Operations Management Concepts of Llew Gwych - Case Study Example

Report for Llew Gwych Name Institution Table of Contents Table of Contents 2 Executive summary 3 Report for Llew Gwych 4 Introduction 4 Question One 5 Question Two 6 Question Three 8 Question Four 10 Recommendations 10 Conclusion 12 References 13 Stein W. W. & Choi T.M.(2011). Robust Supply Chain Management, International Journal of Production Economics, 134 (2); 283-466. 14 Shoude, L. & Mengdi, G.(2010). The effect of emission permit trading with banking on firm's production–inventory strategies, International Journal of Production Economics, 137 (2); 304–308. 14 Paulo , G.J, & Dahab, S. (2010). Bundling resources across supply chain dyads: The role of modularity and coordination capabilities, International Journal of Operations & Production Management, 30 (1); 57 – 74. 14 Moon Y., Yao, T, & Park, S. (2011). Price negotiation under uncertainty, International Journal of Production Economics, 134 (2); 413–423. 14 Vignes A. & Etienne, J.M. (2011). Price formation on the Marseille fish market: Evidence from a network analysis, Journal of Economic Behavior & Organization, 80 (1); 50–67. 14 Dul, J., Hak, T., Goertz, G; & Voss, C.(2010). Necessary condition hypotheses in operations management, International Journal of operations & Production Management 30(11); 1170-1190. 14 Zhou, Z., Li, Y., & Tang, K. (2009). Dynamic pricing and warranty policies for products with fixed lifetime European, Journal of Operational Research, 196 (3) 940–948. 14 Lau, A.K.W., Yam, R.C.M., & Tang, E.P.Y. (2010). Supply chain integration and product modularity: An empirical study of product performance for selected Hong Kong manufacturing industries, International Journal of Operations & Production Management, 30(1); 20 – 56. 14 Executive summary Operations management concepts are very important in development of an effective supply chain. Without proper projection and purchases estimation inventories can result into increased costs of warehousing. As a business expands, the technical team has to look for ways of enhancing the efficiency of delivery of products and services to the customer in order to reduce costs. Report for Llew Gwych represents a typical case of challenges that are faced by an expanding company in challenging environment. The report addresses the disparities in inventory and purchasing management policies and procedures. The other part looks at the weakness in the supply chain as a result of inventory and purchasing management. Suggestions on the concepts that can be used in supply-chain and inventory management are discussed in the third part. The fourth part provides recommendations with regard to restructuring the inventory and purchasing function. The conclusion recaps the main points that have been discussed in the report. Report for Llew Gwych Introduction Gwych has realized tremendous achievements as CEO of Viverra Motors. The company is expanding fast through acquisition of new dealership. The entry of an auto supermarket increases the pressure on the management of inventory and purchasing as other function are introduced to cater for increased car lines. The complexity of sourcing service material and parts proves to be challenging to the CEO. He fears making mistakes that have been previously done by other managers. He has to improve service delivery to customer while at the same time dealing with the pressure as a result of the expansion. This report provides pertinent issues that have to be dealt with as Gwych seeks to take the company to greater heights. Question One Inventory and management policies and procedures will differ since the dealerships purchase different types of service materials and parts from different types of suppliers. The car makes in the auto-supermarkets will require many parts coming from different points of suppliers. Since the purchasing will have to be done from different suppliers, the inventory management within the company will be different from the procedures and policies of purchasing. Numerous order forms will have to be prepared to and send to various suppliers of goods needed in the company. Getting genuine parts from numerous suppliers will not be an easy task. Inventory management policies will have to over see the supply procedure of parts within the company departs where as purchasing policies will entail dealing with a group of suppliers who supply a variety of products. The inventory maintenance records will have to incorporate a standard method that integrates the various supplies of parts from numerous suppliers. Systematic recording of inventory will have to categorize every supply according to type and the relevant supplier. Procedures for management of suppliers will not be the same as inventory control within the records of the company (Faridimehr & Niaki, 2006). The company has to maintain a parallel system that shows the supplies against the inventory so that the right parts of material can be ordered from the relevant suppliers. Different parts of service parts from different suppliers require that meticulous records in the inventory books of the company. Various makes of vehicles will require parts that differ from various suppliers. Consequently the book of record for inventory has to show each part of the make that has remained within the company and which one should be ordered to avoid cases of shortage. While the inventory records should be elaborate, they should avoid unnecessary records that make retrieval of information to laborious and costly to the firm. The company has to focus in increasing efficiency through quick and timely of required service. The method of ordering parts from various dealers will reflect the external environment of the dealers while the inventory management will reflect the internal operation of the business. The worry of continued availability of the right parts of various makes of vehicle increases the warehouse space as more parts have be to stored for fear of running out of stock on crucial days. The suppliers’ orders have to be prepared from time to time to ensure that there is continuous supply of car parts (Dul, Hak, Goertz & Voss, 2010). The internal records that consist of inventory have to be reflected the combination of supplies of service parts that comes fro various suppliers. This type of records will help in making the management to maintain a neat record of what is required within the organization. The weather changes in winter and summer requires different parts to be ordered during the cold weather and hot weather. Internal control system regulates the amount of inventory that is the business at any given time. Question Two The current inventory and purchasing management practices being used at Viverra Motors have certain weaknesses that affect their efficiency. For fear of failure that has been witnessed in other companies, Gwych has put in place procedures that he surmised will not collapse in the event of growth. However, some of the purchasing and inventory control management practices applied could certainly lead to problems that are being avoided. It is reported that each of the four dealerships purchased its own service materials and parts. Making the purchases separately for the four leadership increases confusion and the amount spent in the ordering of the items. This is a company that wants to benefit from economies of scale (Lau, Yam & Tang, 2010). Making the purchases independently for the four dealerships reduces the amount of supplies that can be purchased at ago. By so doing, the company cannot benefit from collaborative supply chain. Collaborative supply chain is founded on collaborative forecasting, replenishment, and planning. Purchases were obtained from forecasts on historical demand data, which is supposed account for some aspects such as seasonality. Air-conditioners were needed in the months of summer; whereas antifreeze was required in winterize cars. Forecasts also followed special vehicle service and sales promotion. This kind of forecasting cannot give a clear picture of what is required in the purchasing and inventory management. It could lead to over purchases in anticipation on a certain kind of weather without looking at the warehousing available at the company. Basing forecasts on service and sales promotion increased the need for material wanted to prepare new cars together with serving other vehicles. Getting the different dealerships purchases from different suppliers increased the changes of ending up with excess purchases (Vignes & Etienne, 2011). During the winter there were high chances of failure for alternators and batters owing to the cold weather. Purchasing service material and parts is challenging as a result of huge number of different parts that had to be in possession of the company at any given time. This has increased the amount of space required to store inventory. Some of the parts are sold over the counter to customers. Some parts that are sold over the counter and other used to service customers vehicles could be applied independently from other requirements of inventory. Finding products from authentic manufacturers is n anthill task as some of the parts are obtained from middle level dealers. The purchasing has to go through long procedures before all the required material or service parts are obtained (Ngai, Moon,Riggins & Yi, 2008). Chances of getting service parts and materials that are not genuine are very high. The procedures being used for purchases of parts is laborious and time consuming. Identifying a suppliers who has supplied a certain type of material may take time in case of the need for replacement. Suppliers that are genuine have to be identified as opposed to making purchases of service parts from any number of suppliers (Dul, Hak, Goertz & Voss, 2010). The greatest threat that exists in the procedure purchasing is the chances of realizing high amount of costs of supply chain maintenance. Increased need for space and escalating costs could affect the smooth running of the acquired auto-supermarket. The increased pressure of having to deal with several car lines resulted into increase supply chain maintenance costs. Question Three There is a possibility of Llew Gwych applying inventory and supply chain management concepts in reduction of investment and requirements for space while maintaining adequate service levels. Gwych has to use collaborative replenishment, forecasting, and planning in order to avoid escalation of costs. Collaborative supply chain management appreciates the role of pull strategy instead independent dealings with each type of dealership. The needs of stakeholders have to be recognized and factored into the operations of the business enterprise. Through collaborative supply chain much value is created for the customer at all possible means. Waste is eliminated through elimination of the bullwhip effect (Stein & Choi, 2011). When collaborative supply chain is used, there is application of lean logistics for realization of maximum efficiency. Customers and suppliers are categorized into certain segments so that they can be efficiently dealt with. Networks where learning and experiences are shared emanate. Collaboration has great advantages when used in the supply chain. Greater flow of information is realized as inventory is reduced. When the flow of information is faster there is more efficiency created within the firm. Inventory increases the cost for warehousing. If inventory is greatly reduced, then operational coasts emanating from inventory maintenance is cut down. Effective use of resources and reduced lead times are realized. With reduced lead times, the customer is not kept waiting after having ordered something. There is also increased responsiveness. Use of this concept emphasizes on the capabilities of the firm (Paulo & Dahab, 2010). There are many gains that are realized at the service level. The concept leads to cost reducing as a result of business processes. Since some of the tedious of operation functions are removed, the product costs are expected to go down. Value creation is realized at the advantage of both the customer and the dealer (Shoude & Mengdi, 2010). The bullwhip effect can be reduced within the operations of the company. The effect comes about as a result of downstream changes that result into upstream supply changes which are huge. The supply chain has to be synchronized for the effect to be eliminated. The bullwhip effect is caused by order batching, price fluctuation, rationing and short gaming together with demand forecasting updating. Gwych can also apply lean concept in his strategy. Lean concept aims at eliminating any kind of defect within the production. Some of the waste realized stem from waiting, overproduction, motion, processing, transportation, defects, and inventory. Lean manufacturing focuses on inventory management as a crucial element. The inventory has to be kept at lower levels as possible (Zhou, Li & Tang, 2009). When inventory control is effectively done it leads to improved quality of outcomes. Efficiency and quality management can be realized if lean concepts are applied in the operations of the business. The cost of maintenance of the supply chain has to be controlled to avoid fixing higher prices for products within the company. A benchmark process has to be used to make sure every type of service is catered for (Moon, Yao & Park, 2011). Benchmarking involves measurement of the company’s services, products, practices and costs and comparing the obtained value with the best in the industry. In best practice, which can also be applied by this firm, performance standards with similar items are measured. Question Four Recommendations The company in this case has gone to another level through acquisition of auto-supermarket that reduces the hassle of pushy sales people that interfered with leisurely buying. Gwych has to restructure the inventory and purchasing functions for Viverra Motors dealership in order to ensure efficiency. The company has to employ pull strategy in the strategic purchasing decision. Having to deal with four separate dealings at different times brings a challenge of increased costs and time management issues in the supply chain of the company. Independent purchases decisions being made for each the dealership brings about repetitive action that can result in the bullwhip effect. Gwych has to look for ways of implementing operational concepts that will increase efficiency while leading to reduced costs. Leaning manufacturing and collaboration will assist the firm in its effort to achieve efficiency. Forecasting purchasing from past historical records is not good for the company. Purchases forecast have to use relevant data such using government agencies and other research companies that store information concerning the prevailing trends in the market. Deriving purchase from historical data can lead to over-purchase and hence increased costs of warehousing. Planning for summer and winter weather conditions has to be prepared in advance to avoid confusion. Demand application in inventory and supply chain can also result into bullwhip effect. Market intelligence from research companies can have more data to be applied in the firm as opposed to historical projection. Trends in the market are bound to change regardless what has happened before in the history. Multi-sourcing will assist Gwych in cutting down costs of operations since some aspects of the supply chain will be pulled together. Reduced lead times can only be realized if required parts arrive at the premises of the firm in time. Efficiency of the supply chain has to be increased by avoiding sourcing of service material and parts from a variety of dealers. Authentic manufacturers have to be identified for the purpose of supplied the required parts in bulk as opposed to sourcing from different small dealers, which may be expensive. The benchmark drawn by the company has to act as a reference point when the company is reviewing its methods of operations. The long term target of the company is to increase efficiency by reducing lead times and increasing more support service for the company. The company has different makes of vehicles; this can be used as an advantage of identifying of have a manufacturer of specific make of material to the company. The hustle of having to look for service parts and material from suppliers reduces the efficiency of operation within the company. Six sigma can be used by the firm in developing its operation. The aim of six sigma is reduction of inefficiencies within the supply chain. Products have to be send to the customer on time. Lead time reduction helps in creating value for the customer. Conclusion Gwych Llew has a challenging task before him as he seeks ways of operation improvement with the new acquisition of the company. The company has four dealerships that require concentration in development of supply chain procedures and policies. The company has to use different policies for purchasing and inventory management in order to deal with increased functions in the supply chain. The dealerships require different strategies that will result in development of an effective environment that meet the expectation of the customers. Pulling strategies have to be used in determining in reduction of the cost of supply chain. The case represents challenges that occur in the supply chain management in case of acquisition or expansion of the business. Gwych has to adjust some of the operation functions within the supply chain in order to achieve efficiency and meet the expectations of the customers. Application of chain-supply and inventory concepts is very important for the expansion of the company. References Faridimehr, S. & Niaki, S.T.A.(2006). Erratum to “Determination of price and warranty length for a normal lifetime distributed product”, International Journal of Production Economics 102(1) 95–107 Ngai, E.W.T. ,Moon, K.K.L.,Riggins, F.J., & Yi, C.Y.(2008). RFID research: An academic literature review (1995-2005) and future research directions, International Journal of Production Economics, 112 (2), 510-520. Stein W. W. & Choi T.M.(2011). Robust Supply Chain Management, International Journal of Production Economics, 134 (2); 283-466. Shoude, L. & Mengdi, G.(2010). The effect of emission permit trading with banking on firm's production–inventory strategies, International Journal of Production Economics, 137 (2); 304–308. Paulo , G.J, & Dahab, S. (2010). Bundling resources across supply chain dyads: The role of modularity and coordination capabilities, International Journal of Operations & Production Management, 30 (1); 57 – 74. Moon Y., Yao, T, & Park, S. (2011). Price negotiation under uncertainty, International Journal of Production Economics, 134 (2); 413–423. Vignes A. & Etienne, J.M. (2011). Price formation on the Marseille fish market: Evidence from a network analysis, Journal of Economic Behavior & Organization, 80 (1); 50–67. Dul, J., Hak, T., Goertz, G; & Voss, C.(2010). Necessary condition hypotheses in operations management, International Journal of operations & Production Management 30(11); 1170-1190. Zhou, Z., Li, Y., & Tang, K. (2009). Dynamic pricing and warranty policies for products with fixed lifetime European, Journal of Operational Research, 196 (3) 940–948. Lau, A.K.W., Yam, R.C.M., & Tang, E.P.Y. (2010). Supply chain integration and product modularity: An empirical study of product performance for selected Hong Kong manufacturing industries, International Journal of Operations & Production Management, 30(1); 20 – 56. Read More