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ACKNOWLEDGEMENT
Firstly I would like to express my gratitude towards for various individuals who supported to
do the assignment by all means. I wish convey my special thanks to all lecture, who gave me
conceptual knowledge at the class room regarding research methods. Secondary, I am
thankfully to ICBT campus for the coordination of this assignment.
EXECUTIVE SUMMARY
The report aims at analysing the Operation Management efficiency of the DAMRO
Furniture which is engaged in the furniture business in Sri Lanka for almost 3 decades.
While considering the Operations Management perspective of DAMRO Furniture it further
illustrate the operational strategies adopted by the DAMRO specifically on Product Design,
Quality Management, Operation, inventory management, Supplier relationships and
Consumer Management.
Eventually it has become the secret of the success gained by DAMRO which is the capability
to produce high quality furniture in more affordable prices while providing exceptional
customer service. The organisations existing vision is to be among the world's top furniture
manufacturers offering an assorted range of modern and traditional furniture. Anyone who
does observer the groups expansion towards the Electronic goods, Fashion Retail and to
Leisure and Hospitality industry purely from furniture industry, it is evident that DAMRO
operations were managed by its management team drives the DAMRO Group towards a
tactical path with a endeavour of clear success.
Its venture in to different industries with in these Thirty years clearly shows the strength of
the DAMRO group and the confidence they gained via the loyalty they built in Sri Lanka
hearts. India and Australia brace their success and current the target market of the DAMRO
group has become Europe.
INTRODUCTION
Operations can be seen as one of many functions (e.g. production, quality control, personal,
marketing, finance) within the organisation. The operation function can be described as the
part of the organisation devoted to the production or delivery of products or services. This
means all operations undertake operation tasks as eventually the entire organisation which
operates to produce products or services. Operations Management is expressed as the
activities which produces and delivers products and services to the end user. Operation
management is also defined as The Management of the conversion of process, which
converts Land, Labour, Capital and Management inputs into desired outputs or goods and
services (Adam el al., 1996: p. 06). Also another definition provided on Operation
Management is that, to manage the organization responsible for the production of goods and
services for business planning and coordinating via use of organizational resources to convert
inputs
into
outputs
(Stevenson,
2002).
Operation management has made it presence in the modern era as a management concept
which enriches technologies to increase productivity while reducing costs, enhancing
flexibility to meet rapidly changing needs and wants of the customer base, in catering quality
product and services. The author explains the concept of Operation Management in this
report segregating the report in to four main sections of in the context of DAMRO Furniture:
(1) Importance of a strong operation strategy in DAMRO Furniture to capitalize global
opportunities.
(2) Identification of major business processes in DAMRO and elaborate them using
standard process management tools and diagrams. Major business processes can be
identified from the areas such as Quality Management, Inventory
Management, Customer Management, Supplier Management, etc.
(3) Critical analysis of and proposing the improvements/changes to the processes
mentioned above in DAMRO Furniture, in the view of Process innovation and
improvement.
(4) Description about the New Product/Service Development process in DAMRO,
while benchmarking the current practices with leading practices in the industry and
recommending required changes.
Company Outline
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DAMRO FURNITURE being one of South Asias largest furniture manufactures is now
among the worlds largest furniture manufacturers who offers assortment of modern and
traditional furniture (The Nation, 22 July 2012). DAMRO Furniture commenced its business
3 decades ago in 1986 by producing soft wood furniture. Since then the company has been
expanding its operations locally as well as globally. Today DAMRO Furniture has 65
overseas showrooms and 102 own showrooms locally. In addition they have a strong dealer
network of 3000 locally & internationally. Currently DAMRO Furniture is dominating the Sri
Lankan furniture market with 33% market share (DAMRO Furniture - About Us, 2014).
It is evident that DAMRO Furniture is the market leader in the furniture industry amidst the
rest of the players in the market (DAMRO Furniture - About Us, 2014). In analysing the
market, the opportunity obtainable in the furniture market is gigantic in Sri Lanka, as the total
size of the business is around 36 billion annually. The furniture market can be divided into
two categories market based on raw materials and the other based on usage. The market
overall is highly fragmented as no player in the market is able to secure more than 35% of
market share. A major portion of the market share is acquired by small wooden furniture
manufacturers who are scattered all over Sri Lanka especially in geographical areas such as,
Moratuwa.
Based on the research findings it is evident that DAMRO Furniture maintain the cost
leadership strategy through mass scale manufacturing and diversifying business in to new
markets such as Hospitality and Leisure service. The main success behind DAMRO Furniture
in furniture is their manufacturing capabilities and Technologies. With state of art
manufacturing spreads in seven different strategic locations in Sri Lanka providing an entire
range of superior furniture to households in the country. DAMRO Furniture is the only Sri
Lankan furniture company who has presence in the global market with 65 overseas
showrooms and is the largest furniture manufacture in south Asia.
DAMRO Furniture is the pioneer in Panel Furniture and Sofas in Sri Lanka, maintaining
market leadership for the past 12 years. Locally they have the best distribution coverage with
102 owned showrooms and 1200 in the country. DAMRO Furniture has grown strength to
strength and recorded Rs 8 Billion net sales during the past financial year.
An operation strategy cannot be decided in isolation, it needs to be cascaded down from the
corporate strategy (James, 2011). The operation strategy of the company combines all the
elements of the organisation such as Production, Quality Management, Inventory
Management, Finance, Marketing and Customer Relationships, Human Resources etc. which
provides the goal congruency in the eventuality. Hence the forcefulness of the Operation
Strategy is a critical subject matter when discussing the success of any organisation. Also
operation Strategy of an organisation should reflect four perspectives of Top-Down and
Bottom-Up requirements and Operations resources (Figure 1).
Chennai. This operation expanded so rapidly that within few years, it expanded to
Karnataka, Andhra Pradesh and other southern and northern parts of India (Daily News,
2002).
1.2 Expanding to Oceania region: Australia which is another country which lots of Sri
Lankans migrate at present, DAMRO is aiming high for their future and plans to expand
to the Far East as well. DAMROs early sensation extended to more than 80 showrooms
diagonally the world and they currently have 40 showrooms Island field (Daily Mirror,
2002). According to statistics DAMRO has 5 branched in Australia. Hence Australia is a
definite global opportunity which is a developed country with considerable high living
standards. Hence the affordability of the population is obviously high where DAMRO
can utilise the opportunity to growing Sri Lankan population to a mode of building their
brand in global level. Approaching the domestic customer base in Australia while
providing job opportunities this opportunity can to use as a gat way to enter to the
European market.
1.3
Low cost strategy: Plastic furniture becoming a trend in the market where as customer
has recognised it as an easy and durable product for usage. DAMRO already produces
these type of products while ignoring the products which are made up of natural wood
DAMRO was able to reduce its raw material and operational cost enormously by using
locally obtainable raw material and low priced timber and locating the mass scale
factory in Nittambuwa which is a remote area of the country as a initiation. The
Penetration strategy of DAMRO was successful in via these low cost products in
domestic arena as well as in India which it had penetrated the market while facing fierce
competition from existing market players.
1.4 Electronic Home Appliances is one of the latest operation strategies of DAMRO in
diversifying to different industries DAMRO has being identified as one of the projected
competitor in the Consumer Durable market where Singer Sir Lanka leads the
market and dominates form a longer period (Daily Mirror, 2013). The loyalty gained via
DAMROs presence in domestic market for almost 30 years has become the most
critical success factor. Hence DAMRO was able to market the DAMRO Washing
machine, Inovex LED TV and other Home Appliances without hesitation. The product
moved in the market along with the Advertising campaign carried out by DAMRO. The
opportunity arises via this new product range of DAMRO enable the group to diversify
its operations risk and also to become stronger as a top business profile in Sri Lankan
economy (The Nation, 2012).
1.5 Fashion Retail: Although it was extraordinary for the Sri Lankan market leader in
furniture retailer to venture into fashion retail, DAMRO took the move to launch its first
fashion retail store naming Diliganz. The outlet stocks local and international clothing
brands, furniture and electronics (The Nation, 2012). This is still in experimental stage
as DAMRO group in not intending to open any showroom in this nature in near future.
But it is quite visible that DAMRO group is operating with a strategy of utilising their
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existing customer base for its new venture of business and offering them more option
through a different shopping experience.
1.6 Damro Groups Marino Hotel being identified as US $ 40 M , 12-storey building with
more than 400,000 sq feet by 2016 and this has being targeting Indian tourist in
middle-class through DAMROs branch network and intends to attract 50,000 new
tourists to the country per annum (The Leader,2013). Recognition of clear potential of
Sri Lanka which reached its target of 1 Mn tourist on August 2014 in the tourism, they
expect growth accomplishment of 2.5 Mn tourist arrivals by 2016 (SLTDA, 2014).
DAMRO group has taken another Strategic operational approach. This lasts
diversifying operations strategy of DAMRO which added colour to Colombo sky line
with this luxuries hotel consist of 12 story construction is a key step taken up by the
management. The tourism industry is becoming more competitive with the international
hotel chains which are about to start their operation in Colombo in the period of 20152016. These are world renowned hotel chains named Shangri-La Colombo, Hyatt
Regency, Movenpick and Sheraton. The venture of the DAMRO group is an interesting
approach in a context where the statistic clearly shows the augmentation of tourist
arrivals to the country (Appendix 01).
2. Identify major business processes in the organization and elaborate them using
standard process management tools and diagrams. Major business processes can be
identified from the areas such as Quality Management, Inventory Management,
Customer Management, and Supplier Management.
2.1
Production Processes
DAMOR currently provides standard product range which is cost effective and durable
for the customers. Within DAMRO customization is not available. DAMRO Furnitures
without being reliable third party suppliers in getting the products via manufacturing in
mass ordered delivered production done at the factory space. The strength of DAMRO
HAS BECOME THE cost based strategy which drives its operations and readymade
structure was its strategy form the being which catered to the customer at an affordable
low cost (Figure 02).
2.2
2.3
Inventory Management
DAMRO Furniture goes with a no stocks policy of finished products so it does not
invest in warehousing facilities. This cost too is saved in terms of the pricing policy that
DAMRO Furniture charges its consumers. Whereas Arpico do not operate with no
stocks but at a minimum quantity to meet consumer needs at a given time. So they do
have stock management systems such as, reorder levels, minimum order quantities in
monitoring stock levels (Appendix 02).
2.4
locations selection of DAMRO group as DAMRO Furniture has more limited spaces
within their showrooms as well as branches are located in the main town areas island
wide. DAMRO Furnitures strategy is to penetrate to the entire country through their
own showrooms located and their dealers (Piyestra) in order to obtain mass scale
operations. However the nearest competitor of DAMRO , Arpico is strong in the bigger
network as it is a diversified company and since they are looking at a trading model
they look at very limited own showroom facilities and looks at reaching the market
through the third party dealers (DAMRO About us, 2014).
2.5
3.1
Quality Management perspective, currently DAMRO is renowned for its quality and
durability. The competitor of DAMRO which is Arpico is also in to Furniture, Home
Appliances, and Fashion Retail etc. The currently perception of the market is that
Arpico provides more quality products and it has win the loyalty of the customer via its
long existence in the Sri Lankan market. DAMRO processes the QUALITY
ASSURANCE in the factory level it is not clear whether operation are targeting a
Continuance Improvement concept within DAMRO.
The group should introduce the Total Quality Management (TQM) which aims increase
the efficiency of the operations of the organisation while diminishing the time hungry
tasks which does not add value toward the end product. Also TQM aim on eliminating
wastage. It is this approach to ensure that the organization functions with a devotion to
continual improvement of quality and catering the consumer needs efficiently. With any
change there will always count The slow road bumps can support DAMRO to
strengthen the bottom line of the business in all sectors (Manufacturing, Fashion,
Leisure etc.) enriching production via enhancing moral of its work force and also
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gaining general positive environment do business. The intense strain on the market
competition will supports trade and to contend worldwide for new ideas explored.
3.2
3.3
Inventory Management: This goes with hand in hand with Suppler Management as
Suppliers will provide the necessary raw material which is stored as raw material
inventory and after the production the Finish goods inventory will be stored again. It is
visible that Currently DAMRO does not practice any modern day inventory
Management system such as Just In Time even though its main factory is situated in a
area where the raw material is quite available, which in Nittambuwa and it has also
situated the other factories in Pannala etc. In order to practice JIT the reliable suppliers
should be located near to the factory which eliminates the inventory Management task
as Suppliers will manage the inventory on behalf of business and provide the necessary
inventory (raw material) at the point of which production starts. Since DAMRO does
mass production which drives cost factor in high volume it is possible for them to
practice JIT in order to be in line with the global best practice.
3.4
Supplier Management: This is the initiation sate for the production process. The
suppliers who have ability to provide necessary material will ensure the inventory
availability for a smooth production line. Even the Inventory Management task would
not be efficient in a context where the suppliers are not reliable which make it tedious to
meet the demand of the market. The materials supplied as part of the management and
operation. Selection of suppliers based on quality, consistency of supply is critical in
achieving business objectives. From the supply side it is visible that quality chain and to
operate efficiently as a result of accomplishing company objectives.
Maintain a sound association with suppliers is critical if DAMRO intends to implement
JIT and only if they pay attention to requirement of the suppliers. Because if the
providers are not necessary to supply raw materials such as plastics, textiles, DAMRO
will not be able to participate but will only operate on the concept of just in
case. Closely supervision and guidance ensure the bond with the supplier which leads
to a long term health relationship.
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DAMRO durable beds The resent addition to the product portfolio of DAMRO which
they advertise as a durable double bed with an attractive advertising which shows that it
can hold the weight of up to 15 people. It is quite interesting who they demonstrate the
strangeness of the bed. The concern is that current context of competition speed of
delivery is an absolutely critical factor to attract new & retain customers. One primary
weakness of DAMRO Furniture is its long product delivery time which may provide a
competitive advantage to its competitors. Therefore it is vital that DAMRO Furniture
improves its efficiency in all operational areas, possibly re-engineer its manufacturing
process & initiate steps to lessen the time taken to deliver the final product to its
customers. Since the competition in the market grows day by day the customer needs
should be addressed given the sort period of time. Customers will engage with modern
trends and the contemporary think is diminishing in the mind set of customers.
4.2
4.3
4.4
Untapped Market When considering the total furniture market based on raw material
segregate, larger potion comes from wooden furniture which is 53%. Being the market
leader for past many years DAMRO Furniture has never given any attempt to getting
into wooden furniture market which is eccentric. Since theres no big company in
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4.6
Distribution Strategy as a new service development There are two Main distribution
channels in consumer durable markets, which is company own showroom network &
dealers. DAMRO Furniture has tapped both these markets with a very innovative
strategy to minimize customer confusion and channel conflict. While promoting
DAMRO Furniture products through their own showroom network, for the dealer
market they came up with a new brand called Piyestra, which helps them to penetrate
the market since Piyestra is a cost leader
CONCLUSION
RECOMMENDATIONS
Recommendations for future action in gaining more success and to answer the challenges.
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Deficient focus - However it is imperative that the Furniture segment is given high
attention along with all other segments since the customer will benchmark the quality of
DAMRO Brand from all its product & service offerings. Effort must be made to ensure
that the Furniture segment of DAMRO is at minimum parallel in terms of quality &
service with its competitors. They loyalty created through almost three decades should
not be vanished in a poor performance in any of the segments. There is a risk of failure
in Electronic Home Appliances sector due to the inherent nature of the industry. There
is a fair question asked as how durable and reliable the brands such as Preethi, the
Indian mixer and Grinder. One sector failure will negatively affect the others sector as
customer buy goods or services with trust they have in the previous experience.
Convenience allowing the customer to access the product desired with relative ease
has become a critical element in current market dynamics. However lacks a wide
network of showrooms therefore has to rely on the loyalty of customers to generate
revenue since it requires effort to locate show rooms.
Technology:
Employment of technology in operational procedures is essential to develop top quality
products in an efficient manner. DAMRO lacks their own state of the art technology
utilized by other competitors such as Arpico Furniture. Investing in state of the art
manufacturing technology may enable DAMRO to acquire long term benefits from its
Furniture division. Technological enhancement eliminates the
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management via these training with convey the message of goal congruence ultimately
across organisation.
customer which helps them to retain their customer while proving benefits for its
customer whenever they do business with Arpico. For now DAMRO lack any service
as such which provide a competitive edge to other players to garb DAMRO customer
via promotions towards them.
REFERENCE
1.
2.
The Nation (2012), DAMRO to enter fashion retailing, Sunday, Available from:
http://www.nation.lk/edition/biz-news/item/8494-DAMRO-to-enter-fashionretailing.html (Accessed on 02nd September 2014)
3.
4.
Daily News (2002), DAMRO Furniture to expand Market beyond, Available from:
http://archives.dailynews.lk/2002/03/20/bus01.html
5.
6.
Daily News (2013), Colombo hotels to add 700 rooms, Available from:
http://www.dailynews.lk/?q=business/colombo-hotels-add-700-rooms
7.
Ada Derana (2013), DAMRO to build Marino Sands Hotel, Available from:
http://adaderana.lk/biznews.php?nid=862
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8.
The Leader (2013), DAMRO to Invest US$ 40m On 270-Room Hotel, Available
from: http://www.thesundayleader.lk/2013/06/09/DAMRO-to-invest-us-40m-on-270room-hotel/
9.
10.
Daily Mirror (2013, Consumer durables to see weak demand, Available from:
http://www.dailymirror.lk/business/economy/28320-consumer-durables-to-see-weakdemand-.html
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Sri Lanka Equity Forum (2013), DAMRO into Hotel business, Available from:
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13.
Crosby, P.B. (1996), Quality is free: Making Quality Certain in Uncertain Times,
USA: McGraw-Hill
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Russell, R.S & Taylor, B.W 2009, Operations Management: Along the Supply Chain,
6th edition, New York: John Wiley & Sons Ltd
18.
Schneider, M., (2003), Operations Management New York: John Wiley & Sons Ltd
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Slack, N., Chambers, S., Johnston R., 2010, Operations management, USA: Prentice
Hall
20.
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SLTDA (2014), Sri Lanka Tourism Development Authority, 2014: Wonder of Asia,
Available from: http://www.sltda.gov.lk/index.html, (Accessed on 02nd September
2014)
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22.
23.
24.
25.
26.
27.
APPENDIX
1. Tourist Arrivals the growth in Sri Lankan Tourism industry
2. Inventory Management
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