OPERATIONS MANAGEMENT SKILLS - Essay Example

OPERATION MANAGEMENT SKILLS] OPERATION MANAGEMENT SKILLS Costs affinity diagram check out costs affected by bootdivisionRaw material costLabor cost(wages)IntroductionA shoe company produces a variety of shoes every year. Different shoes have different seasons of sale despite their constant production throughout the year (Charles, Mcguigan, & William, 2005). For example boots can can have a high a sale during the rainny season than flat shoes.The problem statement is to determine the costs of the company affected by the boot division.

This is done by considering six different types of costs from three categories of costs. The three categories are manufacturing, marketing and storage costs. The affinity diagram considered two costs that might be affected by the company from each category.Manufacturing costs.In the category of manufacturing costs, labour cost and cost of raw materials were considered.Raw material cost. The cost for buying raw materials to be used in boot division maybe high. The boot division may be making losses in their sale, or their stock may not be moving and therefore could’not be able to meet the cost of buying raw material.

The raw materials may also make boots not to be durable, and this may trigger complaints from customers. This may force the company to use its money to purchase the raw materials for the boot division. In such situation the company should stop producing boots in the mean time until the all stock of boots move or until the cost of raw materials used in boot division lowers.Labour cost (wages). This is another cost of the company affected by the boot division. This can happen when the boot division has has a large number of employees than the required capacity.

This may lead to shirking effects, where some workers may free ride and the company may end up spending more in paying wages. The company should therefore determine the required capacity of workers needed in boot division, and reduce this number based on productivity and performance.Marketing costsThis is anotherr category of costs of the company affected by boot division. In this category we considered advertisment and promotion cost.Advertisement cost. These are costs incurred in the prrocess of informing customers about the product.

The boot division may be incurring more cost in advertising their products. This may lead to the company spending more on advertisement of the products. The company may prevent this by determining the desired level of advertisement required for boots to avoid spending more on advertisement.Promotion cost. This is the cost incured in promoting the products of the company. The boot division may increase the promotion cost of the company if it gives the customer promotion every time. Such promotion can be price discounts.

The company should determine if the cost boot division is using more in promotion, and regulate if necessary.Packing costs. The packing of boots may be costly, leading to increase in packing costs of the company. The division may for example be using expensive materials in packing boots. The company can control this by adopting a desirable cost effective packing procedures in boot division.Storage cost. These are costs associated with the storage of finished products or raw materials. It involves costs such as maintenance of stock cost, ordering costs, replacement costs, theft or spoilage.

The division may have poor storage system that contributes to increase in the company storage cost. For example, the security system may be compromised leading to loss of products or raw materials in terms of theft or spoilage. The company can react to this by ensuring the security of storage facilities and ensuring better procedures in ordering of stocks. ConclusionThe top executives should therefore try to determine the costs of the company affected by the boot divisions in order to adopt a strategy to control or to reduce such costs.

Reference`Charles, M. R., Mcguigan, J. R., & William, J. K. (2005). Contemporary financial management New York: Cengage Learning.