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New Nova Homes

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Christine Moreau

on 11 March 2014

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Transcript of New Nova Homes

New Nova Homes
By: Group Athena
Bethany Dickey, Chelsy Furtado, Christine Moreau, Jenna Northcott, Jessica Tinawi, Alexandra Wood
Decision Criteria
"In any moment of decision, the best thing you can do is the right thing, the next best thing is the wrong thing, and the worst thing you can do is nothing." - Theodore Roosevelt
New Nova Homes Decision
Decrease cost of materials
Increase profit margin
Maintain quality of product
Provide customer value by offering a combination of standardized and customized materials
Interruption costs are high and delays production
High overhead costs
Commercial taxes for such a plant
Restriction in dimensions
Doubling of plywood when combining/ stacking boxes for a modular
Customization of materials increases material costs
Niche production
Effective use of trades = short production time
Not constrained by weather factors - Year round production
Benefits associated with a pull system
Ability to provide protection of product until it’s received by the customer
Houses produced are mobile
Immediate certification
Elimination of on-site theft and vandalism
55 years in industry
Align Material Purchases With Internal
Business Units
Reduce material costs
Economies of Scale
Strengthen relationship with key suppliers
Reduce transportation cost
Cross functional expertise and learning
Increased transaction costs
Miscommunication, if not implemented efficiently & effectively
Disagreements between subunits
Options for New Nova Homes
1. Form alliance with another manufacturer
2. Outsource purchasing decisions
3. Investment in an advanced inventory system
4. Purchase materials at a lower cost from a new supplier
5. Alter material standardization and customization
6. Purchase materials from other countries
Thank you very much for your time
Important Background
Problem Statement
Increased entrance of competition
Customers are unwilling to borrow more funds
Growing industry; 200,000 houses are built each year in Canada
Transportation costs are decreasing
Environmental friendly practices
Price sensitive customers
Environmental concern
Introduction of new systems
Decrease in loan interest rates
Canadian building warranties and regulations
Increase in competition as barriers to entry are low
Environmental Scan
Alter Material Classifications
Reduce waste managment
Reduce cost of materials
Improve shipping and arrival times of materials
Reduce the amount of specialized labour needed
Decreased customer specialization options
Research required to reclassify customization needs and wants in the interest of the customer
Higher Inventory levels for certain materials
Reclassification of category materials towards more standardized options
Shift Bill of Material Ordering items to Bulk Material Ordering
Reduce amounts of total percentage spending on categories
Unchanged prices to customers with some selection of materials limited
New Supplier
Options for New Nova Homes
650 houses in 1 year (2 factory output)

Purchasing Department = 4 employees

Costs of materials = 55% cost of the house

Different materials sourced from different suppliers

Price of a new modular house = $170,000
A supply chain strategy must be implemented to lower material costs and increase profit margins while maintaining a high standard of quality.
Recommendation for New Nova Homes
Align Material Purchases with Internal Business Units
& Alter Material Classifications
What makes this strategy cost effective?
Reduces the cost of materials (Economies of scale)
Reduces waste
Time conscious
Strengthens relationship with key suppliers - potential to bargain for lower prices
No major investment costs are needed
Adrian’s Scheduling Considerations
Management of ordering process
Inventory management
Retain supplier relations
Ensure continuous subunit relations
Time Line
What if this recommendation is unsuccessful?
SWOT Analysis
Environmental Scan
Decision Criteria
General and Selected Options
Plan B
What are the risks? How are they minimized?
Disagreements of subunits
- align interests via rewards
Potential miscommunication
- train employees or invest in future technology for tracking inventory
Increased transaction costs
- not a big concern as negotiation is with internal subunits
Increased inventory
- use area originally used for plywood/lumber
Decreased customization
- still offering options but more narrowly focused
Establish a relationship with new national suppliers
Look for a supplier offering a variety of materials needed
Allows for negotiation/bargaining of long term commitment
Compare quotes from suppliers to current material costs - pick a new supplier with the lowest material costs
New supplier options:
*Efficiency NB - Kitchen and Electrical
*Dupont - Variety of materials
*Efficiency Nova Scotia Corporation - Variety of materials
*Peter Kohler - Windows and Doors
Decrease material costs
Room for negotiation/bargaining
New supplier can also be a potential customer

Extensive research is required
Increased transaction costs due to negotiations
Loss of any benefits associated with current supplier
Combine the purchasing of materials with other subunits in Integrated Forest Products such as:
*Forestry & Forest Products - Plywood & Lumber
*Industrial Construction Services Plumbing & Electrical
Allows for bulk ordering of similar materials from suppliers
May 2014
May 2014
2016 - 2017
March 2015
March 2014
Weeks 7 - 10
Notify all parties of standardization changes and make administrative changes
Week 10
Order materials needed for two weeks of production
1 Year
Board evaluation of progress
2 - 3 Year Process
Look at redesigning the product to reduce material waste
Week 1
Contact subunit directors to potentially form an alliance
Weeks 3 - 7
Negotiate contract details with suppliers and subunits
Week 1
Begin reclassifying materials
Year 5
Invest in an advanced inventory system
March - May 2014

If costs associated with supplier are too high, look at ordering materials from a supplier with lower costs
If supplier relations deteriorate, consider remedies such as alternative local/international suppliers
If subunit relations deteriorate and “co-ordering” is no longer effective, consider working independently
If factors affect the purchasing schedule for subunits and “co-ordering” becomes ineffective, then purchase supplies independently and re-evaluate classification of materials
Dupont. (2014). Building & construction products.
Retrieved from http://www.dupont.ca/en/industries/building-and-construction.html

Efficiency NB. (2014). Commercial resource centre.
Retrieved from http://www.efficiencynb.ca/commercial/commercial-resource-centre.html

Efficiency NS. (2013). Product rebates.
Retrieved from http://www.efficiencyns.ca/product-rebates/?user=4

Kent Homes. (2014). Modular Homes.
Retrieved from http://www.kenthomes.com/kent-homes-residential-modular.aspx

PeterKohler. (2014). Home.
Retrieved from http://peterkohler.com/?location=set

Smith, M. (2013, April 21). Benefits of pull systems.
Retrieved from http://elsmar.com/Pull_Systems/sld039.htm

Turner, C. (n.d.). Pull system.
Retrieved from http://leanmanufacturingcoach.com/pullsystem.htm
Prepared for: Professor Wang
Operations Management, BUSI 2513
Full transcript