small industrialist

Indicate advantages
to be ga1nec

Hold pre l 1minary

d1scuss1ons w1tt,
supervisors/all
concernec
Form,1late
strategy for conducting
work study

Record all
the details

Develop Consult witn

analysis everyone affected

Develop
alternative procedures/
methods

Make cost-benefit
calculations

Install proposed
proceclure method

Tell, show, test, monitor

performance of
n"w methoc
 - 53 -

Methods engineering

Methods engineering is one of the two major branches of work study. The
other is work measurement, which is the subject of the next chapter. Methods
engineering applied to a furnit•!re manufacturing firm improves working methods
by economizing on movement of materials and workers. It enhances the utiliza-
tion of machines, equipment, land and buildings, and - if coupled with value
analysis - can bring about improvements in desiga. Methods engineering at-
tempts to minimize the unnecessary work that may be due to any or ~ c~mbina­
tion of the following:

(a) Poor product design. As mentioned earlier, the small-scale fur-

niture manufacturer has the right to try to "sell" his own ideas to customers
in the process of specifying a product's dimensions and other features. He
may attempt to persuade the customer of the savings he can make by agreeing to
sowe of his suggestions. The process of specifying quality requirements, it
must be remembered, is a compromise between the customer's needs and the manu-
facturer's capabilities. Product design~ and specifications that lead to in-
creased manut4cturing time normally feature:

( i) Poor product design, which prevtnts the use of economical pro-

cesses and leads to excessive use Jf materials;

(ii) Lack of standardization, which prevents the use of more sop&.is-

ticated production processes;

(iii) Incorrect quality standards, which cause unnecessary reworks.

(b) Inefficient methods and processes. Furniture manufacturir.g techno-

logy, like other technologies, offers a host of options in manufactu=ing, in-
cluding options with respect to the methods, tools, jigs, fixtures and
machines to be used. Employing inappropriate methods and tools normally leads
to unnecessary work. In some instances, processes are not performed correctly
or suffer because machines are in bad condition, i.e. tolerances cannot be en-
forced. Added to this, operators may also use bad methods of working.

Methods engineering in a small-scale furniture manufacturirg firm follows

the same pattern as work study. The main difference is in the recorrling tech-
niques empioyed.

Tools of methods engineering

Generally speaking, the tools of methods engineering are embodied in the

standardized format recording techniques used. Recordings are made in order
to:

(a) Obtain a clearer picture of a given s:tuation than that provided by

written or verbal descriptions;

(b) Be able to verify the completeness of the data generated;

(c) Transfer data effectively in the shortest time possible. Ex-

perience proves that data presented in a fami I iar pattern 1s more easily
assimilated;
 - 54 -

(d) Provide an effective medium for comparison. In methods engine-

ering, many types of situations relating to the "before" and "after" stages of
improvement must be dealt with. For ease of comparison, a standardized format
is essential. The principal methods engineering tools are: flow charts;
process analysis charts; and multi-activity charts.

Flow charts

The manufacturing flow chart is the best as well as the simplest tool. Es-
sentially, it is used to investigate the sequence of steps in the manufacture
of a piece of furniture and to indicate action that should be taken to elimin-
ate, combine or rearrange steps in order to attain the most economical method
of operating. There are two types of flow chart: general and detailed.

The general flow chart shows a broad picture of all or some of the furni-
ture manufacturing processes. Its usefulness stems from its ability to
provide not only an overall picture of a process under review, but the various
logical relationships existing between ti1at process and other processes em-
ployed by the firm. Figure 25 is an example of a general flow chart for the
preparation of solid wood components in a furniture manufacturing plant.

The detailed flow chart, as the name implies, entail.; greater detail in
the recording process. A sign language is used to symbolize and generally
classify all the tasks and activities of the workers.

The first symbol is a circle, and it is ·.sed to denote an operation such

as sawing, routing, boring, drilling, sanding or finishing. It is used to
indicate any action taken to increase the value of the raw materials. The raw
materials may change wich respect to their physical or mechanical (e.g. if
they are laminated) characteristics, as requ:red by the product specification.)

The second symbol is an arrow and is used to denote the transportation or

movement of raw materials from one work station to another, or from one build-
ing to another. Essentially, the symbol indicates that the material has left
one worker to be further worked on by another (this also represents a transfer
of responsibility). It must be borne in mind that activities classified as
transportation do not enhance the value of the furniture products and should
therefore be minimized or eliminated.

The third symbol, a square, denotes inspection of the materials. This is

used for all tasks related to the examination or checking of work for quality,
no matter whether it is performed by one worker or a group of workers.

The fourth symbol, the letter 0, stands for temporary delay. In job-order
manufacturing, there are usually more delays involved than in the rigid type
of mass production. Although this sy~bol usually denotes a wait for raw mat-
erials, it may also indicate failure to accomplish a certain manufacturing
activity.

The fifth symbol is the triangle. An inverted triangle denotes storage of

raw materials; an upright one denotes storage of finished products.

Figure 26 shows a d~tailed flow chart used by a sm;;ll-scale plain-flush-

door manufacturer in a developing country. There are two ways of dealing with
the results of a detailed flow chart analysis: (a) the time spent on non-
value-adding activities (transport11tion, delay, inspection, storage etc) can
be eliminated or minimized, and (b) activities, which are value-adding through
sub-contracting or other means, should be eliminated - which will also auto-
matically eliminate "make-ready" and "put-awav" activities. The occasion
might also be used to combine, re-arrange or sim~lify some of the manufacturing
operations.
 - 55 -

Figure 2S. General flo~ chart for the preparation of

solid wood components

Timber yard

Kiln drying

Cross-cutting
Ripping
Band sawinr

Surface planing Four-side

Thickness planing moulding

Trim sawing

Mortising
Boring
Tenoning
Moulding
Routing

Sanding

Source: P. Paavola, "Furniture technology", in Furniture and

Joinery industries for Developing Countries (ID/108/Rev. l), p. 150.
 - 56 -

Fir,ure 2Ci. Dctai1C'd flo...- char\. o; plain flush door

m..inufacturing process

Door
knobs Paints
Nails and and Varnish
Sai.m wood Draft paper glues Plywood Sandpaper hinges Lacquers

Rough
sketching

Cros!!'-cutting Dimensioning

length-wise Cutting

Thicknessing

Cross-cutting

¢=..., Q Hort 1 si nr,

T
T
I
_ __J

0 lnspec ting and ref ininr

I

Nailing and gluing

Installing the
plywood components
Clamping by cold press

Sanding

Door knob and hinges

installation

Painting or varnishing
(optional)
 - 57 -

Process analysis chart

The necessity has been discussed of visualizing the furniture manufac-

turing operation in its entirety through the five basic activities (operation,
delay, storage, inspection and transportation) of raw materials handling.
Besides indicating the forms of improvement that might be generated, the flow
charts also provide a guide as to which manufacturing process should t>e sub-
ject to "microscopic" investigation. The process analysis chart is used to
perforo such an investigation. In addition to classifying all the activities
in the process under :-eview, it provides information on the quantities of
materials used, the time spent on each activity, and the distance traversed by
the raw materials used - information that will be extremely useful in pin-
pointing the causes or symptoms of low productivity. Figure 27 is an example
of a process analysis chart used in preparing the materials needed tc manu-
facture flush-type wooden doors. The results of the analysis may be useful
not only for improving existing situations but also for cost esti1Dating, a
critical element in job-order operations. By conducting a detailed study of
the manufacturing operation, using the process analysis chart, the flow of
materials (materials-type process analysis) or the movement of pers~nnel
(worker-type process analysis) can be traced with some degree of accuracy.

It may be desired to use the process analysis chart to concentrate on the

activity of, say, an operator or an assembly worker. Perhaps the concern is
to balance the workload between his right hand and his left. In this case, a
variant of the process analysis chart - the right-hand and left-hand chart -
i~ employed. See figure 28.

Multi-activity chart

Balancing the workload between the right and left hands can also be
achieved using the multi-activity chart. This chart can depict the activities
of more than one subject (e.g. workers, machinery, equipment, or the right and
left hands) on a common time-scale in order to allow investigation of the
dependency of their relationships. Primarily, it is designed to facilitate
determination of ways to reduce idle time in both men and machines. To il-
lustrate the use of the multi-activity chart, a highly simplified version of a
common problem encountered in furniture manufacturing is presented below.

A circular-saw operator prepares the material for a feeding operation re-

quiring, say, one minute. By the time he has arranged the material on the
table of the circular saw, and made all the adjustments needed prior to cut-
ting, a~other minute is gone. The cutting operation requires another minute.
The worker then removes the materials - another minute - and another eye le
begins.

At first impression, there is nothing wrong with the operator-saw re-

lationship or dependency. Closer examination shows, however, that the saw is
id le three quarters of the eye le time and that the operator is engaged in
"make-ready" and "put-away" activities for the same length of time. This is
illustrated in figure 29.
 - 58 -

Figure z;. Process analysis ~hart

Process o1na!ys1s chart - Mate:r1o1ls typ~ (Pre sen<)

Su-Uy
Chut !lo. l Sheet l of
-- No.
-- -l Fune c lC'ns
Oper.1t ion
Presitnt
8
Proposed So1v1n)(:S

Subject charted: Ovor mo1nufo1ccur1ng

(flush-type wooden dooc ) tr .. nsport a
Del•y 0
L~c•tton; Hain worilshap Inspe:c t ton l
Operator: Storage l
u1st.1.nce ~J.1 m
Cho1rted by: EQC Time 18 1un l'I s
One: Lost !lot
ava11•~1.e I
Tot•ls -
No. Oescr1pt1on of i1...:t1v1ties s v • b 0 l s Qty. Dist. Time Rem•rks
0 c::'.) D DK76
I
I. hw en.acer 1.a l •t the stock pile _J.o - - -
2. R•w en.acer 1.a.l ( ~"x6'"xll') pt.:il.ed up 10--- I : l ).2 m l7 s l \larker
). Cross-cuttt:'\g uf r•w mo1ter1.als
c(I i : l 0 4 s ar:e •t
~-, rad 1.1 L-o1r:n s•w I
• t 1:ne
~. Tr•nsport to p Liner D ! ! : : .6 . t> s l worfter
) . P~.antng <Jt r.iw c•Ce-r1.aLs ; I: I
- 0 )) < l •i.lr"er
o. !r.anS?OCt to tdttng .trb1.lr SdW 11 ! I 2 .... 6 m 7 • l worker
l. ~:i.ltt1ng O[ r.1w iu.iceri..il length-wise CY : 0 0 l m•n 10 s l work.er
s. :ranspocc. to ntt•t rad1.1l .rm saw If) ' I t> 5.1 m lO s l "'oc~er

9. Cross cut r~w m~ter1al into halves CI 0 0 l m•n 10 s l 1.1orker

10. Tr•r.spoct to thickness p L.1ner rn I I
lO ). 5 . 15 s l worker
·-
l l. Reduce th 1ckness (from l" to l ~/ 4") a 0 0 2 min )) • l worker
l2. Transoocc b•ck to radial Hm s•w ID 10 L8 m 2~ s l worker
ll. Cross cutting of sem1-f 1n1shed
m.1tirr 1als ex:~ ! 0 0 20 • l worker
14. Rav material - 1 pc s. l 112" x 2" x l'. r-.....
" pcs. l 1/2" 2" x l'.
2 pea. l 1/2" x 2" x 7'
• __l.......... :o I ll - l mm 0 s l work.er
IL Tenon1n1 using r~d1al •rm uw CY I ! 1 - 2 a11n 10 s l worker
lb. Tronaport 2 pea. O[ l l/ 2" • ,.. x ]'
[p i
i
I
co mort1ser 2 ~.9 m 2)
• l worker

• ,.. •
17.

td.
Hort1J1n1 of 2 pc•· 11 l/2"
1 mart i sea t!och
Fu.., puts r.r•nsport
)'),
a:: D i
2
!)
-
8,J m
b min 40

22 •
s l worker
l work.er
Toto • - 4l.l . L8 ,.,n 14 s
 - 59 -

Figure 28. Ri~ht-han.i and left-hand chart

Chart No. Sheet Ne. of Workplace layout

--- -- --
Drawing of assembly studied:
Subject of study:

Operator:
Location:
Charted by: Date:

Left-hand activities Symbols Symbols Right-hand activities

Description 0 q D D !'Vb 0 q D D rv~ Description

_..__
- L-::::::::--
~
;:....-- ----~ ~

--- -- ,_
--- p---- ~- -------
----
~
----~-----·-

I
M e t h 0 d s Present Proposed R e m a r k s
L.H. R.H. L.H. R.H.
Operations
-- -- -·
Transports
Delays
Holding and storage - - - - - - --- - --- ----- ------ ·-------
Inspection -- ----·--- - - - - - - -
~-- ----
Totals
 - 60 -

Figure 29. E..xample of use of a nulti-acti\·ity ..:hart

I Operator
Time
(minutes) Circular saw

Obtaining the 0
!'laterial for cutting Id le

Arranging the 1
mater~al in the saw
table prior to cutting I Occupied

Idle (material ftd to 2 Cutting

saw)

Putting cut materials 3 Idle

away 4

End of one cycle

Computing the values of the following further clarifies the operator-saw

relationship.

Time spent on "do" activities x 100

l. Machine utilization (%)
Total cycle time
2. Operat0r's utilization of Time spent for "make-ready" and
"put-away" act1v1t1es x 100
the machine (%)
Total cycle time

In this example, cutting is the only "do" activity performed by the saw. The
machine is in use, therefore, for a poor 25 per cent of the time ( l out of 4
minutes), while the operator spends 75 per cent of his time operating .:he
machine (J out of 4 minutes). There are two basic approaches to improving the
man-machine relationship anrl thereby attaining greater economy and efficiency
in the manufacturing operation;

(a) Some of the "a:ake-ready" and "put-away" activities may be infused in-
to the "do" elements for each cycle time. Or.e way of accomplishing this in
furniture manufacturing is by using low--cost automation.21

(b) The operator may be asked to operate other similar machines, or given
extra, but related, work to perfor~ during the idle parts of the cycle.

Principles of methods engineering

Some general principles have been formulated that may be found useful in
developing new methods or improving existing ones in furniture manufacturing
operations. These principles govern motion economy; workplace layout and
design; and materials handling.~{
 - 61 -

Principles of motion economy

When possible, movements of the human body should be as f0llows;

Codes2/

1. The hands should begin and complete their

movements at the same time. B and C

2. The hands should n0t be idle at the same time,

except during periods of rest. B and C

3. Arm motions should be symmetrical, in opposite

directions, and made si~1ultaneously. B and C

4. Hand and body motions should b: at the lowest

classification ..!QI needed to do the work
satisfactorily. A, B and C

5. Momentum should be employed to help the worker, but

must be reduced to a minimum whenever it has to be
overcome by muscular effort. B and C

6. Rhythm is essential to the smooth and automatic per-

formance of a repetitive operation. Work should be
arranged to permit easy and natural rhythm whenever
possible. B and C
7. Work should be arranged so that eye movements are con-
fined to a i::omfortable area, without frequent .~hanges
of focus. A, B ar.d C

The work place should be arranged as follows;

1. Fixed stations should be provided for all

tools and materials, to encourage habit forming. A, B and C

2. Tools and materials should be placed in position

prior to manufacture, in order to reduce time spent
in searching for them. B and C

3. Gravity-feed bins and containers should be used to

deliver the materials as close as possible
to where they are needed. B and C

4. Tools, materials and controls should be located

within or as near as possible to the working area. A, B and C

5. Materials and tools should be so arranged as to

permit the optimum seq~ence of motions. A, B and C

6, "Drop delivers" or ejectors should be used

whenever possible to reduce the need for the
operative to use his hands to dispose of
finished work. c
7. Lighting should be adequate. A chair that will
permit good posture should be provided for the
operative. The area of the work place should
allow alternate ~tanding and sitting. A, B and C
 - 62 -

8. The colour of the workplace should ~ontrast with

that of the work, t0 reduce eye fatigue. A, B and C

The design of tools and equipment should be such that;

1. The hands may be relieved o( the chore of

holding the workpiece when this can be done by
a jig, fixture or foot-operated device. A, B and C

2. Two or more tools can be combined whenever

possible. A, B and C

3. Levers, crossbars and handwheels can be placed

so that the operator can use them whilst
making the least change in his body position,
yet offering the greatest mechanical advantage. B and C

Principles of workplace layout design

l. If similar work is being done by each hand,

there should be a separate supply of materials
or parts for each hand. B and C

2. If the eyes are used in the selection of

materials, the materials should be kept, to tl:
extent possible, where the eyes can locate them
without the worker turning his head. c
3. The nature and shape of ma~erials determines
their position ;n the layout. A, B c.nd C

4. Tools should be easily picked up and replaced.

As far as possible, they should have an
automatic return, or the location of the next
piece of materials to be moved should allow
the tool to be returned as the hand travels
to pick it up. c
5. Finished work shculd be:

(a) Dropped down a hole or a chute; A and B

(b) Dropped through a chute, when the hand

is starting the first motion of the next
cycle; A and B

(c1 Put in a container so that hand movements

can be kept to a minimum; A and B

(d) Placed in a container in such a way that the

next operator can pick it up easily (if the
operation is an intermediate one). A, B and C

b. The possibility should always be examined

of 11sing pedals or knee-operated levers for locking
or index 1 ng dt::vices on fixtures, or devices for
dio;posing of finished work. B and C
 - 63 -

Principles of materials ha~dling

l. Handling should be eliminated to the extent

possible. When it is required, mechanical
rather than hum.rn handling is to be preferred. B and C

2. Handling should be combined with the work,

inspection or other processes that would
normally precede or follow it. B and C

3. Tv minimize handling cost, work processes should

include the use of as many hand tools and as much
semi-automatic machinery as possible. B and C

4. Materials handling facilities should be continuously

updated. A, B and C

Application of methods engineering

Methods engineering can be applied at practically all stages of furniture

manufacturing. In product design and development, it can help brin1 into
focus how eac:-i component part contributes to the desired end result .l..J At
the processing and assembly stages, it can serve as a potent tool for :ontinu-
ally improving operations, as illustrated by the following case. A small-scale
door manufacturing fir:n with 30 l.'orkers eml::2rked on a company-wide methods im-
provement progralIDlle with the aid of an industrial extension officer. After al-
most a month of recording and analyzing the relevant facts, the firm decided
to change its layout and introduce various improvements in selected flush-door
manufacturing processes. The result was a 30 per cent increase in production
and savings of IC 3L.24 per door per day. With an a~proximate daily ouput of
24 doors, this meant a saving of IC 15,475 a month or IC 185,702 a year.

As soon as a fi nn embarks on a programme to inprove its manufacturing

operations and increase its productivity, it will observe Lhat one improvement
opens doors for others. When taking such initiatives, therefore, the possi-
bility of effecting improvements in other areas should be bornf: in mind. It
must be remembered also that there is always a better way of doing things.
The task of the firm must be to constantly search, re~ord and analyze, with a
view to developing and introducing improved methods. In the long run, it will
be found, this will be the firm's lever in sustaining its comp~titiveness in
the marketplace.
 - 64 -

VI. WORK MEASUREMENT: CONCEPTS AND PRACTICES IN

SMALL-SCALE FURNITURE MANUFACTURING FIRMS
Scope of work measurement

The other aspect of work study is known as work measurement. This is gen-
erally concerned with the investigation and evaluation of all types of human
work in an industrial setting. In more precise terms, work measurement tech-
ntques are used to gauge - in ter~s of time units - the work content of jobs
performed by trained, qualified workers employing specific methods or pro-
cedures.

If the work ccntent of a job could be measured in terms acceptable to both

management and workers, then work measurement could make a substantial con-
tribution towards determining what constitutes a "fair clay's pay for a fair
day's work" in various manufacturing activities. Unfortunately, however, mdny
people, particularly those operating job-order furniture manufacturing firms
and remunerating their workers on a piece-rate basis, believe that the sole
purpose of work measurement is to improve the administration of the firm in
terms of wages and incentives. In fact, having the work content measured in
terms of time units for the critical - if not all - stages of manufacturing
will increase the effectiveness of workload scheduling and distribution. Like-
wise, having work content information readily accessible will improve the
firm's ability to estimate direct labour costs for every job or production
batch.

Finally, work measurement is an extension of methods eng1neer1ng. In this

context, it is an aid in croosing alternative methods of performing a specific
operation in the furniture manufacturing process. As reduction in the time
needed to perform a task is the only valid proof of imp•oved methods, the work
measurement process must be sustained until a satisfactory method for doing a
particular job has been developed. In the search for this method, the con-
tribution that work measurement can make towards improving the overall pro-
ductivity of the firm will become clear.

Work measurement and productivity improvement

Small firms in developing countries are often accused by their customers

of failing to deliver as promised. In some cases, they are able to get by
with this practice, but with today's consumers increasingly demanding value
for their money, such firms will become uncompetitive in the long run. In the
case of furniture firms, delayed deliveries may be due to (a) overly optimis-
tic estimates of the production time required, and (b) low productivity on the
part of management and workers.

Ov~rly optimistic estimation of production time requirements is an infor-

mation-related problem. This may mean that the owner-manager is unable to
marshal, and effectively utilize, the exi:,:.?rience acquired by the firm in its
day-to-day business. To remedy this situation, promised delivery dates must
be compared with actual de1 ivery dates, and the factors responsible for dis-
crepancies identified anu eliminated. A programme should then be initiat~d
aimed at reducing the delivery time by at least half. (1his ;ispect is dis-
cussed further in chapter VIII.)

Low productivity on the part of managemPnt and workers will also result in
delayed delivery. In chapter V, two factors wi>re cited as ~'t•ing responsibl<>
for unnecessary increase in the basic work content; defective product design
 - 65 -

or specification, and inefficient methods of manufacture. Another factor,

discussed below, is the time lost through inefficiency on the part of manage-
ment and workers.

Examples of inefficient managemer.t in furniture manufacturing are;

(a) Offering too wide a variety of products, coupled with lack of, or in-
adequate, standardization in1t1atives. (This leads to short production runs
and relatively longer set-up times.)

(b) Poor product specification at the job-order preparation stage. (This

can lead to frequent design changes, which in turn cause stoppages in produc-
tion.)

(c) Failure to properly .:o-ordinate the acqu1s1t1on of material inputs.

(This can lead to high incidence of machine, equipment and manpower idleness.)

(d) Poor maintenance. (This can lead to plant breakdown and costly
repairs.)

(e) Inadequate safety measures. (Consequent absences of workers and work

stoppages result in loss of production time.)

( f) Bad worki'.'ts conditions and conditions of work. (These result in

foremen and the like spending increased time on purely supervisory work.)

Worker inefficiency is indicated by habitual absence, tardiness and idle-

ness. Careless workmanship and a negative attitude likewise add unnecessary
time to the basic work content.

Work measurement can help to minimize, if not to eliminate, some of the

inefficiencies of management and workers. The keys to the successful appli-
cation of work measurement are thoroughness, patience and honesty; thorough-
ness in considering every contingency; patience in searching for the relevant
explanations of cause and effect; and honesty in using the results of the
initiative.

Techniques of work measurement

Work measurement, when used to evaluate selected human activities in a

firm, generally follows the work study process of selecting a job to study;
breaking it down into it:: various components; recording every detail; and
questioning every detail, keeping ar. open mind. There are several techniques
that may be employed, and the choice will depend upon the objectives of the
investigation. In the paragraphs that follow, two major objectives of work
measurement are reviewed which reflect the concern of most small-scale
furniture manufacturing firms in developing countries. These are; (a) the
determination and q 1antification of non-productive activities; and (b) the de-
1

termination of standard times needed to perform selected furniture manu-

facturing activities, as the basis for costing and incentive schemes.

Ratio delay study is a technique used to identify and quantify prcductive

and non-productive activities in a firm. It involves a considerable number of
spot observations be~ ng made over a period of time for a group of workers,
machines and equipment. Each observation records what is happening at a par-
ticular instdnt. The frequencies of occurrence of the various productive and
non-productive activities are captured and expressed as percentages of the ac-
tual production time.
 - 66 -

Time study is concerned with assessing - in terms of time units - the

value or content of work performed through human effort. The technique is
used to determine the "standard" times needed for se lee ted, common furniture
manufacturing processes. The standard time is the time required by a quali-
fied (experienced, trained or both) worker to perform a given operation, using
a specified method or procedure and working at normal tempo. The standard
times thus derived are useful in estimating direct labour costs and intro-
ducing incentive schemes.

Ratio delay studies

Neither the concept of, nor the procedures used in, ratio delay studies
are new. 1'heir application in s11.'lll-scale furniture manufacturing firms in
developing countries would, however, be relatively new, and are certainly
desirable. At this point, two oasic questions should be answered: (a) Who
shall conduct the ratio delay studies? and (b) How should they be conducted?

With regard to the first question, as in the case of the methods engineer-
ing processes, the assistance of the industrial extension officer can be
sought. The key man in the production process should be designated the count-
erpart of the extension officers so that through him, in time, the process of
ratio delay studies will be absorbed into the firm. Another possibility is to
have the key production person attend courses on work study. 7here are cer-
tain other basic steps which the owner-manager shoul~ take in order to ensure
the successful outcome of the ratio delay studies. These are set out below.

(a) A meeting should be called to discuss the aims and procedures of the
ratio delay technique with all those people in the firm who may later be af-
fected by the results. This step is often neglected in studies conducted in
other areas of manufacturing. Taking it wi 11 not only resolve some of the
doubts in the minds of the workers, but will also minimize the potential re-
sistance to change that the results might trigger. It may also spark workers'
suggestions on how the productivity of the firm can be improved - besides as-
suring their co-operation throughout the conduct of the study. A promise that
they will not be laid-off as a consequence of the study - a promise that
should be kept - is a further way of ensuring their co-operation.

(b) A firm idea should be established as to what would be the best out-
come of the study. It must be borne in mind that the ratio delay study not
only identifies the firm's productive and non-productive activities, but also
quantifies them. At this stage, the owner-manager - on ~he basis of his ex-
perience in the firm - should have some idea of what the ratio of produ~tive
to non-productive activities will be. An example of this step is providec by
the small-scale household furniture manufacturer who, prior to the conduct of
the ratio delay study, claimed that 80 per cent of the activities performed by
his ~orkers on the shop floor were productive. The results of the study
showed, in fact, that the workers were delivering only 3S per cent direct pro-
ductive activities (2.8 hours per 8-hour day). Of the remaining time, SS per
cent was spent on indirect productive activities and 10 per cent on idle ac-
tivities and personal comfort. Thus, the manufacturer discovered that there
was much room for productivity improvement.

(c) The area selected for the investigation (group of workers, de-
partment etc.) should be subject to thorough observation and a listing made of
all the activities so cbserved. This exercise should be conducted on
"typical" working days in the firm. The listing shown in figure 30 was com-
piled by an extension officer.
 - 67 -

Figur~' >LL Sampk listing of :1d1\·1t1es perf011111.'I..! in srn.:lll-s1.:ale

furnitur1.' ~muf;11.:turing fi1ms

/.._ ,_.,_-~ •: f) 1 ~:· 1: c<.{ ~.- za.t. I<. ,,:.9

.;
:tt ~a::
/. k .
:J: ':'fl
.fl~
~J...(. .{{ "l
-~
z./:..Fu ~
tr:(t../.ll ti O:<fo(.'-
;~;;.:::;;; ;,2,J!'~dl'-4
>-!1 (<{.(_ _../ J;:r 1-t. Y! ~
' {I
,-ft..;;{( led;:,, '-"f ,,_,~, >:.-l:u:-:;, ,a i&u-,(.,1
l .
J!~: .:t!"-t 1!!i
. ;1
•
t p~<"-(.. 7'// c'£-~<u/au ~
L.i E~idl ·, ,:_
I ~
't
,12.a. ,._.kt 1:1-
lf !lV/:... rLt:<.-jXMJ.-.UnJ
._.__,'
tt~-u.. ,.·lr
! ..(.{ !.
~l:.t'..-t1-1~ i-.,: J(f ~ .A7'-l:tA'L.o
?J.! y. {tia >~t~ nf .J~tcl:~ ~:! /..dU: /71-;M:~
,.f.ttt{: ;U-Hf
t~t?ri-# ,,,;(,.~~7!->d
•l,(rvl.</, ,.·;,,a
. ~ - fl f ..~tj<-- .CIZ-1-1-aA.-7Cf
'-· 1 'v<f<_ e-G np l-'

It will be observed that the activities listed may be classified as direct

productive; indirect productive; or idle, viz.:

(i) Direct productive activities. These activities add value to the

raw n.aterials being worked on. ?:xamples are: ripping, sawing
(using circular saw), hand planing, putty patching, staining,
and edge sanding.

(ii) Indirect prC'""-:tive actlV1t1es. These activities do not add

value to the m3terials, but facilitate the performance of direct
productive activities. Examples are: cleaning tht circular
saw, arranging the work piece on the circular saw table, fetch-
ing materials, and sharpening saw blades.

(iii) Idle activities. Examples are: resting, smoking, being absent,

day-dreaming, and drinking water.

(d) The classified activities should be entered in a ratio delay form, as

shown in figure 31.

(e) A trial observation should be made in order to check whether all the
activities performed in the department or section under review have been ac-
counted for. If necessary, more activities should be added to the original
listing.
 - 68 -

Figure 31. A sinpk ratio deLn· fo~

I Date:
Number ot workers: J
Department observed:
!"umber of m.achines:
Wood burn1nr
.)

Number of observations: 42 Type of ratio delay:

Observer:
-- Man ~ach1ne Mc.in and machine
-- -- --

Ciassification

Direct productive
IWorkt!r
No. l
Worker
~o .
.,
..
Worker
Ne. 3
Total PercentagP
of total

activities lfil-111 lHl-111 lfil-rtt( 26.0 61. 9

Indirect productive
activ1t1cs Ill llR 111 11.0 26.2

Idle act1vit1es Ill I l s.o 11. Cj

Totals 42.U ICJlJ.0

a/ Specific direct productive activities, indirect productive

activTties and idle activities may also be itemized and their individual
percentages obtained. This will provide much more insight into the
activities involved in furniture manufacturing.

(f) On the basis of the number of important productive activities regist-

ered, the number of observations to bli! made in order to attain the required
accuracy should be calculated •..!21 In the absence of statistical means of
determining the numbe: of observations, a compromise "guessed" or trial nu1.1ber
of observations, as suggested by the majority of the work~rs, should be used.
As a practical rule, however, the minimum number of observations should be 30,
spread over a period of three weeks ~nd made at different hours of the day.

(g) Observation rounds should be made at random times. The object of

these rounds is to ca!1~ure w!"lat the subject lS doing (direct productive, in-
direct productive or idle activities) at a precise moment. Recording is
simply a matter of making a stroke against the appropriate activity on the
ratio delay fon11 (see again fig·Jre 31).

(h) Data collection should continue until all activities have been ob-
served; their incidence is then calculated as a percentage.

(i) Th,~ results should be checked for accuracy; if they are unsatis-
factory, additional rounds should be made.

(j) The results obtained should be C•)mpared with thos£ initially expected
(step (b) above).

T:1e information obtained through ti\(· condu..:t of ratio delay studies can be
used as a rourh indicator of the total productivity l1•v"l of the firm; to
idf'ntify the reasons bt>hind unexpcctf·dly high perce .. Lages of indirect produc-
tive and idle activities; to measure capacity utilization; and even to provide
 - 69 -

guidance on where to direct methods engineering initiatives. Finally, the

results of the ratio delay studies can be a useful indicator in selecting a
subject for.more detailed study.

Time studies

Time studies are used to assess the value or content of manual operations
in a furniture manufacturing firm by recording the times and rates of working
for the various elements of a specific job carried out under specific condi-
tions. The results of the time studies facilitate the determination of stan-
dard times for the jobs most frequently performed. It will be recalled that
in methods engineering - as to some extent in ratio delay studies - a par-
ticular activity may be evaluated and re-designed for possible improvement.
This facilitates identification of the various elements or components of the
activity - ele'!lents which may be "clocked" or timed after an approprictce
number of observations have b£en made. Standard times may be obtained from
the clock readings by applying a rating factor to account for varying speeds
in workers' performance. Allowance is also made for unavoidable interruptions
in production. The end product is a pragmatic assessment of the productive
content of an activity. This, in a nutshell, is the time studies technique.
A number of distinct steps are involved in cunducting time studies for highly
repetitive activities in furniture manufacturing, viz.;

(a) Familiarity with the operation selected for investigation is obtained

through conscientious observation;

(b) The co-operation of the worker performing the operation is enlisted.

A worker should never be clocked without his knowing it, as this could lead to
serious non-co-operation;

(c) Before conducting the time studies, a precise description of the con-
ditions pertaining to the operation under review should be recorded, e.g.
workplRce layout and location of tools for assembly work;

(d) Timing equipment should be kept handy. For the conduct of highly
formalized time studies, a stop watch is required. Stop watches are cali-
brated in different ways. Two of the more popular watches feature, respec-
tively; a one-minute decimal stop calibrated in hundredths of a minute, and a
one-hour decimal stop showing increments of hundredths of an hour. The :;rmer
may be used in cyclic-type time studies, while the latter may be more useful
in non-cyclic studies;

(e) The "elements" of the operation under review should be determined.

Elements are recognizable parts of an operation, chosen for convenience of
observation. They should be easily identifiable, with definite starting and
finishing points (also referred to as reading points). An example of the
meaning of operation elements is provided by the operator of a radial-arm saw
who repeatedly performs cutting operations to produce a piece. The following
elements are normally involved: (a) fetching materials from the pile; (b)
measuring materials and accessories against specifications; (c) positioning
wood materials in the machine; (d) setting-up and clamping the machine; (e)
cutting; (f) unclamping and putting-away. Examples of break-off points in an
operation which may be designated as reading points in the time study of an
operation are: a distinct sound, tool transfer, or movement of materials;

( f) The number of observat;ions required to attain a certain degree of

accuracy should be estimated.QI As a general rule, there should be no less
than ten observations per operation. As in the case of ratio delay studies,
the observations should be randomly spread over a period of time;
 - 70 -

(g) Ran<!om observations s~ould be made ..>f the ope rat ion under review.
The purpose of this is to determine the elapsed time per element of the oper-
ation. There are two ways of recording this:

(i) Using the snap-back method. The sweep hand of t~e stop watch is
put back to the zero point at the end of every element and as
soon as the elapsed time has been recorded;

( ii) Using the contin'Jous method. In this case, the element times
are recorded with the stop watch running without interruption
throughout the operation. To obtain the elapsed time, each
reading must be subtracted from the preceding one.

Each recording method has its pros and cons. It is probably best to start
with the snap-back method, switching later to the continuous one;

(h) The average cycle time that has elapsed for each element shvuld be
computed.

Figure 32 shows a completed time study form for a small-scale door manu-
facturing firm. The snap-back method of recording elemental times was employ-
ed in seven rounds of observation.

By this point, the reader may have concluded that time studies can only be
applied in furniture manufacturing operaticns that a::~ highly repetitive and
cyclical. They can, however, be applied in a highly intermittent manufact-
uring operation using a variation of the eight steps outlined above. For
non-cyclic time studies, the procedures are as follows;

(a) Note is tJken of the element of work being performed by the worker;

(b) While this action is being observea, th~ reading point is decided
upon;

(c) The time value at the reading point is recorded while the worker con-
tinues his work;

(d) The time study is continued until the job is finished;

(e) From the time studies, a survey sheet may also be compiled, unneces-
sary actions being expressed as percentages of the total time taken to do the
work.

Establishment of time standards

After completing the observations and computing the average tim.: for each
element of the manufacturing operation being considered, the owner-manager
will be in a position to analyze the results prior to establishing standard
times. In making this analysis, questions such as the following should be
asked; Which of the elements observed can really be termed productive? Can
methods engineering hPlp to reduce the average observed times of the most
time-consuming elemer.t? The proper response and follow-up to these questions
can further improve the firm's productivity level.

A look may now be taken at the task of establishing the standard time for
the operation under review. Standard time is the total time that should be
taken for a qualified worker to complete a job, working at a regu1ar pace and
using established methods. The components of standard time are depicted in
figure 33. Before proceeding further, however, some of the terminology
employed must be c!arified.
 Figure ~2. Exa!'1plC' of .'.l C•'!'lJ'il'tPcl tir.iP c;tudy fonn

l
Dr 111..n o_f~_wo rkp l 11c e;

..
Elapsed ti ~p: ng \I
Study Ko: J Sheet No. of 5 20 foi ~
LJ
.,,
l.~vel;
~ ~:; ·~
i
nepa ·/P ~ rt:
,,,.,,. I .:
P<oduor Door . ll
Sk< ~> I ;:. '.J "'
'"'" II
._. 'J
Ho<<OO "• ., 0. ;>-
""'"'"• ' ' " ' p<ep •·~ I ..~ ''I. I 'J

R~ j ~-j-2n------1: ~
"o .Cl
.• III .c"- ~
.':,/)
. •• . ""'on , '.)
-·

~achine. ~&es
1 ·... -

~
0
Operator. Cutting op
o.T· I R -- •-----1- ---

~ '·~- -J--
on · " f -, tu,.' . ·

- - - -1~- l~'
R
Ope< au. · Radi•l-"m '
Tools and
Jig• • d . \ . ,
Date.. __ Checked j - - 1
--
I • .• I H , i
,
I .-1.:__:__:_i---l
iSjo
... - --1---t!
I R
II )o. 1 · I __ •
__ :
: r, lI (, '__:__·_'___
r"'ha·:ed by. - o.;. I R , u,;. R : I l-
1
I 1 ----...- '
t
.
•• ••fetching materials from pile 3 I I 2
" •••
'
i 1 I I I I ?' I 7 i '

+---r~
I ;
i
.....,
2 ~easuring materials and
accessories against -- I I -'·--t--- -- lL I lO I i .' ·--!- - -·
.-

specdi'=ations l ll I I l5
l l :u l I lU l ~

I J Positioning wood materials

in table I I I I ., I I ) i
i
5 ,.,; I ,·
~
5 b ) 6 ~) •7
.i
I I
4 Setting up and clamping I

l
I

I J~ ,'
,H
machine 3 I J I I 2 4 J L I

5 Cutting 30 I I 32 I r Jl i I 30 Jl
·--+---4----+----+---+--'-l_'•
JO
~ 7
r-~t~~~l _ _
t JI,, r, 1

6 1Jnclamping and putting away 10 I I 9 I 10 R .I__

_l_ ____
·- 1a i I---'----'------- ___ L___,
10 ( I 1 I I 'i ' ( '

Totu~s; ( ;: ' I; ;

'--------------------------------------------- -·---·-- --·------------·-· ------'

~o::e: O.T. =observed time R == :-ating factor. 1\ll ~lr-:" :.·. '1",": •"'.r'f••r:':•·rl 11) l:<·1·1>11d1;. f:nar-h:irk rPrr.rriinP. r·1·t'~ ( '~ .;•:••''.,

ai O:'"!ltted from -:o:nput.1t1on 0f averahC' cycl<> tim1· ;1c ·'1"'1.ll .,.,·;,,.rj i...·\tli ·.1q .. ·rv1·~111 r.111 .1rr1vity fnrt'li',n tr•')::•. ,.: ..... ,~·r .1•
about the midpoint.
 - 72 -

Figure 33. Establishinp standard time for a simple manual job

Rating Contingency Relaxation

Observed time
factor allowance allowance

-~
r
Basic ....CIJ
Jl
time ca
-0 "'
>.
... ca
0 ......
> CIJ
Work
"
~

content
-- -
,,
:J
QI -0
c

./
' - St.andard time -----------. -
_,

Source: International Labour Organisation, Introduction to Work Study,

3rd ed. (Geneva, 1979), p. 271.

Note: In this case, the joh was performed at a pace more rapid than
standard.

Observed time. This refers to the time taken for the performance of an
element of the operation or of the entire operation. The time studies will
yield this time. In the example given :i.n figure 32, the overall average
observed time for the door-stile cutting operation, using the radial-arm saw,
1s 62.6 seconds.

Rating factor. This is an increment that is added to the average observed

time. It is the result of a subjective comparison between (a) the pace at
which the observed worker performs the operation and >. b) the observer's pre-
conceived idea of a standard level of performance . .!...:/ In practice, making
such comparisons tends to be complex, since there are few, if any, solid
grounds upon which to base the concept of a standard level of performance.
Although rating scales are obtainable, management and workers in developing
countries are still at the stage of informal debate regarding the suitability
of such scales in their own specific situations. If the owner-manager has had
soli<l previous experi.~nce supervising a furniture manufacturing firm, or has
been running his own firm for some time, he may be in a position to rate the
pace at which a worker can p<!rform an operation. An example of a rating scale
that len<ls itscl f eas1 ly to ad.1ptation is one that rates a W•Jrker at 0 if no
acti·v1ty is pt~rfu1·med; at SU if he P·~rforms .slowly; at 75 if he docs the w01·k
unhurriedly, but at a steady pa..:•_,; at JOO, the standard ratin,:, if h<, does the
work ir1 .1 p1of.,ss1onal, busine~;s-lLkP manrlf'r with an eye to quality and
accuracy; at 125 d lH, is v.·ry fast; and at ISO if he is excq.1t1onally last.
Combining the ilV•!rage oho. .. rveJ tinw with tht' rating factor g1vp;, the basic
time for tht> job. In the door-stile cutting 1·xample, tlH, basic timP is ··~;ti­
mated as fol lows;
 - 73 -

Average observed time x Rating factor __ 62.6 x 17) __

Basic time = - 78.2 s
Standard rating 100
This basic time is the time Lt would t3ke to cut the door stiles, using a sub-
jective rating of 125, if the worker were performing at a standard pace r ather
than at the faster one shown here. The basic timt: for all the elen1ents of the
opera~ion can be estimated in a similar fashion, and this wili be needed if
the elements throughout the entire operation are performed at varying speeds. l...'.:'_i

Once the basic time has been estimated, the work content of the operation
under review can be estimated. This, in simple terms, is the basic time plus
the time allowances permitted by the firm. Two of the more common allowances
are a relaxation allowance and a contingency allowance.~/

The relaxation allowance is intended to provide the worKer with the oppor-
tunity to recover from the physiological and psychological effects of carrying
out specified work under specified conditions, and to allow time for attention
to personal needs. The amount of time allowed will depend on the nature of
the job.

The contingency allowance is a small time allowance which may be included

in a standard time to compensate for legitimate and expected delays, the
precise measurement of which would be uneconomical because of their infrequent
or irregular occurren~e.

After providing for these and other permissible allowances that may be
made in extraordinary circumstances, the standard time is estimated, due con-
sideration being given to other "unavoidable" delays which may be inherent in
the operation under review. In the example of the small-scaie door manufac-
turer, the observer m?de the following relaxation allowances for the door-
stile-cutting operation (expressed as percentages of the basic time): basic
fatigue allowance, 4; standing allowance, 2; working conditions (including
fumes and dust) allowance, 6; noise allowance, 5; monotony allowance, l; and
tediousness allowance, 2. A 5 per cent contingency allowance ·was also pro-
vided. The standard time was then established as follows:

(a) Average observed time: 62.6 seconds;

(b) Basic time: 78.25 seconds;

(c) Total relaxat1on allowance: 20 per cent of the basic time 15.65
seconds;

(d) r.ontingency allowance: 5 per cent of the basic time 3.9 s~conds;

(e) Special allowances: nil;

( f) Standard Basic + Relaxation + Contingency + Special Total

time time allowance allowance allowance
78.25 + 15.65 + 3.9 + 0 91. 8 s
( l. 53 min)

The standard times for some of the high 1 y repetitive steps in the manu-
facturing operation can then be used in estimates of direct labour costs and
in the preparation of incentive schemes. (Note; plotting the sta1.dard times
prior to full imp~emPntation is recommended.)
 - 74 -

Standard times; costing and incentive schemes

The standard times resulting from the time studies will be useful in
product costing activities, especially in estimating direct labour costs. To
take again the example of the small-scale door manufacturer: assuming he is
working on a combined job-order and rigid-type mass production operation, and
that door-stile cutting using a radial-arm saw is relatively repetitive, then
he can use the standard time to estimate, in a more confident manner, the
labour costs of all job orders involving door-stile cutting. This is accom-
plished simply by converting the time unit values of standard times to their
monetary equivalent, on the basis of the wages of the worker doing the job.

Let it be assumed that in the casE of the door-stile-cutting ope rat ion,
the standard time of 1.53 minutes is equivalent to IC 1.00. Thus, if a job
order came in and door-stile cutting w<is part of the manufacturing process,
the owner-manager could charge IC 1.00 every time the operation was pe:-formeci.
Let it be further assumed that after the job order has been completed it is
found that this relatively fa!>t worker (~ho was rated 125 in the standard :.im.'
derivation exercise) spent an average of only 62 seconds perforMing each door-
stile-cutting operation, then it may be said that the firm saved in terms of
direct labour costs. These savings can then be used as a basis for providing
incentives for the fast worker. ~age incentive schemes are designed to
provide workers with the opportunity to earn proportionately higher incomes
through greater efforts on the shop floor. Among the variouf schemes that are
popular with small-scale furniture manufacturing firms in developing countries
are; piece-rate; piece-rate with minimum base; and prof it-sharing.

Piece-rate srheme

This type of wage incentive scheme pays workers a predetermined and

~onsLant amount (rate) per unit (piece) of output. !his rate may be estimated
using either the hourly workers' rates (here, the use of standard times is
inevitable) or the appi:opriate amount per piece completed. The latter tends
to be favoured by small firms, while the former is sometimes used for selected
operations in m£diumto large-scale .irms. Generally, however, the practice in
small firms of hiring a group of "contr;ict workers" (workers possessing
special skills and headed by an informa: leader) to complement the existing
work force <luring peak production seas0ns, and the simplicity of applying
piece rates, have made this the most r·=--oular wage incentivP scheme. Owner-
mar.:igers using it should review the rates periodically. If th•~Y are high
enough to assure the workers a fair return for their output, this will moti-
vate them to increase their efforts and productivity. Conversely, low rates
will have the opposite effect - if workers feel that they can never attain a
wag£ level compatible with their needs.

Piece-rate with m1n1mum base

An improvement on piece-rates, this scheme iuarantees a minimum income for

the workers if certain conditicns (i.e. th_. production quota) art> mPt, and ad-
ditional pay if they are surpassed. Owner-managers using this schemf> should
establish a wage level on the basis of the production output which, it is
estimated, can be attained by average-tempo workers applying the production
standards resulting from the work measurf>ment ~xercises. For productiVl' work
performed in excess of this PStimated output, the worker will be given ad-
ditional compensation. An exilmplP of the :ipplication of this sch1,me is pro-
vided ry thf' finishing department of ii folding-chair m.1nt1factur1•r C.'.ltf'ring to
the dome:;tic market. The pstimate<l hourly 011tput per finisht>r is l) pi1•('('!l.
One finir.h••r clainw<l that hf' complPte<l 1)0 pi1'cPs in .in 8-ho11r clay. llis b;is1!
pay for that day wi II have to b1· incr'!.1S1,d by a traction, comp11tPrl as fol lows:
 - 75 -

Actual production 150 pieces 150 125

Estimated production 8 hours x 15 pieces/h 120

Thus, if he is paid a flat piece-rate i.:age of IC l. "" per hour, i11creasing the
estimated output by 2 5 per cent would allow him tc: .1 l. 2 5 x l. 50 = IC l. 88
per hour. If on the next day, however, he finishes only 100 pieces during the
eight hours, his hourly rate for that day wi 11 st i 11 be IC l. 50, because of
the guaranteed minimum base.

Profit-sharing scheme

Thi.s wage incentive scheme is popular with smali-scale furniture manu-

facturing firms that are managed as industrial co-operatives. Here, an esti-
mated production output is set, and if the worker or group of workers ·ttains
a much higher output, the rewards are shared by workers and employer.

Other incentive schemes can be devised for situations where individual

output (the basis of most popular schemes) cannot be measur~J. Such schemes
may in.: lude ti1e payment of a percentage of: savings on rejects; savings re-
sulting from a cost-reduction idea p.it f"Jrward by the worker; or savings re-
sulting from energy conservation activities.

In selecting the appropriate incentive scheme, the cost-minded manufac-

turer should bear in mind certain factors, among them the following:

(a) The scheme should be implementeti without sacrificing quality, reli-

ability or safety;

(b) The related clerical work should be kept to the minimum;

(c) The functioning of the scheme must be undtrstood by all the workers.
 - 76 -

VII. COST ACCOUNTING AND VALUE ANALYSIS

C0st accounting and value analysis have always constituted weak spots in
the management of small-scale furniture manufacturing firms in developing
countries. The owner of one of these firms was once heard to say: "Of course
we realize the importance of applying value analysis so as to reduce the unit
costs of our products. But our cost system is so topsy-tur~y that we cannot
properly determine the cost items for all of the functions involved in the
manufacture of our products." This is a typical case.

Some owner-managers are aware of the importance and usefulness of value

analysis in improving their product designs, and to some extent their pro-
c~sses. Owing to poor cost accounting practices, however, the benefits of
value analysis have never been fully realized by them.

Cost accounting, for the purposes of th is manual, means the compilation

and study ~f all estimated and actual costs chargeable to a specific business
transactior., for the purpose of measuring, controlling and planning management
activities. (By estimated costs is meant those costs assumed prior to consum-
mation of the transaction; by actual costs is meant the costs as thP.y are seen
following consummation of the transaction.)

Value analysis, on the other hand, is a na:_t.ral outcome of an effective

cost accounting system. It involves a continuing process of equating -::osts
with functions of products, with a vie~ to simplifying the product and improv-
ing the profit without unduly sacrificing quality or reliability. Cost ac-
counting, therefore, is concerned with the question "How have we done in this
business transaction?", while value analysis is concerned with "How should we
do it next time?". It may be argued that cost accounting should be enough to
deal with both issues. This is definitely not the case, however. Cost ac-
counting essentially captures the variances between the initial cost estimates
and the actual costs and should improve the firm's abi lit.; to cost-estimate
subsec,..1ent business transactions. Value analysis generates alternative ways
of approaching a business transaction, by determining the possibility of drop-
ping a cost item related t0 a particular functiun of the product in order to
enhance the profit posture of the su-:ceeding business transaction - without,
however, sacrificing quality and reliability. In the firm, cost accountine is
in the area of budget and finance, while value analysis is in the area of
production management.

Costing in small-furnitur~ manufacturin&.__firms; misapplications

Costing a given job or business transaction in a small firm in a develop-

ing country should be a closed-loop process, as depicted in figu'e 34. In
theory, it starts after the customer has specified the :·roduc ts he requires.
The firm's cost estimator - in most cases, the owner-manager himself - esti-
mates the required production inputs - raw materials, labour, overheads ttc. -
and, on the basis of historical trends, estin.ates the costs tnat will be in-
curred. After these inputs have been acqui1ed, manufacture ot the fur-1iture
products is set in motion. From the time the production system is loaded with
this job, until its completion, various costs will be continually accumulated.
These represent the actual costs involved in the transaction. The variances
which can be derived by comparing the original cost estimates with the actual
co.r,ts should be used to increase the preci:>ion of future cost estimates,
orders and contracts.
 - 77 -

Figure 34. Costing as a closed-loop process

From custom~r
(job specification)

Cost estimating Determination of

Improvements in
procedure variances
14----- cost estimating -
(cost estimates vs.
based on historical processes
costs artual costs)

Actual cost
Production system
(produce the furniture
... accumulation
~allocation of
pieces required)
costs)

Note: The arrow denotes the sequence. Feedback has been omitted for the
sake--;;-r-s1mplicity.

In practice, however, costing is rarely a smooth process, as will be seen

from the following two real-life cases.

The owner-manager was the primary cost estimator of Company A, a firm pro-
ducing teakwood furniture products in a developing country. His brother acted
as the informal purcLasing and materials manager. In costing the products,
tne owner-manager sometimes had to rely on his intuition regarding the price
of certain raw materials. One Jay a customer demanded a product quotation.
The purchasing and materials manager was away at the time, but the owner-
manager felt that as he was senior to his brother in the firm, by two years,
he could e!:timate the price of the products required, 011 the basis of his own
experience. Thr<c>e months after the transaction had been completed, the firm' 5
bookkeeper reportea that a gross under-estimation of the material costs had
resultea i11 the loss of mort.> than IC lU,000 for that tr-rnsaction alone.

Company B spec1al1zed in making oftice furniture. After completing a

contract, the ownPr-managf'r was interested in i inding out how much money he
had made on the transaction. The part-time bookkeeper informed him, thrt.>e
we Pk s a f t e r d fd i v e r y (J 1 t tie prod 11 c t ~ , t ha t t h •~ y had mad f~ a c a sh p r o f 1 t o f IC
2,000. The owner was shockt.>d: this repr1~sf'ntf'd only) per u~nt of the total
contract amount, and ht~ had b.-.;'.n anticipating a net profit of somf' 10 per
CPnt. The bookkeq.1Pr insistPd, howPVf'r, thilt thf· firm rf'ally had made muney
on the tra11silct1nn, as an est1matf·d IC 12,0UU worth of raw material left-overs
WI' re st 1 I l on th1~ prPmi ~;,·s, a1Hl tilt' SP could f' i thPr be so Id or r1·-usPd to gen-
Pratc add It 1011;il 1H't cilsl1 profit. "811t, a~. l do not hav1· ii contr;ict to us"
 - 78 -

such materials, nor a ready buyer for them, what do I do with them?", asked
the owner-manager. The production supervisor then pointed out that the mater-
ials were obstructing current production activities.

Basic costing; cost accounting principles and terminology

As cost accounting is a broad field, this manual must necessarily confine

itself to those concepts and principles that are peculiar to small-scale
furniture manufacturing. The cost of any furniture prod~ct generally covers:
direct materials costs; direct labour costs; and overhead costs. Each of
these in turn has two principal features: quantity and price.

Direct materials costs

These cover the cost of materials incorporated in the product, and measur-
able as such. Certa~n minor materials (e.g. glue or nails) may be counted as
supplies or indirect materials because of the impracticability of identifying
them with specific units of the furniture product. Moreover, the unit cost
may be too insignificant to be measured as a direct materials cost - in which
case it should be classified under manufacturing overheads as an indirect
materials cost.

Direct labour costs

These cover the labour costs directly traceable to a specific product,

e.g. the salaries of machine operators and assemblers. Labour costs that can-
not be linked to specific products are included in manufacturing overheads as
indirect labour. Indirect labour includes storemen, foremen, drivers, clerks,
inspectors, and managers.

Overhead costs

Overheads in furniture manu(acturing consist of: manufacturing overheads;

administrative overheads; and selling overheads. The owner-manager should
have a methodology for relating these expenses to his furniture products or
job orders.

Manufacturing overheads are composed of cost elements that cannot be

charged di.rect to the product or job order - e.g. indirect materials, indirect
labour, depreciation of machines and equipment, repairs and maintenance, fac-
tory insurance, and light and power.

Administrative overheads, also called general overheads, cover executives'

salaries and the costs of administrative activities, as wel 1 as retainer fees
for free-lance designers and management consultants, the salaries of secretar-
ial staff, drivers, a part-time accountant and auditor.

Selling overheads refer to expenses incurred in marketing or selling the

furniture products, e.g. advertising, promotion, transportation, or the paying
of commissions.

With respect to the behaviour of the variou1> types of overhead costs, as

they relate to the volume of production, the following broad cla~sifi::ation
may likewise be used:
 - 79 -

Fixed overhead costs. These cover items such as executive salaries, deprec-
iation, insurar.c:e, ar.d real estate taxes. They tend to remain constant re-
gardless of the volume of production.

Variable overhead costs. These cover supplies, power, indirect materials

etc., and tend to increase as the volume of production increases.

Figure 35 shows a typical cost breakdown. The problem of allocating over-

head costs is a common one to the management of most smal 1-scale furniture
manufacturing firms. Some manufacturers tend to side-slip the issue by dele-
gating the responsibility to the company accountant, or, in the absence of the
latter, by simply plucking a percentage figure "out of the air". How, then,
should the overhead costs be allocated to a firm's products, or to the various
job-orders pr0cessed? Generally speaking, the apportioning of overhead costs
starts with the determination of a single factor which can be considered
coDDDon ~o all the furniture products manufactured - a factor whose values will
change directly with respect to the amount of overhead chargeable to the pro-
ducts. This factor may be, among other things, the cost of direct materials;
the cost of direct labour; or the cost of machine hours. The task of allocat-
ing overhead costs tends to increase in complexity, therefore, as the varia-
bility of the furniture products increases. (This is discussed further below
under "cost accounting n:ethodologies".)

Figure 35. Cost brcakdm,11 and costinr, tcrr.:ino1ogy

Direct materials'
cost
Direct labour
cost
I
+

_., Manufacturi.ngl
Prime cost------~~: overheao _

~Adm1nistrat iv(·1
to'--------- Factory cost ---------t"l""'_ ovi· r he ad _

1
------------Manufacturing cost - - - - - - - - - - -..J""'Sel ing ]

u:=----------
"lnvP r lo1·;1d

Total cost - - - - - - - - - - - - -...... ~!

If a continuous type of production systPm is being 11sed, wh.~rein materials

are the most substantial cost items and common to all prod11cts - as in tht'
case of furniture manufacturing - the ove;head rate may ht> hase<l sat i sf.1c-
torily on the quantity of direct materials used. Thi s i s known as th1• dirt'Ct
material mode of allocating overhead expenses.

Similarly, if the pro<lucts, equipme:it and wages are compar,1tiv .. ly 11niform,

the overhead expenses can be allocatf'd en t11P basis of <lirt>ct laho11r costs.
For ex amp le, if the total overhead cost is re '.JO, UOO, <ind the <l i r·~c t l;1ho11r
cost comes to th,.. sam<' amount, tl:,-.n an ov1•rlwarl r.it,-. of re 1.00 can ht• ,.mploy-
 - 80 -

ed per IC 1.UU of direct labour costs chargeable to a product. This ts aptly

called the direct labour method of allocattng overhead costs.

The direct labour hours method is applied when the type of work and the
pay rates are suffi, i.ently standard to rermit the distribution of overheads on
the basis of the total number of hours spent on the job. Thus, if on aver~ge
the overhead costs IC 0.50 per man-hour, a 100 man-hour job would total IC 50
in overhead expensPs. The distribution of overhead costs may not always be as
simple as illustratt,1 here, but the experience gained with each job will help
in refining and improving procedures for the future.

~ost accounting methodologies

As mentioned earlier, the coverage of cost accounting in the present pub-

lication is limited to those systems commonly employed in small-scale
furniture manufacturing firms, i.e. job order and contractor batch custing.
Within those limits, the focus is further restricted to costi•1g relating only
to manufacturing, i.e. direct labour, direct materials and manufacturing-
related overhead expenses.

Job order costing

This system of cost accounting is used when a specific job is required bi

a specific customer. The costs of raw materials, direct labour and factory
overheads applicable to the job are compileJ and divided by the number of
finished units, in order to arrive at averaF,e unit costs. Job order costing
is used by furniture manufacturers whose products are readily identifiable by
individual uGit or batch, which receive varying degrees of attention 0r skill.
Sometimes selling and administr-itive overheads are charged to job ,·osts, as a
percentage of manufacturing cost, in computing the total job cost.

Where this system :s concerned, the job itself is the focal point for cost
identification and accumulation. Three basic types of form are used, as
illustrated in figures 36-39, viz.: Job Cost Sheets (for both department-
alized and non-depa:tmentalized firms); Materials Requisition Sheets; and Job
Time Tickets.

The costs assigned to the jobs passing through the firm are initially
recorded on the Jc b Cost Shee':s. From an accounting viewpoint, these sheets
represent individual pages in a subsidiary cost ledger. As a rule, each sheet
is divided into sections covering materials, labour and overheads. These
three elements are costed separately. The sheet also provides for recording a
summary 0f the costs involved, as well as determination of the unit costs.

Materials requisitions provide ;:.~ basis for charging direct materials to

a job. In the Materials Requisition Sheet, space is provided for a descrip-
tion of the materials used, along with the quantitier issued and the unit
costs.

Job Time Tickets are used for charging direct labour cost to a job. Each
worker has one time card for each job. The wage rate and the total hours put
in by the worker are entered in the Job Time Card along with the corresponding
Losts (see again chapter VI).

ln job order costing, the predetermined overhead r<:tes obtained through

forecasting or estimating are used in allocating the appropriate factory over-
head rate to a job. This rate call he more precisely determined by: (a) com-
puting total overhead costs for the job; (b) selecting a measure of activity;
 81 -

Jut' n'st sheet fur a mm-Jqurtncntali:eJ 5r.:;ill-s1.::llc

furniture r...1nuiacturing firm

Fe:

_______ lJ.:ite .:or.ipletec

lJire.:t lat>uur Applied overheaa

Time card
Amount lJat e Amount Basis Wage Amount
t-to.
r - - - -
~---k-----~---
I
~~- ------------>------- - - - - - - + - - - - - - + - - - - - + - - - - - + - - - - - - ;

=-----=r-- -:~_-_- ~--- -----_- -_- ~-~-~]---~~-=-:~___.:~--~---

I

--~ --~ -- -~-r- I

- -~- -
- ---r- '--- ---------- ____ .__,._ __
-~-
I

I
-----~~- --- --- - ------+--

------ ~~----- -------- -----·- ~~-- ,____ - - - - - · - -- ------t----------t-----~

---------------~~-- ---~ - - ~- - - - - - - ~·------+-----+----.....

Summary for order No.

Direct materials
Direct labour
Applied overheads
Total factory cost
Factory cost per unit
 - 82 -

Fi~:i.1n' .) . . Job cost sheet for 3 departmental i z.eJ small-scale

fumi turc r.;anufacturing f inn

JOB COST SHEET

For Orde1 No.

Product (juantity
Date wanted Date started Date completed

Direct materials

Requ1stion Cost per Total

Date Department Stores No. Quantity
No. unit cost

Direct labour

Ti mt' card Hours or Total

Date Department Description Wage
number pieces cost

Applied overheads

Total
Date Dcp;1rtnlt'nt Basis Wage
cost

Summary for ordpr No.

[)11ect matl'ri;,Js
- ---
Di r .. ct l;,tJour
Appl it'<i nV(' dwacl s
- - - - -- -
-·-------
Tot ;1 l factory cost
------
Fart ory ( \)st pt·l 11n1 l
----

--
 - 83 -

Firure 38. ~lit er ia ls requisition sheet

-~

MATERIALS REQUISITION
---~ -
DatP RPquisition No.
-----· ------------~----

For
---· - - - - - Product order No.
Department
Requested by

Stores Quantity Quantity Unit

Description Total cost
No. requested issued cost

·--
Received by; Date:
 Figure 39. Job ti.me car;J

JOB TIME CARD

Name Card No.

Department Clock No.
..
Date Production Machine Time Time Total Wage Total
order No. number started stopped hours rate cost

00
I:"
I

No. of pieces finished: Approved by:

-- --

al The back of this form may be used to itemize the type and number of pieces completed
by ~he wor. !r for each production order number, This is particularly appropriate for firms
employing piece-rate wage incentive schemes,
 - 85 -

and (c) dividing the overhead costs by ~~e ~easure of activity to comp~te the
overhead rate. As noted earlier, the overhead rates for various furniture
manufacturing activities can be measured by using one or more of the follow-
ing; direct labor costs; direct labour hours; machine hours; or prime cost.

The use of predetermined =ates raises the question, however, of what to do

with the difference between the overhead applied to production and the over-
head costs actually incurred. If the latter is less than has been estimated,
a balance of overhead will remain not charged to the job. This is known as
undercharged overhead and may be carried as additional asset value in inven-
tory, as it may tend to fluctuate from month to month. Conversely, if the
actual overhead exceeds the estimated one, the result will be an overcharged
overhead.

Inevitably, at the end of the year, there will remain some difference
between overhead incurred and overhead applied. In rep-:irting net income for
the year, on the basis of costs actually incurred, the final net difference
(either over- er under-charged) will be considered an adjustment to the cost
of goods sold as reflected in the profit-and-loss statement.

Although job order costing can be a convenient and useful system to apply
in even very small furniture manufacturing firms, it must be realized that its
successful application entails a considerable outlay on clerical help. It is
important, therefore, that job order costing be used only at the appropriate
level of production and when the related expenses can be kept as low as pos-
sible.

Contract or batch costing

In contract costing, labour, materials and other costs are c.onsidered

direct contract costs, overhead expenses being charged to contracts as appro-
priate. The actual cost of the contract may be compared with the budgeted or
estimated costs as a mean.:. of checking the profitability of the job; the ef-
ficiency of the operation; or the accuracy of the estimates. As a rule, pro-
fits are ignored on contracts not yet completed. It is advisable, however, to
credit part of the profit earned each year to contracts that will last for
several years, in order to avoid profit fluctuation. Batch costing is also
job costing for a group or batch of identical products.

The value analysis concept

Earlier in this chapter, the relationship between cost accounting and

value analysis was discussed. Value analysis, moreover, was defined as a con-
tinuing process of equating costs with product ~unction with a view to effect-
ing product 3~"1plification and increased profit without undue sacrifice of
quality or reliability. Although value analysis is not a new concept, its
application in small-scale furniture manufacturing firms in developing
countri.es has been relatively slow to find acceptance. This trend, however,
may not last, because of the cost-price "squeeze" being felt in m0st develop-
ing countries: the market of the future wi 11 demand that qua 1 ity furnitur,::
products be delivered at minimum overal~ cost.

At this point, the resemblance may be noted between value analysis and
methods engineering or even work study process, both of which lead also to
productivity or profit improvement. The basic difference between value analy-
sis and work study lies in the fact that the focus of the former is on func-
tions, while that of the latter is on methods. The following may be said vf
any value analysis initiative taken in a furniture manufacluring operation;
 - 86 -

(a) It is a systematic and creative approach to cost reduction;

(b) It pinpoints areas where excessive and unnecessary costs are incurred;

(c) It enriches the value of the product in general as well as the

value of each of the components;

(d) It will generate the same, if not better, product performance at a

relatively lower cost;

(e) It does not sacrifice quality or reliability.

Value analysis methodology

In conducting a value analysis exercise in a furniture manufacturing firm,

a series of five ;;tens may be employed. This five-step process, which ought
to lead to product imp~ovement, is depicted in figure 40.

The basis of value analysis is that well-known technique called "brain-

storming". This features group participation in the speedy generation of a
spectrum of ideas for tackling a specific problem. (Here, again, is the
opportunity to seek the co-operation of the work-force.) For maximum results,
the following sequence should be adopted;

(a) The problem statement is formulated;

(b) The members of the brain-storming panei are carefully selected. (It
should never be assumed that membership must be restricted to the firm. Out-
siders such as suppliers or government-sponsored industrial extension officers
can be invited to participate.);

(c) The panel members are given 10 to 20 minutes to note down their ideas
on the problem;

(d) The panel members are encouraged to continue generating ideas while
each in turn presents his own. As the aim is to generate as many ideas as
possible, even seemingly unrealistic ones should be welcome. No idea should
be criticized. The combining of ideas should be encouraged;

(e) The ideas are subjected to an initial screening (only after step (d)
has been completed). Should the results of the first brain-storming session
be unsatisfactory, another one - this time using a more refined problem formu-
lation - is scheduled.

Brain-stoillling aside, it wi 11 be recalled that systematic value analysis

involves five basic steps, as depicted in figure 40: search; speculate;
analyse; decide; and execute.

1. Search. The search step consists of information gathering and function

defining. Assuming that a group has already been assembled to brain-storm a
particular furniture product, the first stage of the search activity will be
tv present all the appropriate background information to the panel - informa-
tion on cost manufacturing; intended use by customer; inventory levels;
materials billing; fl.Jw process -:harts; flow charts; time studies; and the
like. Upon conclusion of this, the panel prepares for the next stage: func-
tion definition. It must be borne in mind that there are four types of func-
tion: utility or use function; aesthetic or attractiveness function; posRess-
ion (pride in possessing) or esteem function; and resale or trading function.
Small-scale furniture man•ifacturers will be conce-ned mainly with utility and
aesthetic functions.
 - 87 -

Fi ~urc ·W. Value analysis methodology (~r2in-stormin£ technique)

Search for
functions

Speculate
on other
ways of
delivering
the function

Simplification and
Analyse
overall improvement
cost and
of the furniture
function
products and their
equation
components

Decide
on options
yielding
the lowest
cost

l:.xecute
the necessary
changes
 - 88 -

Funct1uns c:.:rn .:ilsu be c.:.tegufi.zed as pr1mi.lry, secun~ary i.!nd tert1i.!ty, t1u1.·-

ever, thus g li1ng ;Jn iJe.:i ut ti1e priori.ty standing ut ead: iunct1cltl. \\hen
der1ning the tLlnctiuts ur .:. proauct or its 1.1Gili1du.:ii .:.u:::ponellts, c'nly t.,.u
wor<Js - il v.-rb .ind.:. nuun - shoul<J be empioyed. Fu1 exi.!r.tple: a ielt bL1ck-
bua1J c>r;,::-;er, Je::-;i.gned !L'l the remuv.:;l of ci1;iik markings, wuuld havt' th.:>
tunct"un: "erase wr1t1ng". It is important that the function b.- detineo in
this manner 111 ura.:r to avoid, from the e<Jrliest stages, confusion regarding
combinations of runctions. LlKe1.1se, as a :-ule, the fun·.:.tions of a product or
of HS cumponents should be prec1sely aetined. In applying this der1nition of
tunctions to furniture products, care should be taken that t''.e var1ous func-
t1ons of tiie parts of the pr·oducts are likewise specified and that the proper
cost estimates for each component are equated with the functiou of the compo-
nent.

Figure 41 illustrates the result ot tl<e seatcn step tn a value analysts

exercise carried out on an ordinary felt blackboar<J eraser. It 1.ill be readily
observe<J tiiat tile main function: "era:;e writing" can be aelivered at an est1-
matea cost of IC lJ.}U when performed exclusively oy the felt-strip component
of the product. This gives ample putentiai tor product simplliication and
improvement.

Figure 41. Example of search phase: value analysis of a

blackboard eraser

Product:
Bi;d..tfj·hl./ui p~ ( /,£-tf-)
I

Function: t~ -Aff~j=

Estimated
Parts Functions costs (l.C.)

O.l>O

o.D5

The succef,,;(ul conduct of tht· Sf'arch step is :,om1·t1mf'~ 1nltib1t(:d liy:

1nacle(1uacy ot th•~ facts gathered; basing decisions on tJP!i»f:; r;,ther th;in on
f a c t s ; a 11 ci 1111 p r cc 1 s (' ck t i n i t 1on o I f u n c t I on .

I.. Sp•·~_i_:· Thi:> st•·p involvr•s th" :,yst .. matic cons1clf'riltinn 01 tit•• various
opllon:, op•·11 in d1·l1v1·ri1w. th•· l1mct1rn1 t" tit•· c11stnrn1·r. ll<'!or1· tttt· pan1·l
 - 89 -

ing questions should be answered: "Is this function necessary?", "How else -
other than the way in which it is being done today - can the product deliver
this function?", "Which product components do not make a significant contri-
bution to the main or primary function?" and the like. The owner-manager, in
speculating on alternative ways of delivering the intended product function,
should set targets for the brain-storming panel, e.g. reduce the cost of the
compon.?nts by SO per cent. This may force the panel to enter areas hitherto
unexplored. It must be remembered that the aim of the speculation exercise is
to find out: "What else can perform this function?".

3. Analyze. Thi~ step is concerned with the analysis and weighing of all the
ideas collected at the previous step with regard to cost implications, func-
tion and feasibility. At this step (a) monetary values are assigned to the
ideas and (b) the value or contribution of the ideas is questioned. At this
step, the intention is not to eliminate ideas, but to analyze them with a view
to determining or enhancing their feasibility and workabi 1 ity. Should the
brain-storming sessions have led only to the generation of "conceptual" ideas,
the details of these ideas should ~till be worked out prior to ta~ing the next
step.

4. Decide. This step contains two sub-steps: additional information; and

decision/promotion. As mentioned in the discussion of the "Analyze" step, the
workability of an idea needs to be assured. At the first sub-step, special-
ized advice should be sought on those issues which need clarification prior to
deciding to implement an idea. The decision/promotion activity implies exer-
cisi11g judgement in choosing an idea and planning a campaign to enlist the
support of those workers who may be affected, directly or indirectly, by the
final decision.

S. Execute. At this step, eE.ch promisi.ng idea is appraised ;ind evaluated.

During the evaluation, additional information may be generated and used to
improve on the original idea. The panel can then decide on the appropriate
action to be taken for each idea so evaluated. Recommendations for action can
include; dropping the idea; shelving it for a number of years; implementing
it in the next batch; or implementing it immediately. The execution step ends
when the likely outcome of an idea - 'better product design, cost reduction,
improvement in current practices and methods etc. - has been determined.

Applying value analysis

From the preceding discussion, it will be clear that the application of

v~lue analysis in a furniture manufacturing operation calls for;

(a) The setting up of a panel with its own rules of procedure and terms
of tenure, which will he principally responsible for the value analysis exer-
cise. Membership may include the st2ff of the firm and others in a position
to contribute to the improvement of the firm's products, practices an~
methods. As a rule, those selected for the panel should have a questioning
attitude and be perPistent, imaginative and tenacious in their work;

( b) The establishment of a procedure for the systematic pinpointing and

review of high-cost items in the firm. Already existing cost-reduction pro-
grammes, suggestion-gathering arrangemP.nts and the like can be tied-in with
the value analysis effort;

(c) The holding of regular panel meetings to evaluate the results of past
initiatives; discuss current projects; brain-storm on new products or ideas
presented; and establish pertinent courses of action;
 - 90 -

(d) The cond•1ct of value and function tests on the product and its com-
ponents to determine; ( i) if their cost is proportionate to their value or
usefulness; (ii) if there is anything better available that can be used for
the same purposes; (iii) if they can be produced at a lower cost by using
improvP.d methods; (iv) if any other firm is producing the same product or com-
ponent for less; or (v) if standardized, marketable products can be produced;

(e) The keeping of thorough and accurate records Cl)Vering all the ideas
put forward, the deliberations on them, suggestions for their improvement etc.
Reports on all projects - whether they have succeeded or failed - should be
filed. The record of a project that has failed to generate usable results car.
be kept to forestall future similar ventures or to start a new project at the
point where the previous attempt began to fail.

Value analysis and cost reduction

When value analysis is first introduced, the panel members may suggest
that the exercise has been carried out before, but under the heading of "cost
reductic..1". And, indeed, there would appear to be no significant difference
between the two. Yet a difference does exist; it lies in the fact that value
analysis means sustained, planned change while cost reduction means intermit-
tent, partially sustainable change. V2lue analysis can also lead to benefits
other than cost reduction. /he most important of thesP is product standardi-
zation and simplification •.!2
 - 91 -

VIII. PRODUCTION PLANNING AND CONTROL

Scope of production planning and control

Production planning and control is the most important production manage-

ment function in any small-scale fun1iture manufacturing fin;.

Essentially, it means the co-ordination, supervision and regulation of the

rate at which the various production inputs - materials, manpower, machine-
time etc. - are provided to the production system in order to meet delivery
schedules at minimum cost. In a small firm, it encompasses the following
tasks:

(a) Planning - forecasting sales, determining which products to produce,

the amount of materials required, the processes to be performed etc.

(b) Routing - selecting the path through the manufacturing system which
the product (or job-order) must follow in order to achieve scheduled deliv-
eries at minimum cost. Here, it must be decided which mactine to use and who
will use it.

(c) Scheduling - preparing and monitoring production timetables and, in

cases of job-order production, scheduling the incoming job orders bearing in
mind the delivery requirements of other job orders on hand.

{d) Dispatching - authorizing the loading of a job order and sending it

to manufacturing. This simultaneously releases the raw materials, tools,
jigs, fixtures etc. required for the manufacturing operation.

(e) Expediting - assisting or fostering the performance of the various

manufacturing operations, minimi'zing or elill!inating "surprises" that may
develop along the way.

Production planning and control, therefore, acts as an interphase between

the market and the firm's production system, as depicted in figure 42. In
developing countries, the typical owner-manager of a smal 1-scale furniture
mAnufacturing firm tends to perform all the production planning and control
tasks besides the more functional ones involved in day-to-day management of
the firm. In performing these tasks, however, he is seldom in possession of
all the information necessary to make correct decisions. The result is that
the goodwill of the firm suffers, as failing to live up to delivery colllllit-
ments is a sure way to lose customers.

A corollary to this unhappy practice is the persistent reluctance of some

owner-.nanagers to inform plant supervisors and workers of the production
schedule (which is stored in his head). This situation can bring a firm's
production activity to a halt as the workers await instructions on what to
load next. This problem, which can severely ~rain productivity and resources,
can be rectified simply by setting up a production schedule.

In order to simplify the explanation of what constitutes production plan-

ning and cont!"ol in furniture manufacturing, the two functions are treated
separately below. In practice, however, they f;O hand in hand. Generally
speaking, production planning consists of; co-ordinating the production func··
tion with other areas of the business; determining what products to produce,
based on market study; calculating the quantities involved, based on sales
forecasts; scheduling delivery; progrananing requirements of materials, parts,
lab,.,ur and facilities; and synchronizing the contributions of the finance,
personnel, purchasin~, marketing and administrative sections to the
 - 92 -

Figure 42. Production planning and control as an interphase

between market and production system

A. For job-order B. For ~ontinuous

production systec production system

I Customer
Consumer
mc.rket

-~
•
Job order
~l r
I
-
'II ,
Marketing
management --,I
f J
I
Production
planning
and control
I
t
I
I
I
I
I
I
I
'
Product ion
planning
and control
I
I
I
1
1 I
I I I
I I I
I I
I
L- Production
system
I
.... J L Product ion
system
J
 - 93 -

overall production activity. Production control, on the other hand, in-

volves; monitoring all activities within the production department, thereby
promoting effective sho;;i operation; co-ordinating manufacturing activities in
line with production plans; routing, loading, scheduling, expediting and
following-up; identifying deviations from the production plan during the manu-
facturing processes; find~ng the causes of such deviations and suggesting ways
of eliminating them.

Production p:anning

Figure 43 shows a simplified production planning ~cheme for a s~all-scale

furniture manufacturing firm. Evea simplified, the task of production plan-
ning involves a number of steps and requires inputs of various types of in-
formation. The process is seldo~ as systematic-looking as the one depicted,
as in most cases planning activities are performed and stored in the head of
the manufacturer. One conse4uence of this is that the manufacturer may give
in to changes of mind, with resulting confusion and frequent changeovers in
production loads. Moreover, a manufacturer with a lot on his mind is liable
to forget plans that he has only mentally recorded.

Production planning COllllllences with awareness of the production capacity ~f

the firm. Production capacity, in theory, is the maximum output that could be
produced if :here were no such thing as internal and external constraints. In
reality, however, machinery, equipment and staff seldom operate without such
influence; hence the term "effective capacity". This is always less than
production capacity, because of the physi~al, product, process and human con-
straints that hamper the production of furn~ture products. Physical con-
straints may be the consequence of faulty plant location, layout, or materials
handling procedures, among other things. Product constraints may have their
roots in, for example, standardization and simplification efforts; the number
of product lines or designs carried; or the quality and material requirements
attarhing to the products. Human constraints may be related to work methods;
labour inter:sity; morale; working conditions; compensation and remuneration
patterns; and the level of experience of the workers.

The effective procuction capacity of the firm acts as a "filter", separa-

ting jobs chat can be accommodated on 3 one- or multiple-shift basis from
those that might be sub-contracted to other firms. In intermittent furniture
manufacturing overations, effective production capacity is generally expressed
in terms of prcduclion hours. In continuous operations, it is expressed in
terms of quantities per unit of time, e.g. 300 school ciesks per month. Thus,
effective production capacity should be generally in accordance with
production forecasts. The primary source of information for intermittent
operations is the job-order, while that for continuous operations is the sales
forecast.

Preparing production plans

On the basis of technical drawings, product specifications and/or a sample

product, the total materials requirements are estimated. Initial estimates of
raw materials (direct and indirect) should allow for spoilage, wastage, econo-
mic quantity C1rdering, re-order points, offcuts, existing inventory, and the
like. At the process planning stage, the types of .nachinery needed to manu-
facture the product, as weli as the estimated machin.!-hours required per
process, are I isted. Similar jobs carried out in the past will serve as a
basis for the initial estimate of total machine-hour requirements. This esti-
mate may l>e adjusted later to compensate for such factors as potential machine
breakdown, rcp.1irs, power supply irregularit.it'S, .1nd availability of opt>rators.
 - 94 -

Figure 43. A simplifie<l production planning scheme

for a small furniture manufacturing firm

For intermittent
uianufacturing For continuous manufacturing

Job orders Past sales

Production
~-I __
Sales forecasting
capacity s.:heme

Production -- ~
Sales forecast
forecasts
(in monetary terms)
(in units)

Technical drawing or
product specifications

Materials
Process planning
Man-h~u:-1
billings
Type of machin~s to
be employed [ plann111b _J
I
Standards Standards

Estimated ral.'
materials per
unit time quantity
-----]
Estimated machinl'
hours per prodtction
Estimate~ ma~-----]
hours. p<,r product ion
quantity
------------ ----------
Factors Factors Factors

Adjusted raw Adjusted machine dj~sted man-hour

materials 11sed hour estimates st1mates
---

Master schf'd11l(' boa1d

---------·----
 - 95 -

Process planning is fol lowed by man-hour planning. This process begins

with the identification ,Jf all the areas of pro·:iuct ion where manpower inputs
will be required. Man-hour estimates may be made using roug~ staadards based
on workers' el.perience !evels and records of absenteeism, mocdiness, tardiness
etc. In some cases, man-hour planning is much simpler than process planning,
because more than one worker may be assigned to a machine. The data provided
by the ma:erials billing, process planning and man-hour planning procedures
will serv~ as in;.>uts tc the preparation of a "master schedule board" which
should contain all the relevant information that is available regarding job
orders on hand or in process, jobs to be completed, and so on.

From sales forecasts to production plans

In continuous manufacturing operations, the sa:es forecast is the basic

information input to the formulation of a production plan. Sales forecasting
refers to the ability of the owner-manager to plan in advance - by estimation
and calculation - the future sales volume of the firm and the resources and
activities needed to attain it. The increasingly scientific methods of esti-
mating future sales have provided smal 1-scale furniture manufacturers with a
more sure approach to setting sales goals. Although the results of these
initiatives may still, in many cases, bt: mere "guesstimates", such forecasting
is vital to the preparation of the firw' s budget and production plans. But
how does one prepare a sales forecast?

A variety of techniques are available, ranging from the highly intuitive

to the highly scientific. Simple approaches consider only a firm's production
in relation to its share of the market, while mort:: det.iiled approaches would
take into account the state of the economy and possible substitution by or of
the product manufactured. In the present publication, an attempt will be made
to introduce scientific, but simplifie:l, forecasting pi:ocedures. No matter
which procedure is ultimately chosen, however, the following should be kept in
mind:

(a) Whenever possible, scientific methods should be used to process sales

forecasting data. When using the scientific approach, "cause-and-effect"
relationships should be searched for which would justify or not the
results obtained;

(b) Sales forecasting techniques should be used only as tools. They are
"true" only to the extent that they are based on assumptions;

(c) Sales forecasting expenses should be kept to a minimum;

(d) The technique should be thoroughly understood by the user, who

shoi.:ld never, in any case, rely on the results of only ~me metliod;

(e) Results expressed in ranges are preferable to ;~solute values;

{f) Attempts should be concentrated on generating accurate forecasts for

the short term (some weeks or months). Long-term projections (e.g. 3 ye.irs or
more) should at best be considered mere prospects;

(g) The procedure should be subject to continuous revision and updating.

Figu'P 44 shows the various factord that can have a positive or negative
effect on future sales volumes.
 - 96 -

Figun..' -l-l. Factors aff1..Yting future sales in small-scale

furniture manufacturing finns

State of the Past sales Product ciesign,

economy and of volume trends and
the furniture season
industry
Long-term
sales trends

Competitors and
Production
FUTURE SALES ""'~--------- nature of
capacity competition

Quality of Pricing
sales force policies

Relative Advertising and

Market research product prom.Jtional
studies profitability ac ... vities

Sales forecasting techniques

The following forecasting techniques are particularly appropriate for

small-scale furniture manufacturing firms.

Executive judgement method

Essentially non-mathematical, this method begins with the firm's salesmen

b~ing askerl to submit their estimates of future sales. These are reviewed by
t>e salesmen's immediate managers, who may adjust them if it is considered
that the salesmen have tended to be too conservative in their estimates. The
final (managers') estimates are then transmitted to a special c01lllllittee
charged with drafting the final forecasts. (In very small firms, this func-
tion is assumed by the owner-manager.) The committee would likely be composed
of: the head of the marketing department; the head of the production depart-
ment; the company treasurer; the company president; and the company secretary.
The commitr.ee reviews, revises and adjusts the sales estimates in the light of
other factors that the salesmen and their managers have not been in a position
to consider, such as: expected changes in product design; possible increased
use of advertising; probable adjustments in selling price; planned improve··
 - 97 -

ments in project quality; expected rev1s1on of marketing strategies; and

probable economic Lhangt=s as a spin-off of changes taking place on the nation-
al scene. This finc.l revision rep>:esents the official sales forecast for a
particular product.

Derived demand method

Also non-mathematical, this approach is particularly appropriate for sub-

contractors who depend on orders from another company. The sub-contractor's
forecast could be based totally on the sales prvjection figures of the other
company. For example, a small firm producing wooden cases for a bottling
company can base its sales forecasts on the sales projections of the bottling
company.

Market indicators method

Market indicators are economic factors that influence the demand for a
product. In using these for ~orecasting purposes, the main idea is to obtain
the increase/decrease rate of sales volume. This is especially applicable to
products that be::tave according to a specific market indicator. A difficulty
in applying the method, however, lies in the fact that some products are
directly affected by a number of market indicators. Among the more co11111on
market indicators are: (a) ;>011ulation trends (population magnitude; birth
rates; death rates; marital trends; migration; age patterns); (b) construction
trends (private and public building); (c) foreign trade developments (import
and export activities); and (d) general economic conditions (increases in
gross national product, unemployment rates, inflation rates). In the case of
ftJrniture manufacturing, the volume of construction activity in an area can be
an indicator. Marriage and birth rates can also be used, but these tend to be
weak indicators.

Arithmetic method

If a firm has been in existence for some time, sales projections can be
based on past sales data. The objective in using historical figures analysis
is to compute average increases or decreases fer a given forecast period,
using the Sif'..ple Average Annual Increase (SMI) system, as shown in the fol-
lowing example;

The annual sales record of a small-scale furniture manufacturing

firm is:
Sales
Year (thousands of IC)
-1- 45
2 52
) 39
4 42
5 65

Using the arithmetic method, the following computations

art~ obtained;
(thousands of IC)
Salc5 1n year 5 - 65
S.'.1 les 1n ye.1r 1 = 45
Increase in 4 yPars' operation 20
 - 98 -

Thus, SAil = 0.5 (obtained by dividing the

increase by the y~ars of operation).

Sales projections

Year Sales
(thou-;;;~of IC)
6 70
7 75
8 80

Year-to-year change method

It will be observed that using the arithmetic method only the 1 ;i.st year
(5) and the first year ( l) were used in projecting the sales volume. The
years in-between were virtually disregard~d. In the year-to-year change
method, however, the changes (posi.tive or negative) are considered for each
period, as shown in the following example:

Year-to-year
Sales volume change Percentage
Year (thousands of IC) (thousands of IC) change
l 45 (base year)
2 52 +7 +15.6
3 39 -6 -13.3
4 42 -3 -6.7
5 65 +20 +44.4
Algebraic sum +18 +40.0

Thus, the year-to-year change of + IC 18,000 for a period

of 5 years - or IC 3,600 ?er annum - can he used in projec-
ting the sales volume. The average annual growth at 8 per
cent (40.0 - S) can likewise be used in forecasting sales.

The above are examples of possible techniques for sales forecasting. As

soon as the forecasts are finalized, the production plan can be prepared. At
this stage, instead of monetary units, the sales forecasts will have to be
expressed in production volume equivalents. This is accomplisheC: by consid-
ering the unit price of the product (for single-product firms) or the average
price of the product (for multiple-product firms) together with the sales
forecast results. Care should be exercised when using the average price for
firms whose prices vary significantly. Still another way of converting the
sales forecasts of multiple-product firms is to apply thP. perct>ntage distri-
bution of each product line to the total sales volume generated in the pre-
vious year. These percPntages can be used as the basis for determining the
contribution of each product line in succeeding years.

From job orde:s to production plans

Production planning for a continuous-type manufacturing operation is rela-

tively simple compared with that for a job-order production systP.m. This is
primarily because plar.ning ~ se tends to be more difficult in the latter
case. The basic information for the prepara· lOn of a product ion plan for a
job-order Ofoeration is entered in a procluctinn planning sheet, a model of
which is shown in figure 45.
 - 99 -

rroJu...:t ion planning sheet for a ~al l-s1.:all'

turniturc m.:mufaLturin~ f inn

1. Job order No. 5. Date received

1. Customer b. Volume needed
J. Address 7. Other information
4. Contact

8. Product spec1ficat~ons

8.1 Standard product lines 8.2 Made-to-orde1 products

~dditional specifications Product design/technical

(moisture content, finish- drawing
ing modification etc.)
Breakdo\oTTl of parr s/
Conditions of delivery components and fittinbs

Additional specifications
(type of materials,
finishing t>lc.)

Conditions of delivery

9. Materials list Unit Quantity/piece Tr~al quantity required

l. Wood and lumber mzterials

2. Upholstery materials
------------------!-----+---·---------- - - - - - - - - - - - - - - - - - !
- - - - - - - - - - - - - - - - --- - ----·-

____________________. _____._ - - - - - - - - - - -
3. Hardware
- - ----- - -------
----------------·------..---------------· -- - - -- -- --------
4. Othrr
- - - - - - - - - - ----------- ------ ----------------------- --
- - - - - - - - - - - - - - - - - ----- - ---------- -- ---- - - - - - - - - - -
•·

------------------- ____ . ___,_ ____ --------- -----

-----~----+-------------

-------------·---------~- ----------~------------------ -

---------- -------- ---------- --- ------

____ __________________...
---------- --- - -- - ------------·-----------------
,___
---------------------------- -- ----- --- ----------- ----------------· -----
~------~

I -------·----------- · - - - - - ---- ----------------- -- --------------1

 - 100 -

10. Manufactu1 ini; processes for standard prt>duct lines

Machines, Est 11.1ated Est1mat .. d i o t o ;

Manufacturing processes Jigs, fixtures machine-hours man-hours .--~-.a-c_h_1 r~:;~1-i.,,u~ ~--
to be used required required hou: s

------- -- --- ----- - - - - - -----------r----------+----- -

---- --- - -+ -- ---- - -- -
'
! - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - ,. . .--- ---- -- - - - - - . - - ----- l--
__
• - - - - - - - - - - - - - - __,~--------------~------- --- - ---

i,_:------------~---- l------_-_-_-_-_-_- _- _ -_-_-_______ -- . - - - - - ---

'-------------------~- ---- - - - ---~--- - - - - ----- - - -
;
- - - - - - - - - - - - - - - - - + - - - - - - - - - - - - - - - - - - -------+---------- -- ____.
>-------------------:-------------11------------1----------t-------~-~- - ---
---------..--- ------- - - - -
!----------------+-----------~--------- -- - - -----·-- - - -- - ------.. --- - ----

11. For made-to-order prodPcts

Machines, Est im.1ted Estimated

Parts Jigs, fixtures machine machine Estimated Tot;; l
to be used set-up hours man-hours
___________
,__ -- - - -
----- ----------- --- - - - - - - - --
~
-
-
-
,___ _____ ---- -

-------- - - -- - - - - - -----·t----- - - - - - - - - -

---
~----------- --- .,_ __ ---- --------t-------------
>---------------- ------- --

I,___ _ _ _ _ --+------------~------ - - -- ------- r - - - - ----- - .

!

~ote:
,_____ The estimated machine set-up time includes the time nePded for the trial run.

12. Adjuitm~n•s estimates

(allowances for non-availability, rejection rates, scraps etc.)

Machin1·-hours (1.e. allowances for power failure, machine breakdown etc.)

Man-hours {~bsencecis~. tardiness etc.)

--
----
----

13. Prepared by: 14. Ver i fit>d by: ----------- ___ _

~-~~~~~~~~-~-~~-1-~----A-p~p-r_o_v_e_.d~-b-y_:_~_-_-_-_~~~~------~---~--~----===~~----~.~~-~~-____J
 - 101 -

The production planning sheet inquires (item 8) whether the product needed
is standard or made-to-order. If standard, then besides the materials (item
9), the manufacturing processes - including the machines and equipme~t needed
- will have to be listed in detail. In firms using relatively sophisticated
techniques, index cards may have to be consulted when filling in the manufac-
turing processes columns (item 10). The index cards should contain details of
all standard product lines carried by the firm. For :ton-standard products,
item 11 should be filled in. Various adjustments can later be made (if neces-
sary) to allow for unexpected delays. Records of these adjustments will help
the owner-manager in future estimating of realistic delivery dates.

Again, in the more sophisticated, medium-sized firms, a card detailing the

process flow of the product is preparec. This accompanies the components
throughout the factory, se:rving to inf on•. workers about the next operation,
how the machine is to be s~t up, which jigs to use etc. This card also states
the exact operation to be carried out on each machine, describing the special
tools or jigs that may be needed. A space is usually provided for the workers
to initial when an operation has been completed, or to list the starting and
finishing times of pieces machined if they are working on a piece-rate basis.
As a rule, this card is encased in a plastic folder bearing a dimensioned
sketch of the finished component, enabling the operator to set the machine for
each operation.

After capacity, availability and other adjustment factors have been taken
into account, the scheduling process may be started. The objective of schedu-
ling in manufacturing, whatever the scale, is to prepare, allocat~ and make
available all the physical inputs needed in the manufacture of goods or the
provision of servires, in order to ensure that:

(a) All job orders are executed in the shortest possiole time;

(b) Estimated delivery dates are based on reliable information;

(c) A continuous supply of work flows to each process; and

(d) Plant sup~rvision can be kept to a minimum.

Figure 46 gives an example of a general production plan for a job-order

system. Such plans must not be too rigid; there should be leeway for any
revisions that may have be made if:

(a) A new product (or job order) is added;

( b) Chang£.3 are called for in the design of a product (the result, for
example, of rationalization, standardization or product adaptation efforts,
cost effectiveness schemes or productivity studies);

(c) A n2ed is seen to reduce production costs (through greater utiliza-

tion of existing facilities) or to minimize labour or materials costs;

{d) Procecses, equipment or methods 9ecome obsolete;

{e) It is decided to introduce more effective supervision a~d production

control.

Plans may be revised through (a) periodic adjustments (in small plants that
change products and acce?_'>t job orders at regular intervals); (b) continuous
adjustments (in smal 1 firms employing job-order systems with very short pro-
duction cycles); or (c) accidental adjustments (upon discovery, in the course
of production, of new or improved methods or processes).
 Figure 46. Production plan for a job-order manufacturing system

First
Date M;.rn- Machine- Volume machine
Job order Date of Quantity Haterials hours hours per loading Production
No. received delivery required required l!Stimate estimate week date to date

---------
.....
0
N
-- -

··----·

-·

...______ ~L---
--
~
 - 103 -

Basic production control procedures

Basically, production control means regulating, synchronizing and co-

ordinating all the activities involved in manufacturing in order that delivery
dates can be met, plans implemented with optimum efficiency and economy, and
the right quality achieved using minimum capitd investment. All furniture
manufacturing companies, big and small, are beset by th~ following problems:

(a) How to satisfy customers' delivery and quality require~ents;

(b) How to reduce production costs, thereby lowering ':he price of the
product;

(c) How to maintain a minimum !evel of capital investment;

(d) How to streamline the production cycle.

These problems sometimes seem insoluble, as they appear to be inconsistent

with one another. Salesmen and other marketing staff clamour for quick deliv-
ery, production personnel for more time, and financial staff for reduced
capital expenditures.

The basic elements of a control system must be present in production

control. Figure 47 illustrates the basic production control co::::ept. Here,
subject to control is the rate of production that will permit the realization
of all delivery commitments at a relatively low cost. A daily production (or
accomplishments) report should be prepared in order to keep track of the day-
to-day rate of production. This report should tally with the production plan
(which outlines the desired rate of production). Deviations from the produc-
tion plan are recorded in a daily production variance report. Each deviation
must be explained by the persons responsible, who should, besides,take the
necessary corrective action. The production plan may sometimes need to be ad-
justed in the light of information acquired subsequent to the production plan-
ning stage. Production control is a continuous pr<'":.Ss of adjus:..ing the
actual production rate to measure up to the desired one.

Very small firms may consider that the basic pre.:-« ction control. concept is
too sophisticated for their needs. Ir this event, a ~tmpler approach could be
employed, based on the use of a "production monitor chart", as explained later
in the present chapter. In general, an efficient production control system
helps to: systematize job-order scheduling; optimize the utilization of men
and machines; provide better control of work methods; maximize workers' satis-
faction, besides increasing their effectiveness; minimize waste; and bring to
light more profitable options for m~nufacturing specific products.

Order and flow production control systems

There are two basic production control systems: order control and flow
control. The two systems exist because there are two general types of manu-
facturing process: continuous and intermittent. It is difficult, however, t~
classify companies by type of manufacturing process, since some use both.

Order control system

A firm uses the intermittent process wt.en it;

(a) Manufactures wide varieties of products per order;

(b) Manufactures small quantities of units that are seldom re-orders;

 Figure 47. Basic stn..icture of a production control system

Production plan
Daily production report
Date: (standards)
Subject to control \ Depts. Production to date Remarks J)epts. Production target Reraarks
)
•
-- --
)

j Rate of production
output -==::::
l ... .LA • -- - - --'i'
- ~;'
/
_/
_/
_/
I
I
......-- -
_/

--
~
_/

------ 1
i.---
I ....
0
l:-

... l.-
'I
I

'Il
... i,

Areas to be controlled Persons responsible Daily production variance report

Production Variance
Continuous supply of Depts. Production to date
raw materials
Purchasing officer target I
L-
I
~ I
Breakdowns oi machines
and equipment
'
_...- --- --- ~
I
Plant supervisor ~
~

l
'--"" --- r
I
Recorder (clerk)
-- I
L------------------~
 - 105 -

(c) Uses multi-purpose machinery and equipment ia the processing of its

products;

(d) Is laid out along the lines of the production process;

(E) Bases its manufacturing activities on past sales records.

These cases call for the application of order control.

A feature of tho? order control system is that the process of production

control actually starts with the signing of the contract or agreement between
the firm and the customer, regKrding the type, quantity and quality of pro-
ducts to be produced, and the delivery date. The elements of this agreement
are embodied in the Production Planning Sheet (see again figure 45) - and
sometimes in the Job Order Sheet. A routing scheme may subsequently be de-
vised showing the most appropriate flow of materials within the plant in light
of the various manufacturing processes required. The estimated time, raw
materials and the machine-hour requirements for each manufacturing step invol-
ved in a specific job-order should be included in the routing scheme. This
wi~l lead to the establishment of an effective production schedule, and ensure
that products will arrive at the finished goods storeroom on the date stipu-
lated. To guarantee the success of this operation, the following steps should
be taken:

(a) The product should be divided into its major and minor components and
the decision made as to whether to make or buy them. This means determining
in advance which parts or components it would be economical for the firm to
make and which could be more economically bought outside.

(b) The owner-manager should make himself thoroughly familiar with the
alternative ways of delivering the services stipulated in the job-order, in
order that the most economical process w~ll be selected ~~ior to inserting the
job-order in the production system;

(c) It should be ascertained that the various procurement lead times for
the required raw materials are realistic;

(d) The situation regarding job orders in process, as well as those

scheduled to be processed, should be care fr 1. ly -:Jnsidered before fixing a
schedule for the new job order.

At this point, a formal schedule is prepared, preferably using a Gantt chart

or the PERT (Programme Evaluation and Review Techniques) Network Analysis.

The Gantt chart shows, in descending steps, all the time and activities
involved in a p.ocess, from the procurement of the raw materials to the com-
pletion of the product. In furniture manufacturing, two type& of Gantt charts
may be employed: a machine record chart and an operator record chart. Both
use similar procedures and differ only in the type of "causes" of failure to
meet production plans. An exampie of a Gantt chart for a particular job order
is shown in figure 48.

The PERT Network is a logical representation of the sequences and proce-

dures involved in all the manufacturing activities associated with a given job
order, using PERT principles of programming. At the moment, the PERT Network
is applied only in sophisticated medium- to large-scale furniture
manufacturing plants.
 - 106 -

Figure 48. Gantt chart (operator record type)

Day number ~

21 22 23 24 25 26 27 28 29 30 31

Job order SSS

Operator
Operator 2
Operator 3
Operator 4

Operator :.

Causes of delay
Operator absent
Date
Planned time for job order Power failure
Actual time for job order Tools jigs not available
Machine breakdown
Accident

The scheduling process will never be completed satisfactorily unless a

production monitoring chart is employed which illustrates the stage-by-stage
completion of the various job orders. Figure 49 shows an example of such a
chart. Out of this production schedule will evolve a summarized report on the
process of every job being processed. A format of a typical such report is
shown in figure SO.

In dispatching, which follows scheduling, the primary aim is to maintain

lines of cormnunication with all those concerned in the manufacturing processes
to ensure that materials and products move from process to process as planned
and on schedule. Dispatching involves;

(a) Co-orainating all production schedules prior to their release to the

various departments concerned;

(b) Machine and manpower loading, which means assigning specific jobs to
specific machines and workers;

(c) Reporting and arranging feedback on the status of each job order
being processed in the plant;

(d) Controlling work-in-process. This task involves assuming respon-

sibility for uncompleted w'>rk after a certain date, reporting the level of
work-in-process, the amount requiring re-work and the amount of scrap mater-
ials generated.
 - 107 -

figure 49. Production monitoring chart

PRODUCTION MONITORING CHART

Month of January

Job order
No. 2 3 4 5
....
b 7 8 9 10 12 12 ~ 31

xx xx:.>

xxxx4

xxxxb

Kev;
__._ Planned production (in units}

Actual production t~ dGte

Date today

.;ut>-or<lr-:- proccs:,1111; report for t11e month of •••

Cusc 01c1er Jub order No. Past due Th1!0 week

-------- --------·---·----------~-------+----------!

------------ - - - - - - - - - - - - + - - - - - - - - - - - - - - - - - - - - - - - - - -+-----
-------- ----- --------·- -------- -- ----------
,__ ________ -- ------ ------
~---

. ---- - -- -------- ---------

------ - ---~- ---- ---·- - - - - --- - ----------- ~·------ - -·----------!
- ---------- ---- - -- -------- ---------+----------
- - - - - -·- .____ ____________._______ --------~-----------------
r - 108 -

If the production plann:ng ar.d control functions of an intermittent manu-

facturing operation have been wel! laid out, "expediting" should not be neces-
;:;ary. This, however, is seldom the case: schedules are not adhered to,
reachines break down, and other production mishaps occur - hence the need for a
production expediter. Production expediters have an intimate knowledge of the
firm's products, processes, machines, routing schemes etc. in order to be able
to predict and forestall the occurrence of production set-backs.

Flew control system

The flow control syst~m is applicable to small firms that employ the con-
tinuous manufacturing process. Such firms are generally characterized by;
th~ large-volume production of standardized products; the departmentalization
of the plant by product; the use of special-purpose machines; the tendency
towards long-term sales contracts; and production for stock.

The primary function of flow control is to provide adequate control of the

rate at which a product or material "flows" through the firm. A firm employ-
ing the continue.us manufacturing Frocess can reap the economic advantages of
the mass production system - i.e. speed, low inventory in ptocess, low unit
costs, simpler supervision, a:id simple production control met:10ds. Even if
flow control is relatively limited in application vis-A-vis order control
(e.g. in intermittent manufacturing) the basic elements remain the same;
routing, scheduling, dispatching and expediting.

In continuous manufacturing, the product ion department must be told what

to produce, in what quantities and by what date. Continuously manufactured
products are usually standard products, i.e. they are produced for stock and
not against customers' orders. The rate of manufacturing will be based on the
company's sales forecasts.

The basic elements of flow control are routing, scheduling and dispatching.

Routing. Th~ production S{aff must be familiar with the different pro-
cesses involved in the manufacture of the product. This is important because
the processes may require special parts and tools.

Scheduling. As mentioned earlier, the scheduliug of continuous man<Jfact-

uring is much easier than that of intermittent manufacturing. The Gantt chart
lends itself well to flow control methods. In addition, however, charts to
monitor production progress shou-d be used. Figure 51 shows two examples of
production monitoring charts for continuous-type furniture manufacturing.
Critical to effective scheduling is the procurement, in good time, of all the
necessary materials, so that the production processes will not be hampered or
delayed.

Dispatching. After the operating schedules and plans have been consid-
ered, the production control department contacts the purchasing department
regarding the procurement of the raw materials. It then gives the production
personnel instructions on the manufacturing processes to be ..?mployed. For
continuous manufacturing, these instructions will be relatively complicated.
For this reason, most sm2ll companies engaged in continuous manufacturing do
not employ dispatch forms.
 - 109 -

Figure 51. Prodt•ction monitoring charts for continucus

furniture manufacturing

Ex.ample A

Production
capacity
time
(one shift)

Planned
product ion
Actual
Production production
(in units)

l..l j- Time (days}

Example B

Planntd production

Production

,,,.,.., ,,
(in units) Cumulative
actual product

,,..-"'
------ -- ----
Time
(days)
 - llC -

Figurl' ~'-. R1..' 1 a t i on sh i p ht' t \' e c n prod u (" t i on p 1 an n i n ~ an J ,_. on t r o 1

anJ h"itl; areas of the fi1-r1

Delivery

Lust orr<e t ..:<:-------------------- Marketing sales persun

• Spee i t y 11tt1..-: s 0bt.:i1111clar11y 11e<'Cs
L. L·. pr•)<luL t, quant l t y.
qual1ty, 1l<-l1v.·ry c:.:-.tt·
etc.

P1uuuct1un, pi;;1:11e1
Sp1....:ity p:·oJu..:t
1
desq;n, proLt.'~" .J1.."ifn,-----1
ruutu1i;, ;;..:t1v1ty, parts, I
tools t:tc.

l estir.:.lt,_·

t' I \Jt; t; ·..: t l 1 i:, l': • ~ ! 1 •

~1un1tu: ... x,-..:uti1·r.

l' t ddUi.... l l 1HI r.~.-!rl~;:L' ! "~ ! r: ..-1:!u ! act u r l :~1·

I J!lUt'1 ·•t>pruVt: Oilit·I

manlitiH: tur 1t1g

Finance
Al locate funris

l
StorPk•:t'p<'l / ;iurct1as l nt.;
!Jct .. rm1n•· wl:;,it n,;,r,·rial
is av<.11L1bl1· and wi1.it should
be pru..:urt-<l
 - 111 -

Production planning and control and its links with other

areas of the firm

Production planning and c<>ntrol activity is a critical element of the

"creative" function of a furniture manufa·:turing firm (figure 52). It is the
connecting link between the marketing and the production phases - a link that
starts with the marketing department's job of determining the quantity, init-
ial specifications, and delivery time of the product. This information is
forwarded to the production planner who is responsible for, or who co-ordin-
ates, the product anJ process designs; routing activities; parts and tools
listing; and the building of a prototype or model of the product. The pro-
duct ion planner then forwards his findings to a cost engineer or a cost ac-
countant who will estimate the cost of manufacturing the product. In small
furniture manufacturing fi~ms, the estimates are usually furnished by the
production managers o;r the product designers.

The cost estimates are then forwarded to the finance department in order
that funds may be appropriated for the manufacture of the product. The list
of material anc parts rr~uirements is sent to the storekeeper who subsequently
reports to the purchas1"g department (under finance) on \ollaat materials and
parts are out of stock and need to he procured. The purchasing department
buys or otherwise procures the materials and parts needed. The agreed deliv-
ery date is passed on tc the production control department which will be in
charge of routing and scheduling the manufacture of the product. Dispacching
activities in a small firm are usually handled by the production manager.

Notes

1/ Un less otherwise indicated, in this manual tr.e term "small-scale" is

used-;- for brevity, to cover family, small or medium-sized enterprises employ-
ing up to 100 people.

'2./ Small-scale furniture manufacturin;; firms are assumed to develop in

stages almost parallelling tho~e in the life cycle of the product: intro-
,juction; growth; maturity; and de-ay. In some cases, an idea or conct>ption
stage precedes the introauction stage.

3/ One definition of specialization that h ·S proved 11seful fur smal 1-

scale industries has bePn the ability of a relatively small firm tl1 concen-
trate on using its limitf'd resources to produce as !im1ted a product 11nf' as
possible in areas where it has a distinct .1dvantage. The degree of applica-
tion of the conc.~pt of specialization may be measured using the following
ratios:

Sales generatPd by the

market sPgment having the
(a) Market specialization highest sales volume
ratio Total sales volume

Sales generated ty the procc~s

(b) Proce3s specialization having the highest sales volume
ratio Total sales volume
 - 112 -

Sales generated by the product

(c) Product specialization having the highest sales volume
ratio Total sales volume

The values of the specialization ratios may range from a high of 1.0 (indicat-
ing highly specialized firms) to O. (See also Eduardo Q. Canela, "Making sub-
contracting 1o1ork", Small Industry Journal, December 1981.)

4/ See Canela, loc. cit.

S/ Specific types of production management problems are touched upon

elsewhere in this manual as follows: planning related problems, chaps. I-V
and VllI; control-related problems, chaps. llI, IV, VI-Vlll; productivity-
related problems, chaps. V-VII; organizing, directing and integrating related
problems, chaps. I arJ VIII; and technology-related problems, chaps. I, V and
VI.

b/ A simple sorting/clzssification technique, the Pareto Principle can be

used with good effect in other areas of furniture manufacturing.

7/ Low Cost Automation for the Furniture and Joinery Industry

( ID/TS4/Rev. 1).

8/ The principles of motion economy and workplace layout and design have
been taken from the International Labor Organisation, Introduction to Work
Study, 3rd ed. (Geneva, 1979). Only those principle:; directly applicable to
small-scale furniture manufacturing firms have been selected. Readers should
refer to the ILO publication for the complete listing.

9/ These codes provide a rough guide as to which size or type of furni-

ture-manufacturing firm each principle is most likely to be applicable; A =
Job-order, small to very small firms; B = Rigid-mass production or medium-
sized firms; and C = fairly large-sized firms, probably using a flexible type
massproduction system.

10/ Introduction to Work Study classifies the movements of the human body
as fOTlows (see p. 157).

Class Pivot Body members moved

l Knuckle Finger
2 Wrist Hand and fingers
3 Elbow Forearm, hand and fingers
4 Shoulder Upper arm, forearm, hand and fingers
5 Trunk Torso, upper arm, forearm, hand and fingers

11/ The specific technique used, known as ''value analysis/value engin-

eering", attempts to determine the cost-function relationship of the parts and
materials used in a product. For a more detailed discussion, see: Lawrence
[), Miles, Techniques of Value Ana~ysis and Engineering, 2nd ed. (New York,
McGraw-Hill, 1972) and Manual on Value Analysis (I0/298).

12/ For information on the statistical and monogram methodi of C:etenn-

ining the number of observations to be made, see Introduction to '..lork ~;4dy,
pp. 196-191:1; for instructions on making random observations, se.? pp. 198- L: •

13/ See Introduction to Work Study on the dete•mina;ion of sample size

for time studies (p. 230). See also Raymond Mayer, !!_oduc~ion ar.d Operatior1s
Manilgement, 3rd ed. (New York, McGrair-Hill, 1975), pp. 5,6 to 517).
 - 113 -

14/ By a standard le·.-el of perfonnance is meant the average output which

qualified workers will naturally achieve, without over-exertion, in a working
day or shift, provided they are familiar with and adhere to a specified method
and are sufficiently motivated to apply themselves to thei~ work.

15/ Introduction to Work Study, p. 2~9.

16/ Ibid., pp. 266 and 268. This publication also provides details on
how to estimate their allowan~es.

t7/ Manual on Value Analysis (ID/298); and Low Cost Automation for the
Furniture and Joinery Industry (ID/154/Rev.l), pre:pared by W.J. Sant1ano and
H.P. Bnon.
 - 114 -

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 I
- 115 -/ i.
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 - 117 -

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90 p. (ID/275)
 - 118 -

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Wooden bridges. UNIDO's prefabricated modular system. January 1984.

16 p. (PI/88)

Wood processing for developing countries. Report of a Workshop, Vienna,

3-7 November 1975. October 1976. 79 p. (ID/180)

UNIDO guides to information sources. No. 4: Information sources on the

furniture and joinery industry. (UNIDO/LIB/SER.D/4/Rev.l) (ID/188)
Currently out of print.

No. 6: Information sources on industrial quality control.

November 1980. 71 p. (UNIDO/LIB/SER.D/6/Rev.l) (ID/256)

No. 9: Information sources on building boards from wood and other

fibrous materials. (UNIDO/LIB/SER.D/9)
Currently out of print.
 - 119 -

No. 18: Information sources on the paint and varnish industry.

(UNIDO/LIB/SER.D/18) (ID/150)
Currently out of print.

No. 31: Information sources on woodworking machinery. October 1978.

100 p. (UNIDO/LIB/SER.D/31) (ID/214)

No. 35: Information sources on utilization of agricultural res dues for

the production of panels, pulp and paper. November 1979. 99 p.
(UNIDO/LIBiSER.D/35) (ID/234)

No. 36: Informatio;! sources on industrial maintenance and repairs.

November 1979. 88 p. (UNIDO/LIB/SER.D/36) (ID/236)
 .t~~
UNIDO
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.....-,.~

UNITED NATIONS INDUSTRIAL DEVELOPMEN1 ORGANIZATION

Telex: 135612 Cables: UNIDO Vimna Fax: 232156

UNIDO GENERAL STUDIES SERIES

The following publications are al'Oilable in this series:

Title Symbol Price ($US)

Planning and Programming the Introduction of CAD/CAM Systems ID/SER.Oil 25.00
A reference guide for developing countries

Value Analysis in the Furninu-e Industry ID/SER. ':J{l. 7.00

Production Management for Small- and Medium-Scale Furniture

Manufacturers ID/SER.0/3 10.00
A manual for developing countries

Documcntalion and Information Systems for Furniture and Joinery Plants ID/SER.0/4 20.00
A manual for developing countries

Low-cost Prefabricated Wooden Houses ID/SER.0/5 6.00

A manual for developing countries

Technical Criteria for the Selection of Woodworking Machines ID/SER.0/11 25.00

Forthcoming titles include:

Timber Contrucrion for Developing Countries ID/SER.0/6 10.00

Introduction to wood and timber engineering

Timber Construction for Developing Countries ID/SER.on 20.00

Structural timber and related products

Timber Construction for Developing Cowirries ID/SER.0/8 11.00

Durability and fire resistance

Timber Construclion for Developing Countries ID/SER.0/9 16.00

Strength characterislics and design

Timber Construclion for Developing Cowitries ID/SER.0/IO 10.00

Applications and examples

Design and Manufaclure of Bamboo and Rartan Furniture ID/SER.0/12 2'.'i.00

Please odd SUS 2.50 per c<>py to cm·er postage and pocking. Allow 4-6 wee/cs for deli~·ery.
 ORDER FORM
Please complete this form and return it to:
UNIDO Documents Unit (F-355)
Vienna International Centre
P.O. Box 300, A-1400 Vienna, Austria

Send me _ _ _ copy/copies of _ _ _ _ _ _ _ _ _ _ _ _ _ - - - - · - - - - -
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PAYMENT

D I enclose a cheque, money order or UNESCO coupon (obtainable from UNESCO offlC8s
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D I have made payment through the foftowing UNIOO bank account: CA-BV, No. 29-05115 (ref.
RB-7310000), SchoHengasse 6, A-1010 Vienna. Austria.

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Tel.: (212) 963-8302 Tel.: (22) 34-60-11, ext. Bookshop

KC-'-------------------------------------~-