Operations management

Operations management

Thesis statement

Selection of a production process has impacts in the product to be produced by any company.  Production planning is necessary for any company so as to ensure a smooth flow in the process.  Space Age Furniture Company, a company that deals with the manufacture of tables and cabinets will be studied in this paper.  This paper also exposes the implications of holding inventories in the company and compares it with the costs incurred by overtime.  It also gives solutions that the operation manager may take to solve cases of overtime in the company.  Finally the paper gives approaches that can be employed by the company so as to improve the image of the company as well as attracting more customers to the company.

 Space Age Furniture Company

Introduction

Space Age Furniture Company manufactures tables and cabinets that are required to hold the microwave ovens and portable televisions.  The products are made in different sizes and features but follow the same operations and production methods.  The subassemblies used in making the Saturn and Gemini stand have a part of number 3079 that is made by a special lathe machine that is wholly dedicated for the production of this part.  This part is produced by a renowned specialist, Ed Szewczak who has been forced to work overtime due to the increasing demand for the part.  The company aims to avoid holding an inventory due to the costs involved in the storage.  The company has therefore adopted a zero finished goods inventory.  The company now faces a challenge because Ed Szewczak, the machinist feels totally uncomfortable with the extra overtime on his side due to great demand of part 3079.

Options available to address Coral’s problems

The problem facing Coral is the worry of losing his experienced machinist due to overtime allegations in producing part 3079.  This has been caused by the increase in the production of the part 3079 that is then used in the manufacture of the subassemblies for the Gemini and Saturn stands.  The company needs to act very fast on this case because getting another skilled employee is not an easy task (Potamianos, 2006).

The first strategy that can be employed in this scenario is the development of a sound production planning.  A comprehensive plan clearly stipulates the quantity demanded in the market and the resources available to make a give number of units.

This will enable the company to work on an economical order quantity that comes with a proper allocation of resources and human labour (Hill, 2003).  This approach will ensure that cases of overtime are eliminated as the company will only be working on a given quantity demanded hence ensuring that Ed Szewczak works within his required time limit.  This step will also include proper forecasting of the demand for the product so as to come up with an appropriate production schedule for the different products produced by the company.

The company should also conduct a total product maintenance that is aimed at reducing downtimes and breakdowns of equipment during the production process which later on escalates to overtime on the part of Ed Szewczak.  In order to perform this, the company needs to carry out efficient preventive maintenance of all the conveyors, machines and any other equipment that is involved in the production process.  This will always ensure smooth flow of operations throughout the production process (Vieira, 2006).   This reduces the cases of delays and avoids the risk of substandard products being released from the production line.

In order to minimize the overtime costs associated with the production, the company needs to look for tools and technologies that make the process flow faster and increasing the level of automation so that the employees can work faster. This will make the employees active at the regular hours, therefore avoiding cases of an over time (Kabir, 2005).  Overtime costs are very high and lead to a lot of expenses during production.

According to Crawler (2009), it will be prudent for the company employ additional staff or subcontractors during the seasons when the production of Part 3079 is at it’s peak so as to save the specialized employees like Ed Szewczak from for overtime hours.  The company will only source them during the peak seasons of production hence making the whole production process to be economical.  This will also boost the morale of the permanent employees to work better in their areas of specialization.   This will enable the company to remain competitive by capitalizing on the high demand.

Reducing the minimum quantities of subassemblies

Developing the minimum quantities for a given stock in production process is one of the stock control methods that can be used to control the amount of stock in a given process.  Minimum quantities of subassemblies are kept by the company so as to ensure that a certain amount of stock is kept and that the company does not run short of the subassemblies.  When the quantities of this stock reach the minimum quantity, a reorder level is attained such that the company can again produce another batch of stock.  Part 3079 is a crucial component of the two subassemblies.   If the minimum quantities of these subassemblies are reduced, the quantity of this part 3079 will automatically reduce in the same margin.  This will mean that the company will reduce the production of this part to be able to meet the reduced level of the minimum quantities (Potamianos, 2006).

The extent of the minimum quantities of the subassemblies to be kept by the company will depend on the master schedule for the week.  The development of these master schedules is helpful in forecasting the demand of the two products, Saturn and Gemini TV stands.    It is essential that the company keeps some minimum quantities of the subassemblies below which production cannot take place.  The effects of reducing the quantities of the subassemblies will lower the overall costs and in case of any problem in the production of the two products, there will be no buffer stock to use for production (Crawler, 2009).

The cost implications of excess items in inventory at each stage

In the event that the company produces excess items in inventory at each stage, then costs of holding this inventory will automatically increase.  In this case the holding costs include the housing costs, materials handling costs, labour costs and the investment costs.  In the production of Gemini and Saturn TV stands, keeping excess inventories of the subassemblies and the part 3079 will require storage space for these intermediate products.  It will lead to other costs like movement costs and additional equipment and staff will have to be employed to do this task (Hill, 2003).  During storage of these products, the storage conditions have to be maintained so as to ensure that the quality of the product is not affected by the storage conditions.  When summed up together, the costs of these operations will escalate the cost of production.

The cost of holding each of the subassembly in the inventory is $0.25 per week and each part 3079 costs $0.75 per unit per week.  The storage of each Gemini cost $1.25 per week and Saturn costs $1.50 per week if the products were not shipped immediately to their destination.  The total cost per week if all the inventories were held per week is obtained is obtained by multiplying the units of the products held with the cost of storage for each product.  From the above data, we can see that the cost of storing the finished product per unit is higher than the holding costs for each of the subassembly parts and part 3079.  This shows that the finished products should be transported as soon as the production process ends (Kabir, 2005).

Trade off between overtime and inventory costs

Overtime costs are deemed to be very expensive to the production process of the company.  In this scenario, these costs amount up to 50% premium for any overtime worked.  Production is seen to diminish with the increase in the overtime.  Overtime that is within the reasonable limit is a way to meet the variable and seasonal demand in the company.  On the other hand inventory costs are associated with the storage of intermittent products or finished products.  This is applicable in the situation that the company desires to hold enough stock before distribution.  In as much this step is good, the products attract the storage costs for the company, hence increasing the overall expenses (Potamianos, 2006).

If the company experiences a seasonal and a flexible demand and are not sure of the high and low seasons the overtime costs will increase during the peak periods.  If the company tries to minimize the overtime costs with the high levels of flexible demand, it can always look forward to saving a lot of costs.  In the case of Space Age Furniture Company, the company attracts $0.75 per unit per week for holding each of the three subassemblies in inventory (Vieira, 2006).

Type of production processing

There are different types of production processes that can be used by companies to make their products.  They include job shop, batch, repetitive and continuous.  Job shop is used for high varieties of products with low volume with the largest production in work in progress.  Batch production involves division of the operation into parts or operations.  Each operation is first completed before another operation is commenced.  Continuous production involves those processes that can be used to manufacture large quantities of the same product.  In repetitive manufacturing, the same scenario of continuous production applies but work in progress is very low and the items move very quickly within the plant (Crawler, 2009).

The production process involved in Space Age Furniture Company is batch production.  In this process, a specific group of components are involved which go through a production process together such that after one batch is completed, another one then starts.  The batches are therefore processed continuously processed through each machine before advancing to the next operation (Hill, 2003).  Batch productions are normally in the range of 10 to 1000 units.  In this scenario, the subassemblies 257 and 435 are produced using the same equipment which has the capacity of producing 1000 at any given time.  The part 3079 is produced continuously using the lathe machine at any given time.   One part of 3079 is then used in each subassembly and one of each subassembly is used in each of the final products.

This is a typical batch production process.  The typical advantages of a batch operation are that it is suitable for a wide range of similar products which can use the same machinery on different settings.  It also economizes on the range of machinery required and cuts the requirements of a flexible workforce.

The units can also respond very fast to the customer orders by moving work in progress through the final stages of production. There are also economies of scale associated with this kind of production.  It also makes the costing process easy and gives good information service for management (Kabir, 2005).

How the management can keep track of job status and location during production.

In such a type of a production process, it is a absolute necessity for the company to continuously monitor the job status and location during the production process.  The job status can be monitored by the operators whereby they can be mandated to be filling out production tracking forms that indicate the volume of production per unit time (Potamianos, 2006).  This approach will enable the company to estimate the time that will be required in achieving the set targets of the final products per day.

According to Crawler (2009), the management of the company can also use the time and attendance software to help in managing and tracking employees.  They help in monitoring the employee work hours and payment policies.  These softwares automate the collection, calculation and reporting of the transactions between the employees and the work.  These powerful softwares can track any work environment using stipulated labour laws and policies.

The company should also have keep traceability records for all the products produced within the day and their dispatch.  This will help the company to know the movement of the products within the company until the time of release.   Each machine should have appropriate number of staff so as to fulfill the operations within the shortest time possible.  CCTV camera’s can also be installed at various positions in the company so as to monitor the company’s activities from one central place (Potamianos, 2006).

Changes that may be beneficial to the company

In order to smoothen operations in the company, the company can adopt the following strategies. First, the company should ensure frequent and reliable deliveries to avoid stock buildup in the company (Vieira, 2006).  To assist in implementing this strategy, the company should set delivery dates for their raw materials and impose penalties in case these suppliers do not meet these regulations.  An online system should also be used to inform the customers when the products are ready for sale.  This will greatly enhance business as it will ensure that no finished product incurs any other costs.

Secondly the company should critically analyze whether it has the location advantage of being near to both the suppliers and customers.  Sometimes the company delivers the finished product to the final consumer.  It is therefore important to establish the production site in a centrally placed site that will make all the transactions easy to manage (Crawler, 2003).

Thirdly, both the suppliers and customers should be involved in the design aspects of the product so as to minimize the non conforming products that may lead to unnecessary inventory costs.  The customers should participate in giving the production department relevant information that will assist then in coming up with the appropriate products that meet their specifications, tastes and preferences.  This approach will foster the relationships between the customers and the company hence improving the rate of sales of a given company (Hill, 2003).  The production will be tailor made in such a manner that the customer has the greatest power and the sales of the products will be stimulated with no material held in the company’s premises awaiting for sales.

Fourthly, the company should also adhere to a strict quality control procedure during the production process.  Quality control is an essential aspect of any given product.  It usually comes during the production period or later on after the production is over (Kabir, 2005).  The product is subjected to some known tests and its properties compared to the standards.  If the product does not meet the set standards then it is returned back to the process for more modifications.   If the product meets the required standards, it is released.

Fifthly, the company may need to design an efficient material handling systems so as to ensure an effective delivery of the production subassemblies to the respective assembly point.  The design should be done in such a manner that these parts are delivered at the right place in the right time.  This will involve the selection of the right conveyors, lifts, cranes and trucks so as to deliver these products to the right place at the right time (Potamianos, 2006).

Finally, it will also be prudent for the company to hire competent employees with the right skills so that all the employees are well conversant with the operations in the company.  The management should also be always updated on the current trends of demand and act accordingly to the same.  It is also appropriate for the company to ensure appropriate allocation of resources to the production process so as to ensure appropriate returns to the company (Hill, 2003).

Conclusion

Production planning is a very critical step in today’s production environment.  Every production manager should be very conversant with the production procedures involved as well as factors that influence the performance of a given plant.  The selection of a given type of production lies heavily on the nature of the desired product.

Inventory control is another critical aspect of the production environment that any operational manager must be well versed with.  The nature of a given product tells a lot about the handling of the product.  The operations manager should always ensure that the costs associated with holding of the inventories are minimized so that the expenses associated with it are also minimized. Today’s competitive world requires that production is sales driven and not production oriented.  In this approach, the orders from different customers are obtained and a master schedule established so as help in the production planning process.  It can be concluded that targeting zero inventory is a very profitable venture for any given company.

Overtime allocation is also very critical in any given production.  Any operations manager should ensure that over time is planned and allocated appropriately.  If overtime is not allocated appropriately it may lead to severe losses and complaints from the employees.  Sometimes the demand for any given product at any given time can vary with seasons leading to unpredictable fluctuations.  These fluctuations pose a serious threat to the planning of the company.  In spite of this the operations manager should always be in a position to plan appropriately for the labour supply during the peak seasons.

References

Crawler, S. (2009). Management Insights. Production and Operations Management, 219-234.

Hill, J. A. (2003). “Revising the Master Production Schedule in Sequence Dependent Processes.” . International Journal of Production Research, 2021-2035.

Kabir, M. A. (2005). “Batch-model Assembly Line Balancing: A Multiattribute Decision Making Approach. International Journal of Production Economics, 193-201.

Potamianos, J. a. (2006). An Interactive Dynamic Inventory-Production Control System. Journal of the Operational Research Society, 1017-1028.

Vieira, G. E. (2006). A New and Practical Heuristic for Master Production Scheduling Creation. International Journal of Production Research, 3607-3625.

 

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