How Should Albatross Anchor Overcome Its Business Challenges - Case Study Example

? Unit eight Written Assignment KU Consulting Proposal for Albatross Anchor MT435 Operations Management Kaplan IntroductionAlbatross Anchor is facing a tough time in managing its operations due to use of obsolete technology and management practices. The company has a very high changeover time. Its prices are comparable to its competitors but the margins are pretty low. The company deals only with wholesale customers and distributors. The company has a single plant whose set-up is also questionable. Question One Albatross Anchor faces the following major challenges in its operations: Challenge #1: Time Management The current time management process at Albatross Anchor is poor and outdated. There are a lot of inefficiencies in manufacturing. The changeover time required from one anchor type to another is as large as 36 hours. This implies that the company may be spending more time in set-up rather than manufacturing. No doubt the lead time of the products manufactured by the company for bulk orders is 3-4 weeks. These inefficiencies in time management have a huge impact on its profit margins and customer satisfaction. The most obvious and the best way of time management is to reduce set-up time. It is recommended that Albatross Anchor uses SMED (Single Minute Exchange of Dyes) methodology. The idea behind this methodology is to reduce set-up time to less than a minute (which was later modified to single digit). It may not be possible to literally reduce the set-up time to a single digit. The aim should be reduce the set-up time realistically to as low as possible. SMED can be applied by Albatross Anchor by identifying the activities which can be performed externally i.e. not within the machine set up. These activities need to be performed before the changeover is required. This means deploying certain resources for performing these external activities in parallel while the other resources are working on the machine for current operation. All the wastes should be eliminated and each operation should be optimized. If Albatross can afford to make capital investment, it needs to go for equipment which has the same basic parts and requires only a change of few parts (dyes) while changing over from one anchor to another. By following such steps, Albatross Anchor should be able to reduce its set up time from 36 hours to less than an hour. Challenge #2: Technology Adoption One of the biggest challenges in front of Albatross Anchor is the use of obsolete technology. Moreover technology is not being used for several operations. This leads to safety issues, poor quality, long lead times, long set-up times, efficiency losses and customer dissatisfaction. The biggest need at the moment is to adopt latest manufacturing technology. A changeover time of 36 hours causes a huge opportunity cost to the company. While the capital investment may seem large at the moment, long-term gains of the same vis-a-vis the current situation must be analyzed using financial techniques such as Net Present Value and Discounted Cash Flows. The second need is in terms of information technology. The best companies in the world use Enterprise Planning tools such as SCM, CRM and ERP to manage their operations. This enables them to communicate well with their supply chain partners. This also ensures visibility and velocity in the supply chain. The use of information systems enables a company to procure centrally. It also helps in remaining in touch with distributors and customers. The data accuracy improves enormously. Albatross Anchor is at a low level of business maturity at current stage. While the investment in manufacturing technology is a must, the investment in information technology can be deferred to a later period when the other improvements have been made. Challenge #3: Quality Management Quality Management at Albatross Anchor is a big challenge. In current scenario, it appears to be totally out of focus. The antiquated plant, obsolete technology and concerns over safety measures add to the quality woes for the company. There seems to no mechanism to track product quality at any stage. The company may be surviving due to its past performance or relationships but quality issues and competition may pose threat for it in the future. It is recommended that the company develops a quality program in line with Juran’s Quality Trilogy. Under this program, Albatross Anchor must work on Quality Planning, Quality Improvement and Quality Control. Firstly, a plan should be laid out to track quality. Under this, certain parameters or dimensions to measure quality must be decided after brainstorming. For example, for tracking quality of raw material certain parameters such as tensile strength or density might be required while for measuring final product quality, the dimensions and weight of the anchors might be important. Secondly, steps for continuous improvement in quality must be initiated. For this the errors must be tracked. The vital few errors must be separated from the trivial many with the help of Pareto analysis. After this, root cause analysis must be done for these vital errors using tools such as Fish bone diagram. After identifying causes, steps should be taken to rectify them for ever. Finally, Quality control measures are required. Audits must be conducted frequently to control quality. The best practices must be documented and engrained in the manufacturing set up for anchors. Challenge #4: Supply Chain Management The current supply chain of Albatross Anchor has many issues. In fact, it would not be prudent to call it a supply chain. The company appears as a standalone manufacturing unit. There are no strategic contracts with suppliers and distributors. The company deals only in the wholesale business and the forward supply chain is totally controlled by distributors. In addition, the company faces issues in demand fulfillment and transportation. It is recommended that the company follows a Lean supply chain approach. Firstly, the procurement should be done centrally after negotiating strategic contracts with the suppliers. The transportation needs to be managed efficiently. Instead of depending on distributors, the company needs to establish a few warehouses to get in touch with customers. Alternatively third party logistic vendors may be used for this purpose to achieve economies of scale and scope. Further, the company can reduce its lead time from 3-4 weeks to a few days by two ways. Firstly, scientific forecasting methods should be used to anticipate the demand in the future. This will reduce uncertainty in demand and peaks and valleys in work load. Secondly the principle of postponement should be used where the basic assembly of the anchor can be made beforehand and the same can be customized after the actual demand comes. The company currently has a single plant location which limits its distribution capabilities. The company must contemplate opening other locations. The procurement and administration for these locations would be centralized while manufacturing and distribution could be decentralized. Question Two a) The following changes are proposed in the existing facilities and the process flow keeping in view the 60 day and work time constraints: 1) Move the Shipping part to the South-West The shipping portion must be moved to South-West part of the building area below the Finished Products. This will enable the finished products to be transferred directly to the trucks for domestic sales. There will not be any unnecessary cost on internal logistics within the company premises. 2) Adjust Foundry in between Receiving and Manufacturing This will enable a logical flow of raw material. It will also enable to have sufficient space for receiving goods and shipping international goods. 3) Plan a circular Layout Plan a circular layout instead of a box type layout. Receiving should be followed by Foundry which should be followed by Manufacturing. Thereafter Raw Products and Finished Products fall in the circular path. The Finished products division should be followed by two sections Shipping and receiving. 4) Shift administrative offices in the middle The administrative offices should be present in the middle of the circular path so that the managers may have an easy access to all the departments. This would ensure smooth operations. 5) Keep employee parking outside circle The employee parking could be kept outside the circle as a concentric circle while the entrance gates can be different for different departments. This would save time of the workers and managers. b) The three possible implications of the above changes in process flow are: 1) There would be a significant savings in time. Since the circular process is based on logical flow of goods, there won’t be unnecessary time wastage in non-productive operations. The saved time could be utilized for improving the process further. 2) There would be considerable cost savings. The cost spent in this re-arrangement may get recovered in a few months. The cost savings would be especially noticed in transportation and internal logistics. 3) There would be improvement in quality because a logical process flow reduces chances of errors, re-works, mis-handling etc. The space required for inventory would be less and hence lean management could be made possible in the future. The three possible complications arising out of these changes are: 1) The employees may take some time in getting adjusted to the new set-up. This could lead to certain losses in the beginning. However, by proper training, the same can be avoided. 2) Since there are only 60 days available to make changes, it is very important to make a well laid plan and follow it. Otherwise, it may be possible that certain changes are left in between and the situation may turn worse than before. 3) It would be quite difficult to move heavy machinery especially in manufacturing area. Therefore, some work around is required. c) The following Gantt chart shows the timelines for implementing the above changes: 1) Gantt Chart 2) Explanation of Gantt Chart The Gantt chart shows that the first two activities can be started in parallel since they are independent of each other. The third activity i.e. planning a circular layout is dependent on both these activities and hence starts after their completion on Day 16. This activity continues till Day 60. The 4th and 5th activities can be started after significant progress has been made on 3rd activity. Hence, they start on days 46 and 51 respectively. Thus, in a period of 60 days, the tasks can be accomplished. Conclusion After a thorough discussion on the challenges, the recommendations and their implications, it can be said the company needs a major overhaul. The company needs to initiate a process such as Business Process Re-engineering (BPR) for these changes. Some of the changes are must in the short term while others can be postponed depending upon the capital availability. References SMED-Quick tool or process change. Retrieved 06 September, 2011 from Ross, Joel E. (1993). Total Quality Management: Text, Cases and Readings. Chapters 1,4,6,7 Chopra., Meindel. (2002). Supply Chain Management: Strategy, Planning, and Operation. Prentice Hall of India Read More