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An Entrepreneurship Business Model, Inventory Management,
Distribution and Forecasting Planning of “Hall of Wander”
Course: Operations Management: MGT314. 10
Date of Submission: August 20, 2017
Submitted To
Nafish Sarwar Islam
Lecturer, Department of Management
SBE, North South University
Submitted By
Name ID
Md. Naimul Hossain Bhuiyan 152 0482 631
Rifat Hossain Khan 141 1038 030
Maisha Noshin 141 0889 630
Sakib-Ur-Rahman 123 0627 030
Md. Rubaiyat Khan 121 0124 030
Md. Mahmud Morshed 111 3290 030
Jannatul Ferdoushi 133 1014 630
2
Acknowledgement
Firstly, we want to thank Allah for giving us the strength and ability to complete this project. Our
sincere thanks go to our honorable faculty member Nafish Sarwar Islam for his support and
instructions in preparing of this paper. Without his continuous support and guidelines this report
would not see the light. We also want to thank our family members, classmates and friends for
their tremendous help, support.
This report is regarding to production process of “Hall of Wander” in Bangladesh. We hope we
have done a sufficient job considering our level of knowledge, experience and expertise. Finally,
we pray and hope that our hard work and whole month night and day effort will be at least catch
up your expectation from us.
3
Letter of Transmittal
August, 20, 2017
Nafish Sarwar Islam
Lecturer,
SBE, North South University
Subject: Submitting the report on "Production Process of Hall of Wander".
Dear Sir,
It our pleasure to inform you that we, the members of our group have successfully completed our
report which you authorized us. We have tried our best to fulfill the every requirement of this
report by engaging ourselves seriously to prepare this report. This report makes us able to
understand the core concepts of “Operations Management” which we hope it will be very useful
in our professional life.
Under this circumstance, we would be greatly happy if you kindly accept the result of our hard
work and appreciate us for the future purposes.
If you have any enquires after reading this report you are welcome to contact us. Thank you.
Sincerely,
Md. Naimul Hossain Bhuiyan
Rifat Hossain Khan
Maisha Noshin
Sakib-Ur-Rahman
Md. Rubaiyat Khan
Md. Mahmud Morshed
Jannatul Ferdoushi
4
Executive Summary
We are going to introduce "Hall Of Wonder" which is a new T-shirt manufacturing company in
the RMG sector of Bangladesh. It aims to be one of the best companies in the Bangladeshi RMG
market. We are going to offer best products with a competitive price and product quality to grab
the market and a large number of loyal customers. We have strong marketing, SCM, HR,
operational, organizational, financial and promotional plans of building a T-shirt manufacturing
company. The report divided into 6 part at first part we are Describe your product and its
distribution center(s) along with a creative mission statement of our organization. Second part we
develop an Optimum Layout for our Organization That Highlights At Least Major Departments.
Third 3Predicting the Market Demand and Selecting the Feasible Method for Forecasting. Forth
Part we did proposing method to ensure the quality of our product (Quality Chart: C-chart. Fifth
part we ABC Classification Inventory of “Hall of Wander and final part of our report hold develop
a Gantt chart along with either work breakdown structure or project network diagram to find out
the estimate time required to launch your product.
5
Table of Contents
Contents Name Page No.
❖ Description of Our Business and
Product
6
❖ Brief Overview of the 4P(s) of the
Company, Mission, Vision, and
Objective of our Business
7-11
❖ An Optimum Layout For our
Organization That Highlights Major
Departments
12-15
❖ Predicting the Market Demand and
Selecting the Feasible Method for
Forecasting
16-19
❖ Proposing method to ensure the quality
of our product (Quality Chart: C-
chart)
20-22
❖ Overview of Planning To Maintain the
Inventory of our Product
23-27
❖ Developing a Gantt chart along with
Project Network Diagram and
estimate time required to launch our
product
28-29
❖ Conclusion 30
❖ References 30
6
Description of Our Business and Product
"Hall Of Wander"
Bring It On
We are going to introduce "Hall Of Wonder" which is a new T-shirt manufacturing company in
the RMG sector of Bangladesh. It aims to be one of the best companies in the Bangladeshi RMG
market. We are going to offer best products with a competitive price and product quality to grab
the market and a large number of loyal customers. We have strong marketing, SCM, HR,
operational, organizational, financial and promotional plans of building a T-shirt manufacturing
company.
Currently, there are various brands are available in the market. Availability of lots of brand in the
market makes confusion in the customers' mind. People always find comfortable fabric as their
clothes. Set an affordable price for different sort of people is also an important issue to starting a
business. People always want to get good quality fabrics at a low price. People also follow brands
marketing strategies, how it attracts customers. To implement a profitable business, business
should introduce proper supply chain in the organization from its suppliers to consumers keeping
every sort of realistic thing in our mind, we are going to introduce comfortable fabrics in our
production process. As a new business, it is our responsibility to provide comfortable products to
customers. Our management and finance team working on the production process, try to set best
possible acceptable price for customers. To ensure quality we are also focused on our suppliers,
labors, machines. By introducing proper pricing, good quality, good inventory, and layout
management our business can achieve success.
We believe that with the enriched business knowledge and experience of partners and the proper
implementation of plans would emerge our brand in the Bangladeshi RMG sector successfully.
We also believe that we will also achieve trust and reliance of the customers with its unique quality,
marketing strategy, and competitive price range.
7
Brief Overview of the 4P(s) of the Company, Mission, Vision, and
Objective of our Business
Mission Statement:
To provide good quality of T-shirt with the best affordable price and good quality & consistency
is our comment to our customers and also brings the good return on investment for the investors.
Vision Statement:
By the of the year of 2020 we will be to hold most of the market share of T-shirt though out our
good quality, consistency & our comment to our customers is our business idea that match with
our mission statement as well.
Business Objective:
✓ Creating a positive brand image in the customer mindset
✓ Becoming a leading force in the Bangladeshi T-shirt RMG sector in next 3 years
✓ Providing good quality, consistency and unique T-shirt an affordable price
✓ Creating strong customer relationship
✓ Gain more market share
Marketing Mix (4P's):
To market a product or service Marketing mix is the main strategy, which will help the marketer
to introduce their product, price, place, and promotion. These are the four elements of the
marketing mix. Our 4Ps strategy will definitely justify our mission, vision and business objective.
Product:
"Hall Of Wander" is a unique combination of T-shirt that can be offered to a market for attention,
acquisition, use that might satisfy the customer desire want or need. We are making three different
sizes of ‘Hall Of Wander' T-Shirt
8
• Small
• Medium
• Large
We making various different colors of T-shirt for according to the different size.
Price:
Price is the amount of money charged for a product we are producing a good quality product so
our pricing strategy is market penetration pricing.
Small Medium Large
Fabric 1.1 Yard = (50*1.1)
= 55 Taka
1.2 Yard=(50*1.2)= 60
Taka
1.3 Yard=(50*1.3)=65
Taka
Hang Tag 2 Tk/PC 2 Tk/PC 2 Tk/PC
Care lebel 3 Tk/PC 3 Tk/PC 3 Tk/PC
Size lebel 2 Tk/PC 2 Tk/PC 2 Tk/PC
Design printing 10 Tk/PC 10 Tk/PC 10 Tk/PC
Logo Printing 5 Tk/PC 5 Tk/PC 5 Tk/PC
Wash 10 TK/PC 10 TK/PC 10 TK/PC
Packeging 1 Tk/PC 1 Tk/PC 1 Tk/PC
CM 10 Tk/PC 10 Tk/PC 10 Tk/PC
TOTAL 98 Tk/PC 103 TK/PC 108 TK/PC
Place:
Place means the distribution channel. To make our Hall Of Wander T-shirt available in the market
a set of an interdependent organization that helps make a product available for use. Between
manufacturer and retailer that is the wholesaler.
9
So we will use this distribution channel for rest of our target area except Dhaka. Sometime
wholesaler create some problems to eliminate all the noises we want to have a good
communication and by monitor them properly with strong structure management. We are
manufacturing Hall Of Wander T-shirt at Dhaka cities so we want we eliminate the wholesaler
because Dhaka is our main targeted area so we want to control Dhaka by ourselves. For each target
market, we will use our own transport system our company has enough sufficient delivery van to
make our product available in time
To provide our product we have to build some warehouse or distribution center. Initially, we will
open three distribution center.
▪ Distribution center 1: Dhaka- for the middle part of the country
▪ Distribution center 2: Sylhet- for the North East part of the country
▪ Distribution center 3: Chittagong- for the Southern part of the country
10
Promotion:
Promotion of our product is one of the necessities for getting our brand in front of the public and
attracting new customers. Since, it is a new brand in the market, so, the promotional stage is really
the most challenging factor. We have to do advertising with our limited budget.
In the following, we have shown a good amount of budget to promote our brand in order to beat
its competitors.
Tools Budget Tools Budget
Online media 20% Campaign 15%
Newspaper 25% Consumer Promotion 5%
Billboard 15% Celebrity
Endorsement
10%
Trade promotion 10%
This budget is for first three years. Therefore, within this time we want to reach our break-even
units.
Online media:
Nowadays, companies use various social media in a great way to promote products and services
in a more relaxed environment. This is direct marketing at its best. We decided to promote our
product through Facebook page, interstitial ads, online banner ads etc. Besides, we will have our
own pages in different social media. Therefore, we keep 10% of our budget for online media
advertising.
Newspaper:
Everyday about three million people read newspaper in our country. Therefore, print media is a
very strong source of advertising in this area. We decide to advertise in some leading Bengali and
English newspaper that may cover minimum 1 million reader. This is comparatively more
expensive so, we want keep 25% of our budget for it.
11
Billboard:
Billboard can make an appeal in our targeted customer’s mind. Therefore, if we can establish some
billboard in important areas in our targeted cities (Dhaka, Chittagong, and Sylhet) then those will
greatly help to promote our brand.
Trade Promotion:
Trade promotion is a business-to-business marketing. Trade promotion means discounts,
allowances, rewards and other incentives go to the wholesalers and retailers. If they get a good
amount of incentives regularly, they will be motivated to sell our products. For this, we should
keep 10% credit from our budget.
Campaign:
Campaign is a quiet good source of promotion. We want to campaign in leading schools, colleges,
and universities. We also want to do a campaign in our targeted area. In important festival like
Pahela Baiskh, we can arrange some different campaign such as we can arrange some funny games
for university students.
Consumer Promotion:
Consumer promotion means give something free or give some discount to consumers. We can
allow some discounts; buy one get one-fee deal to attract our customers. If they get these incentives
now and then, they will be pushed to buy our product.
Celebrity Endorsement:
A good celebrity endorsement is as important to a startup brand as a business plan and a great
product. We want to do sponsor in school and university level cricket, football and other
tournaments. If we can make a better profit after our break-even then we want to sponsor national
and international level cricket tournaments. So, from that budget we want to make our brand
ambassador. We will go for our ODI cricket captain Mashrafee Bin Mortaza as our brand
ambassador. In order to do this we need good money and that’s why we keep 10% credit from our
budget.
12
An Optimum Layout For our Organization That Highlights Major
Departments
Location Selection Method:
The Center of Gravity Method:
We have to select the location of most efficient and economic place for the distribution point. For
this, we need to use the center of gravity method. Firstly, we have to find out the longitude and
latitude of the potential market places. On the other hand, the market demand of those places is
also required to accomplish the calculations.
Potential Market Areas Location
(Latitude, Longitude)
Demand (Units)
Dhaka 23,90 2000
Chittagong 22,91 1500
Sylhet 24,91 1000
Calculation
Cx = (23*2000) + (22*1500) + (24*1000) /
(2000+1500+1000)
=22.89
Cy = (90*2000) + (91*1500) + (91*1000) /
(2000+1500+1000)
= 90.56
From the above calculation, we found that Cx having a point of 22.89 which is more close to
Dhaka more over Cy is also having a point of 90.56 which is more close to Dhaka. By using the
Center of gravity method we can select Dhaka place closest to the city as our distribution center.
13
So 22.89 is the exact place where our distribution center should be located. From this place the
operation of distributing the goods across all the market place such as, Dhaka, Chittagong &
Sylhet, will be much efficient and economic.
Layout of the Company:
The layout design of Hall of Wander Company should be considered as a smart decision system
as it includes essential departments. The main departments of this company are Design &
Sampling, Manufacturing, Warehouse Racking, distribution, equipment maintenance, finance &
accounts and HR/ admin department etc.
Design & sampling Department: The function of this department is to design the product after
getting clarification about style details from merchandiser. To get the buyer’s approval they
prepare different samples.
Manufacturing Department: Since we are starting a new company, so at first we will go for
small-scale production. We will also outsource some production when demand will be more.
Starting from raw material, we will run the production in a very organized way to the finished
goods. The sub-departments under which the production occurs are given below:
Warehouse: The responsibility of this department is to monitor the manufactured goods before
the distribution for sale.
14
Distribution Department: This department will supply the demands according to the demands of
the wholesalers and the retailers.
Equipment maintenance: The equipment maintenance department keeps all the necessary tools,
such as, small carts, cranes, lifters, office equipment, gadgets & software, and tidy in one place.
The maintenance engineer will monitor the equipment.
Finance & accounts: They will handle the budget plan, forecasting demand etc.
HR/ admin: Their function is to recruit new employee for the company and measure the
performance of existing employees.
We keep our inventory fabric & accessories according to our production required. We also have
unit named by pattern & cutting section for different kinds of T-shirt alongside we also have a
sample section where we make our product sampleWe keep our inventory fabric & accessories
according to our production required. We also have unit named by pattern & cutting section for
different kinds of T-shirt alongside we also have a sample section where we make our product
sample
15
Lay out process work:
At first we have a different inventory fabric & accessories section we used this section according
to production requirement than we have different in kind of T-shirt pattern and cutting section
which we did our cutting activities than we do the sewing activities for our T-shirt after that we
have sample section in which we make our product sample and after making the product sample
we will select the good quality T shirts than the merchandising section make our Hall of wonder
T-shirt after making the T shirt than goes to packaging section here we package our T-shirt after
our T-shirt is ready for the delivery process.
16
Predicting the Market Demand and Selecting the Feasible Method for
Forecasting
Target Customer:
Hall Of Wonder" T-shirt targeted man age range from 16 to 30 years old Bangladeshi people are
the main target group of customers for the middle-class category. "Hall Of Wonder" comes under
the middle-class target group. Because the man in this age range category holds the power to make
frequently purchase decision to buy their clothes regularly, weekly or monthly basis. The price
"Hall Of Wonder" affordable for middle-class family alongside all class customers have the ability
to purchases it “Hall Of Wonder-shirt to full fill customers' needs want & demand of the target.
Forecasting Method:
Since the product of our company is t-shirt and our main target customer is college and university
going student. Our company is in initial stage, it would be better if the company follows the
Exponential Smoothing Method to forecast the predicted sales. To do that, first the company has
to determine the monthly demand for the t-shirt.
Exponential Smoothing Forecasting Method:
In exponential smoothing forecasting method, we need the monthly demands of the t-shirt market
and the value of alpha.
We have chosen the alpha (α) value to be 0.3.
17
The formula of exponential smoothing method, used for forecasting the demand, is given below.
Months Actual Demand
(Units)
Predicted Demand
(Units)
Error
(Actual-Predicted)
January 4500 4500 0
February 3700 4500 -800
March 3500 4200 -700
April 4000 4140 -140
May 3600 3978 -378
June 4700 4194.6 505.4
July 5000 4436.22 563.78
August 2500 3855.98 -1355.98
September 2000 3299.19 -1299.19
October 1500 2759.43 -1259.43
November 3800 3071.60 728.4
December 4800 3590.12 1209.88
Total 43600 46525.14 -2925.14
18
Let’s assume,
t = Name of the Month
F = Forecasted Demand
α = 0.3 Calculation of Predicted Months using the formula,
Ft = Ft-1+α [At-1 – Ft-1]
January = 4500
February =4500+0.3(4500-4500) =4500
March = 4500+0.3(3500-4500) =4200
April =4200+0.3(4000-42000) =4140
May = 4140+0.3(3600-4140) =3978
June = 3978+0.3(4700-3978) =4194.6
July = 4194.6+0.3(5000-4191.6) =4436.22
August = 4434.12+0.3(2500-4434.12) =3855.98
September = 3855.98+0.3(2000-3855.98) =3299.19
October =3297.71+0.3(1500-3297.71) =2759.43
November = 2759.43+0.3(3800-2759.43) =3071.60
December = 3071.60+0.3(4800-3071.60) =3590.12
19
FINDINGS:
Calculation
Total Predicted Demand 46525.14
Total Error -2925.14
20
Proposing method to ensure the quality of our product (Quality
Chart: C-chart)
Quality Control
After analyzing the type of our product and doing some researches, we have enlisted some
variability which we have to keep in check to make it standard to sell. Like,
➢ Ensuring 100% cotton fabric.
➢ No use of harmful color.
➢ Not using more chemical ingredients while producing T-shirts.
➢ Long term durability of color and fabric.
➢ Strong and smooth stitching.
We think a hypothesis based on the quality control and by using that we figure out whether bulk
of products are between UCL to LCL or not and actual position. So, two control limits selected for
the scenario, such as upper and lower control limit. The primary purpose of this quality control
mechanism is to monitor the number of the defects per bulk and find out whether it does or not go
beyond those limits.
Quality Control Measurement
To measure and maintain required quality standard of T-shirt, we have decided to follow the
control chart as C-Chart method. We think about a hypothesis based on the number of defects
found on a bulk of T-shirts. If all the above mentioned variability’s are kept in control, then we
consider that bulk of product as qualified or quality controlled finished goods.
Let’s assume, we have selected 12 sample of T-shirts from a bulk of T-shirt to evaluate whether
the production process stays between both the upper and lower control limits or not.
21
Number of sample Number of defects
1 4
2 10
3 12
4 8
5 9
6 6
7 5
8 10
9 11
10 7
11 6
12 4
Total 92
Findings
𝐂̅ = Total Number of defects/ Total Number of sample = 92/12 =7.67
√ 𝐂̅= 2.77
𝐔𝐂𝐋 = 𝐂̅ + 𝐙√ 𝐂̅ = 7.67 + 3*2.77 = 16
𝐋𝐂𝐋 = 𝐂̅ − 𝐙√ 𝐂̅ =7.67 – 3*2.77 = 0 (-0.64)
22
The process is totally within the control. It is not following any particular pattern and none of the
samples are beyond the upper-control (UCL) and lower-control limits (LCL). So, it satisfies all the
rules and maintains the standard quality for the production of T-shirt.
CL
UCL
LCL0
2
4
6
8
10
12
14
16
18
1 2 3 4 5 6 7 8 9 10 11 12
Numberofdefects
Number of Sample
Quality Control Chart(C-Chart)
23
Overview of Planning To Maintain the Inventory of our Product
ABC Classification Inventory of “Hall of Wander”:
ABC analysis is an inventory categorization method, which consists in dividing items into three
categories (A, B, C).
Class A:
A-items are goods which annual consumption value is the highest. 70-80% of the annual
consumption value of the company. Only 5-15% units of total inventory items.
Class B:
B-items are the interclass items with a medium consumption value. 15% of the annual
consumption value of the company. 30% units of total inventory items.
Class C:
C-items are the items with the lowest consumption value. 5-10% of the annual consumption value
of the company. 50-60% units of total inventory items.
Small, Medium and large T-shirt’s Activity based costing:
5 line factory producing 50 units of t-shirt per hour. Total working hour is 9 hours per day.
Therefore, total production:
Per day is 9*50=450 pieces t-shirt
Per month is 27*450=12,150 pieces t-shirt
Manufacturing Overhead Cost for the 1st Year
Description Cost
Setup 3,50,000
Carrying Cost 60,000
Electricity Cost (25 machine each consume 3
units per day makes 2025 units in total per
month)
2, 91,600
24
Rental Cost 2,40,000
Security Cost 1,20,000
Purchasing Generator (2units) 60,000
Machine placement 30,000
Cutting and pattern master cost 1,80,000
Sewing operator cost 12,50,000
Electrical setup 30,000
Total overhead cost 2,551,600
Therefore, overhead costing per product is = 2, 551,600/1, 41,750= .180%
Overhead cost of carrying per T-shirt = 60,000/2,551,600 = 0.023%
Overhead cost of Electricity per T-shirt = 2, 91,600/2,551,600 =.115%
Overhead cost of Rent per T-shirt = 2, 40,000/2,551,600 = .094%
Overhead cost of Security per T-shirt = 1, 20,000/2,551,600 = .047%
Overhead cost of Generator per T-shirt = 60,000/2,551,600 = .023%
Overhead cost of Machine placement per T-shirt = 30,000/2,551,600 = .011%
Overhead cost of Cutting and pattern per T-shirt = 1, 80,000/2,551,600 = .070%
Overhead cost of Sewing operator per T-shirt = 2,551,600/12, 50,000 =.020%
Overhead cost of direct labor per T-shirt = 12, 50,000/2,551,600 = .489%
25
ABC Classification of 1 Year Factory Inventory: Calculation:
The annual consumption value is calculated with the formula: (Annual demand) x (item cost per
unit).
INVENTORY
Item Annual
Demand
Unit Cost in
taka
Annual
Price
Value
Usage as a
% of total
usage
Classification
Based on Rating
Fabric 198450
Yards
40 taka 7938000 94.71% A
Sewing
thread
4725 Piece 60 283500 3.39% B
Needle 1160 Piece 3 3480 0.041% C
Machine oil 1225 Piece 10 12250 0.14% B
Marker pen 60 Piece 60 3600 0.05% C
Pen 600 Piece 5 3000 0.04% C
Pencil 600 Piece 5 3000 0.04% C
Chalk 2 Packet 40 80 0.00095% C
Poly 141750 .30 47250 0.57% B
Cartoon 1417 15 21255 0.26% B
PP Tape 140 Piece 8 1120 0.01% C
Cartridge 24 1638 39312 0.46% B
Cutting
Seizer
50 120 6000 0.072% C
26
Rexene tape 60 30 1800 0.021% C
Scotch tape
4”
30 90 2700 0.032% C
Stapler pin 12 Packet 120 1440 0.018% C
Measuring
tape
30 Piece 10 300 0.0036% C
Adjustable
Seam Guide
15 Piece 180 2700 0.032% C
Attachment
holder set
15 Piece 225 3375 0.04% C
Blue-Tip
Needles
1440 5 7200 0.085% C
Total usage 8381362 100%
27
Calculation Derived Inventory Management:
Category Item Percentage
of items
Percentage of
usage (%)
Action
Class A items Fabric 10% 94.71% Close control
Class B items Sewing thread,
Machine-oil, Poly,
Cartoon, Cartridge
25% 4.82% Regular review
Class C Needle, marker pen,
Pen,
Pencil Chalk, PP
Tape, Cutting
Seizer, Rexene tape,
Scotch tape 4”,
Stapler pin,
Measuring tape,
Adjustable Seam
Guide, Attachment
holder set, Blue-Tip
Needles
70% 0.5% Infrequent
review
28
Developing a Gantt chart along with Project Network Diagram and
estimate time required to launch our product
Here are the all production activities:
➢ Collecting materials
➢ Hiring labors
➢ Designing and Fabric manufacturing
➢ Cutting and Sewing
➢ Printing
➢ Trimming
➢ Packing
➢ Dispatch
Activities Predecessors Days
Collecting materials(A) - 2
Hiring labors(B) - 2
Designing and fabric
manufacturing(C)
A,B 3
Cutting and Sewing(D) C 4
Printing(E) D 2
Trimming(F) D 2
Packing(G) E,F 1
Dispatch(H) G 1
29
Project Network Diagram:
By calculating early start and early finish time we can create the Gantt chart. Here are the Gantt
chart of our product:
Gantt chart
1 2 3 4 5 6 7 8 9 10 11 12 13
Collecting Materials
Hiring labors
Designing and fabric
manufacturing
Cutting and sewing
Printing
Trimming
Packing
Dispatch
E, 2A, 2
H, 1G, 1C, 3
B, 2 F, 2
D, 4
30
Conclusion
Hall of wonder T-shirt we found out about the peoples knowledge, attitudes, and preference or
buying behaviors by let them know about our product. The major advantage of is its flexibility and
the most obvious advantages are speed up. It is an excellent way for reaching the hard to reach
consumers but todays manufacture process are going even further social networking sites listing
and watching consumers online provide valuable insight into what consumers feeling for Hall of
wonder T shirt.
References
Stevenson, W. J. (2015). Operations Management. New York: McGraw-Hill.
Control Chart (n.d). Data Collection and Analysis Tools. Retrieved April 07, 2017, from
http://asq.org/learn-about-quality/data-collection- analysis-tools/overview/control-
chart.html
S., & Says, M. (2014, September 26). Center of Gravity Method in Distribution Center Location.
Retrieved April 07, 2017, from http://www.shmula.com/distribution-center- location-
optimizing-your-logistics-network/9312/
ABC Inventory Management. (2015, November 11). Retrieved April 07, 2017, from
http://www.cgma.org/resources/tools/abc-inventory-management.html

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Operation management: an entrepreneurship business model, inventory management, distribution and forecasting planning

  • 1. An Entrepreneurship Business Model, Inventory Management, Distribution and Forecasting Planning of “Hall of Wander” Course: Operations Management: MGT314. 10 Date of Submission: August 20, 2017 Submitted To Nafish Sarwar Islam Lecturer, Department of Management SBE, North South University Submitted By Name ID Md. Naimul Hossain Bhuiyan 152 0482 631 Rifat Hossain Khan 141 1038 030 Maisha Noshin 141 0889 630 Sakib-Ur-Rahman 123 0627 030 Md. Rubaiyat Khan 121 0124 030 Md. Mahmud Morshed 111 3290 030 Jannatul Ferdoushi 133 1014 630
  • 2. 2 Acknowledgement Firstly, we want to thank Allah for giving us the strength and ability to complete this project. Our sincere thanks go to our honorable faculty member Nafish Sarwar Islam for his support and instructions in preparing of this paper. Without his continuous support and guidelines this report would not see the light. We also want to thank our family members, classmates and friends for their tremendous help, support. This report is regarding to production process of “Hall of Wander” in Bangladesh. We hope we have done a sufficient job considering our level of knowledge, experience and expertise. Finally, we pray and hope that our hard work and whole month night and day effort will be at least catch up your expectation from us.
  • 3. 3 Letter of Transmittal August, 20, 2017 Nafish Sarwar Islam Lecturer, SBE, North South University Subject: Submitting the report on "Production Process of Hall of Wander". Dear Sir, It our pleasure to inform you that we, the members of our group have successfully completed our report which you authorized us. We have tried our best to fulfill the every requirement of this report by engaging ourselves seriously to prepare this report. This report makes us able to understand the core concepts of “Operations Management” which we hope it will be very useful in our professional life. Under this circumstance, we would be greatly happy if you kindly accept the result of our hard work and appreciate us for the future purposes. If you have any enquires after reading this report you are welcome to contact us. Thank you. Sincerely, Md. Naimul Hossain Bhuiyan Rifat Hossain Khan Maisha Noshin Sakib-Ur-Rahman Md. Rubaiyat Khan Md. Mahmud Morshed Jannatul Ferdoushi
  • 4. 4 Executive Summary We are going to introduce "Hall Of Wonder" which is a new T-shirt manufacturing company in the RMG sector of Bangladesh. It aims to be one of the best companies in the Bangladeshi RMG market. We are going to offer best products with a competitive price and product quality to grab the market and a large number of loyal customers. We have strong marketing, SCM, HR, operational, organizational, financial and promotional plans of building a T-shirt manufacturing company. The report divided into 6 part at first part we are Describe your product and its distribution center(s) along with a creative mission statement of our organization. Second part we develop an Optimum Layout for our Organization That Highlights At Least Major Departments. Third 3Predicting the Market Demand and Selecting the Feasible Method for Forecasting. Forth Part we did proposing method to ensure the quality of our product (Quality Chart: C-chart. Fifth part we ABC Classification Inventory of “Hall of Wander and final part of our report hold develop a Gantt chart along with either work breakdown structure or project network diagram to find out the estimate time required to launch your product.
  • 5. 5 Table of Contents Contents Name Page No. ❖ Description of Our Business and Product 6 ❖ Brief Overview of the 4P(s) of the Company, Mission, Vision, and Objective of our Business 7-11 ❖ An Optimum Layout For our Organization That Highlights Major Departments 12-15 ❖ Predicting the Market Demand and Selecting the Feasible Method for Forecasting 16-19 ❖ Proposing method to ensure the quality of our product (Quality Chart: C- chart) 20-22 ❖ Overview of Planning To Maintain the Inventory of our Product 23-27 ❖ Developing a Gantt chart along with Project Network Diagram and estimate time required to launch our product 28-29 ❖ Conclusion 30 ❖ References 30
  • 6. 6 Description of Our Business and Product "Hall Of Wander" Bring It On We are going to introduce "Hall Of Wonder" which is a new T-shirt manufacturing company in the RMG sector of Bangladesh. It aims to be one of the best companies in the Bangladeshi RMG market. We are going to offer best products with a competitive price and product quality to grab the market and a large number of loyal customers. We have strong marketing, SCM, HR, operational, organizational, financial and promotional plans of building a T-shirt manufacturing company. Currently, there are various brands are available in the market. Availability of lots of brand in the market makes confusion in the customers' mind. People always find comfortable fabric as their clothes. Set an affordable price for different sort of people is also an important issue to starting a business. People always want to get good quality fabrics at a low price. People also follow brands marketing strategies, how it attracts customers. To implement a profitable business, business should introduce proper supply chain in the organization from its suppliers to consumers keeping every sort of realistic thing in our mind, we are going to introduce comfortable fabrics in our production process. As a new business, it is our responsibility to provide comfortable products to customers. Our management and finance team working on the production process, try to set best possible acceptable price for customers. To ensure quality we are also focused on our suppliers, labors, machines. By introducing proper pricing, good quality, good inventory, and layout management our business can achieve success. We believe that with the enriched business knowledge and experience of partners and the proper implementation of plans would emerge our brand in the Bangladeshi RMG sector successfully. We also believe that we will also achieve trust and reliance of the customers with its unique quality, marketing strategy, and competitive price range.
  • 7. 7 Brief Overview of the 4P(s) of the Company, Mission, Vision, and Objective of our Business Mission Statement: To provide good quality of T-shirt with the best affordable price and good quality & consistency is our comment to our customers and also brings the good return on investment for the investors. Vision Statement: By the of the year of 2020 we will be to hold most of the market share of T-shirt though out our good quality, consistency & our comment to our customers is our business idea that match with our mission statement as well. Business Objective: ✓ Creating a positive brand image in the customer mindset ✓ Becoming a leading force in the Bangladeshi T-shirt RMG sector in next 3 years ✓ Providing good quality, consistency and unique T-shirt an affordable price ✓ Creating strong customer relationship ✓ Gain more market share Marketing Mix (4P's): To market a product or service Marketing mix is the main strategy, which will help the marketer to introduce their product, price, place, and promotion. These are the four elements of the marketing mix. Our 4Ps strategy will definitely justify our mission, vision and business objective. Product: "Hall Of Wander" is a unique combination of T-shirt that can be offered to a market for attention, acquisition, use that might satisfy the customer desire want or need. We are making three different sizes of ‘Hall Of Wander' T-Shirt
  • 8. 8 • Small • Medium • Large We making various different colors of T-shirt for according to the different size. Price: Price is the amount of money charged for a product we are producing a good quality product so our pricing strategy is market penetration pricing. Small Medium Large Fabric 1.1 Yard = (50*1.1) = 55 Taka 1.2 Yard=(50*1.2)= 60 Taka 1.3 Yard=(50*1.3)=65 Taka Hang Tag 2 Tk/PC 2 Tk/PC 2 Tk/PC Care lebel 3 Tk/PC 3 Tk/PC 3 Tk/PC Size lebel 2 Tk/PC 2 Tk/PC 2 Tk/PC Design printing 10 Tk/PC 10 Tk/PC 10 Tk/PC Logo Printing 5 Tk/PC 5 Tk/PC 5 Tk/PC Wash 10 TK/PC 10 TK/PC 10 TK/PC Packeging 1 Tk/PC 1 Tk/PC 1 Tk/PC CM 10 Tk/PC 10 Tk/PC 10 Tk/PC TOTAL 98 Tk/PC 103 TK/PC 108 TK/PC Place: Place means the distribution channel. To make our Hall Of Wander T-shirt available in the market a set of an interdependent organization that helps make a product available for use. Between manufacturer and retailer that is the wholesaler.
  • 9. 9 So we will use this distribution channel for rest of our target area except Dhaka. Sometime wholesaler create some problems to eliminate all the noises we want to have a good communication and by monitor them properly with strong structure management. We are manufacturing Hall Of Wander T-shirt at Dhaka cities so we want we eliminate the wholesaler because Dhaka is our main targeted area so we want to control Dhaka by ourselves. For each target market, we will use our own transport system our company has enough sufficient delivery van to make our product available in time To provide our product we have to build some warehouse or distribution center. Initially, we will open three distribution center. ▪ Distribution center 1: Dhaka- for the middle part of the country ▪ Distribution center 2: Sylhet- for the North East part of the country ▪ Distribution center 3: Chittagong- for the Southern part of the country
  • 10. 10 Promotion: Promotion of our product is one of the necessities for getting our brand in front of the public and attracting new customers. Since, it is a new brand in the market, so, the promotional stage is really the most challenging factor. We have to do advertising with our limited budget. In the following, we have shown a good amount of budget to promote our brand in order to beat its competitors. Tools Budget Tools Budget Online media 20% Campaign 15% Newspaper 25% Consumer Promotion 5% Billboard 15% Celebrity Endorsement 10% Trade promotion 10% This budget is for first three years. Therefore, within this time we want to reach our break-even units. Online media: Nowadays, companies use various social media in a great way to promote products and services in a more relaxed environment. This is direct marketing at its best. We decided to promote our product through Facebook page, interstitial ads, online banner ads etc. Besides, we will have our own pages in different social media. Therefore, we keep 10% of our budget for online media advertising. Newspaper: Everyday about three million people read newspaper in our country. Therefore, print media is a very strong source of advertising in this area. We decide to advertise in some leading Bengali and English newspaper that may cover minimum 1 million reader. This is comparatively more expensive so, we want keep 25% of our budget for it.
  • 11. 11 Billboard: Billboard can make an appeal in our targeted customer’s mind. Therefore, if we can establish some billboard in important areas in our targeted cities (Dhaka, Chittagong, and Sylhet) then those will greatly help to promote our brand. Trade Promotion: Trade promotion is a business-to-business marketing. Trade promotion means discounts, allowances, rewards and other incentives go to the wholesalers and retailers. If they get a good amount of incentives regularly, they will be motivated to sell our products. For this, we should keep 10% credit from our budget. Campaign: Campaign is a quiet good source of promotion. We want to campaign in leading schools, colleges, and universities. We also want to do a campaign in our targeted area. In important festival like Pahela Baiskh, we can arrange some different campaign such as we can arrange some funny games for university students. Consumer Promotion: Consumer promotion means give something free or give some discount to consumers. We can allow some discounts; buy one get one-fee deal to attract our customers. If they get these incentives now and then, they will be pushed to buy our product. Celebrity Endorsement: A good celebrity endorsement is as important to a startup brand as a business plan and a great product. We want to do sponsor in school and university level cricket, football and other tournaments. If we can make a better profit after our break-even then we want to sponsor national and international level cricket tournaments. So, from that budget we want to make our brand ambassador. We will go for our ODI cricket captain Mashrafee Bin Mortaza as our brand ambassador. In order to do this we need good money and that’s why we keep 10% credit from our budget.
  • 12. 12 An Optimum Layout For our Organization That Highlights Major Departments Location Selection Method: The Center of Gravity Method: We have to select the location of most efficient and economic place for the distribution point. For this, we need to use the center of gravity method. Firstly, we have to find out the longitude and latitude of the potential market places. On the other hand, the market demand of those places is also required to accomplish the calculations. Potential Market Areas Location (Latitude, Longitude) Demand (Units) Dhaka 23,90 2000 Chittagong 22,91 1500 Sylhet 24,91 1000 Calculation Cx = (23*2000) + (22*1500) + (24*1000) / (2000+1500+1000) =22.89 Cy = (90*2000) + (91*1500) + (91*1000) / (2000+1500+1000) = 90.56 From the above calculation, we found that Cx having a point of 22.89 which is more close to Dhaka more over Cy is also having a point of 90.56 which is more close to Dhaka. By using the Center of gravity method we can select Dhaka place closest to the city as our distribution center.
  • 13. 13 So 22.89 is the exact place where our distribution center should be located. From this place the operation of distributing the goods across all the market place such as, Dhaka, Chittagong & Sylhet, will be much efficient and economic. Layout of the Company: The layout design of Hall of Wander Company should be considered as a smart decision system as it includes essential departments. The main departments of this company are Design & Sampling, Manufacturing, Warehouse Racking, distribution, equipment maintenance, finance & accounts and HR/ admin department etc. Design & sampling Department: The function of this department is to design the product after getting clarification about style details from merchandiser. To get the buyer’s approval they prepare different samples. Manufacturing Department: Since we are starting a new company, so at first we will go for small-scale production. We will also outsource some production when demand will be more. Starting from raw material, we will run the production in a very organized way to the finished goods. The sub-departments under which the production occurs are given below: Warehouse: The responsibility of this department is to monitor the manufactured goods before the distribution for sale.
  • 14. 14 Distribution Department: This department will supply the demands according to the demands of the wholesalers and the retailers. Equipment maintenance: The equipment maintenance department keeps all the necessary tools, such as, small carts, cranes, lifters, office equipment, gadgets & software, and tidy in one place. The maintenance engineer will monitor the equipment. Finance & accounts: They will handle the budget plan, forecasting demand etc. HR/ admin: Their function is to recruit new employee for the company and measure the performance of existing employees. We keep our inventory fabric & accessories according to our production required. We also have unit named by pattern & cutting section for different kinds of T-shirt alongside we also have a sample section where we make our product sampleWe keep our inventory fabric & accessories according to our production required. We also have unit named by pattern & cutting section for different kinds of T-shirt alongside we also have a sample section where we make our product sample
  • 15. 15 Lay out process work: At first we have a different inventory fabric & accessories section we used this section according to production requirement than we have different in kind of T-shirt pattern and cutting section which we did our cutting activities than we do the sewing activities for our T-shirt after that we have sample section in which we make our product sample and after making the product sample we will select the good quality T shirts than the merchandising section make our Hall of wonder T-shirt after making the T shirt than goes to packaging section here we package our T-shirt after our T-shirt is ready for the delivery process.
  • 16. 16 Predicting the Market Demand and Selecting the Feasible Method for Forecasting Target Customer: Hall Of Wonder" T-shirt targeted man age range from 16 to 30 years old Bangladeshi people are the main target group of customers for the middle-class category. "Hall Of Wonder" comes under the middle-class target group. Because the man in this age range category holds the power to make frequently purchase decision to buy their clothes regularly, weekly or monthly basis. The price "Hall Of Wonder" affordable for middle-class family alongside all class customers have the ability to purchases it “Hall Of Wonder-shirt to full fill customers' needs want & demand of the target. Forecasting Method: Since the product of our company is t-shirt and our main target customer is college and university going student. Our company is in initial stage, it would be better if the company follows the Exponential Smoothing Method to forecast the predicted sales. To do that, first the company has to determine the monthly demand for the t-shirt. Exponential Smoothing Forecasting Method: In exponential smoothing forecasting method, we need the monthly demands of the t-shirt market and the value of alpha. We have chosen the alpha (α) value to be 0.3.
  • 17. 17 The formula of exponential smoothing method, used for forecasting the demand, is given below. Months Actual Demand (Units) Predicted Demand (Units) Error (Actual-Predicted) January 4500 4500 0 February 3700 4500 -800 March 3500 4200 -700 April 4000 4140 -140 May 3600 3978 -378 June 4700 4194.6 505.4 July 5000 4436.22 563.78 August 2500 3855.98 -1355.98 September 2000 3299.19 -1299.19 October 1500 2759.43 -1259.43 November 3800 3071.60 728.4 December 4800 3590.12 1209.88 Total 43600 46525.14 -2925.14
  • 18. 18 Let’s assume, t = Name of the Month F = Forecasted Demand α = 0.3 Calculation of Predicted Months using the formula, Ft = Ft-1+α [At-1 – Ft-1] January = 4500 February =4500+0.3(4500-4500) =4500 March = 4500+0.3(3500-4500) =4200 April =4200+0.3(4000-42000) =4140 May = 4140+0.3(3600-4140) =3978 June = 3978+0.3(4700-3978) =4194.6 July = 4194.6+0.3(5000-4191.6) =4436.22 August = 4434.12+0.3(2500-4434.12) =3855.98 September = 3855.98+0.3(2000-3855.98) =3299.19 October =3297.71+0.3(1500-3297.71) =2759.43 November = 2759.43+0.3(3800-2759.43) =3071.60 December = 3071.60+0.3(4800-3071.60) =3590.12
  • 19. 19 FINDINGS: Calculation Total Predicted Demand 46525.14 Total Error -2925.14
  • 20. 20 Proposing method to ensure the quality of our product (Quality Chart: C-chart) Quality Control After analyzing the type of our product and doing some researches, we have enlisted some variability which we have to keep in check to make it standard to sell. Like, ➢ Ensuring 100% cotton fabric. ➢ No use of harmful color. ➢ Not using more chemical ingredients while producing T-shirts. ➢ Long term durability of color and fabric. ➢ Strong and smooth stitching. We think a hypothesis based on the quality control and by using that we figure out whether bulk of products are between UCL to LCL or not and actual position. So, two control limits selected for the scenario, such as upper and lower control limit. The primary purpose of this quality control mechanism is to monitor the number of the defects per bulk and find out whether it does or not go beyond those limits. Quality Control Measurement To measure and maintain required quality standard of T-shirt, we have decided to follow the control chart as C-Chart method. We think about a hypothesis based on the number of defects found on a bulk of T-shirts. If all the above mentioned variability’s are kept in control, then we consider that bulk of product as qualified or quality controlled finished goods. Let’s assume, we have selected 12 sample of T-shirts from a bulk of T-shirt to evaluate whether the production process stays between both the upper and lower control limits or not.
  • 21. 21 Number of sample Number of defects 1 4 2 10 3 12 4 8 5 9 6 6 7 5 8 10 9 11 10 7 11 6 12 4 Total 92 Findings 𝐂̅ = Total Number of defects/ Total Number of sample = 92/12 =7.67 √ 𝐂̅= 2.77 𝐔𝐂𝐋 = 𝐂̅ + 𝐙√ 𝐂̅ = 7.67 + 3*2.77 = 16 𝐋𝐂𝐋 = 𝐂̅ − 𝐙√ 𝐂̅ =7.67 – 3*2.77 = 0 (-0.64)
  • 22. 22 The process is totally within the control. It is not following any particular pattern and none of the samples are beyond the upper-control (UCL) and lower-control limits (LCL). So, it satisfies all the rules and maintains the standard quality for the production of T-shirt. CL UCL LCL0 2 4 6 8 10 12 14 16 18 1 2 3 4 5 6 7 8 9 10 11 12 Numberofdefects Number of Sample Quality Control Chart(C-Chart)
  • 23. 23 Overview of Planning To Maintain the Inventory of our Product ABC Classification Inventory of “Hall of Wander”: ABC analysis is an inventory categorization method, which consists in dividing items into three categories (A, B, C). Class A: A-items are goods which annual consumption value is the highest. 70-80% of the annual consumption value of the company. Only 5-15% units of total inventory items. Class B: B-items are the interclass items with a medium consumption value. 15% of the annual consumption value of the company. 30% units of total inventory items. Class C: C-items are the items with the lowest consumption value. 5-10% of the annual consumption value of the company. 50-60% units of total inventory items. Small, Medium and large T-shirt’s Activity based costing: 5 line factory producing 50 units of t-shirt per hour. Total working hour is 9 hours per day. Therefore, total production: Per day is 9*50=450 pieces t-shirt Per month is 27*450=12,150 pieces t-shirt Manufacturing Overhead Cost for the 1st Year Description Cost Setup 3,50,000 Carrying Cost 60,000 Electricity Cost (25 machine each consume 3 units per day makes 2025 units in total per month) 2, 91,600
  • 24. 24 Rental Cost 2,40,000 Security Cost 1,20,000 Purchasing Generator (2units) 60,000 Machine placement 30,000 Cutting and pattern master cost 1,80,000 Sewing operator cost 12,50,000 Electrical setup 30,000 Total overhead cost 2,551,600 Therefore, overhead costing per product is = 2, 551,600/1, 41,750= .180% Overhead cost of carrying per T-shirt = 60,000/2,551,600 = 0.023% Overhead cost of Electricity per T-shirt = 2, 91,600/2,551,600 =.115% Overhead cost of Rent per T-shirt = 2, 40,000/2,551,600 = .094% Overhead cost of Security per T-shirt = 1, 20,000/2,551,600 = .047% Overhead cost of Generator per T-shirt = 60,000/2,551,600 = .023% Overhead cost of Machine placement per T-shirt = 30,000/2,551,600 = .011% Overhead cost of Cutting and pattern per T-shirt = 1, 80,000/2,551,600 = .070% Overhead cost of Sewing operator per T-shirt = 2,551,600/12, 50,000 =.020% Overhead cost of direct labor per T-shirt = 12, 50,000/2,551,600 = .489%
  • 25. 25 ABC Classification of 1 Year Factory Inventory: Calculation: The annual consumption value is calculated with the formula: (Annual demand) x (item cost per unit). INVENTORY Item Annual Demand Unit Cost in taka Annual Price Value Usage as a % of total usage Classification Based on Rating Fabric 198450 Yards 40 taka 7938000 94.71% A Sewing thread 4725 Piece 60 283500 3.39% B Needle 1160 Piece 3 3480 0.041% C Machine oil 1225 Piece 10 12250 0.14% B Marker pen 60 Piece 60 3600 0.05% C Pen 600 Piece 5 3000 0.04% C Pencil 600 Piece 5 3000 0.04% C Chalk 2 Packet 40 80 0.00095% C Poly 141750 .30 47250 0.57% B Cartoon 1417 15 21255 0.26% B PP Tape 140 Piece 8 1120 0.01% C Cartridge 24 1638 39312 0.46% B Cutting Seizer 50 120 6000 0.072% C
  • 26. 26 Rexene tape 60 30 1800 0.021% C Scotch tape 4” 30 90 2700 0.032% C Stapler pin 12 Packet 120 1440 0.018% C Measuring tape 30 Piece 10 300 0.0036% C Adjustable Seam Guide 15 Piece 180 2700 0.032% C Attachment holder set 15 Piece 225 3375 0.04% C Blue-Tip Needles 1440 5 7200 0.085% C Total usage 8381362 100%
  • 27. 27 Calculation Derived Inventory Management: Category Item Percentage of items Percentage of usage (%) Action Class A items Fabric 10% 94.71% Close control Class B items Sewing thread, Machine-oil, Poly, Cartoon, Cartridge 25% 4.82% Regular review Class C Needle, marker pen, Pen, Pencil Chalk, PP Tape, Cutting Seizer, Rexene tape, Scotch tape 4”, Stapler pin, Measuring tape, Adjustable Seam Guide, Attachment holder set, Blue-Tip Needles 70% 0.5% Infrequent review
  • 28. 28 Developing a Gantt chart along with Project Network Diagram and estimate time required to launch our product Here are the all production activities: ➢ Collecting materials ➢ Hiring labors ➢ Designing and Fabric manufacturing ➢ Cutting and Sewing ➢ Printing ➢ Trimming ➢ Packing ➢ Dispatch Activities Predecessors Days Collecting materials(A) - 2 Hiring labors(B) - 2 Designing and fabric manufacturing(C) A,B 3 Cutting and Sewing(D) C 4 Printing(E) D 2 Trimming(F) D 2 Packing(G) E,F 1 Dispatch(H) G 1
  • 29. 29 Project Network Diagram: By calculating early start and early finish time we can create the Gantt chart. Here are the Gantt chart of our product: Gantt chart 1 2 3 4 5 6 7 8 9 10 11 12 13 Collecting Materials Hiring labors Designing and fabric manufacturing Cutting and sewing Printing Trimming Packing Dispatch E, 2A, 2 H, 1G, 1C, 3 B, 2 F, 2 D, 4
  • 30. 30 Conclusion Hall of wonder T-shirt we found out about the peoples knowledge, attitudes, and preference or buying behaviors by let them know about our product. The major advantage of is its flexibility and the most obvious advantages are speed up. It is an excellent way for reaching the hard to reach consumers but todays manufacture process are going even further social networking sites listing and watching consumers online provide valuable insight into what consumers feeling for Hall of wonder T shirt. References Stevenson, W. J. (2015). Operations Management. New York: McGraw-Hill. Control Chart (n.d). Data Collection and Analysis Tools. Retrieved April 07, 2017, from http://asq.org/learn-about-quality/data-collection- analysis-tools/overview/control- chart.html S., & Says, M. (2014, September 26). Center of Gravity Method in Distribution Center Location. Retrieved April 07, 2017, from http://www.shmula.com/distribution-center- location- optimizing-your-logistics-network/9312/ ABC Inventory Management. (2015, November 11). Retrieved April 07, 2017, from http://www.cgma.org/resources/tools/abc-inventory-management.html