Operations Planning and Control for Ringinglow Farm - Case Study Example

PART ONE - RINGINGLOW FARM Introduction Fred and Gillan Giles have opened their mixed (dairy and arable) far to the paying public in order to develop their business. As the next plans for business development, the company is planning to expand its business by growing sales and increasing number of visitors. In addition to this, there is suggested an idea to introduce a broader range of ice-cream flavours from four to ten. All these strategic operational issues require more detailed analysis of the historical business activity of the Ringinglow farm as well as its future sales forecasts. This report aims to analyse the case of the Ringinglow farm in terms of operational capacity and planning issues, and based on the findings to recommend the next steps to Fred and Gillan Giles. An increase of the number of farm visitors in 2015 by 35 per cent In order to increase returns on assets and to achieve the extra sales targets Gillian has decided to increase the number of farm visitors by 35 per cent through all the opening months in 2015. However, before making a final decision, it is necessary to analyze the demand for farm visits and the capacities. Analysis of demand for farm visits in 2014 and 2015 According to the information given in the case study, the number of visitors on weekend (Saturday and Sundays) is two times higher than on workdays. Therefore, it is possible to calculate the peak demand in 2014 and 2015 on a monthly basis. The data shows that the peak month in the Ringinglow farm is August (4258 visitors in 2014). Then, average weekly demand on Aug 2014 was 1064,5 visitors/week (=4258/4). On Saturdays or Sundays (August 2014) an average number of visitors was approximately 354 visitors per day (1/3 of 1064). Assuming that in 2015, the number of far visitors will increase by 35 per cent, during a peak month in August 2015, an average number of visitors will be 5748. The average weekly demand on August 2015 should be approximately 1437 visitors per week (=5748/4). On Saturdays or Sundays (August 2015) an average number of visitors was approximately 479 visitors per day (1/3 of 1437).Therefore, the pattern of farm visitors’ attendance is over 479 people on the peak day (Saturday or Sunday). The capacity analysis and capacity constraints for the farm visit side of the business There can be identified two capacity measures for the farm visit side of the business: the number of parking places and the number of visitors who want to visit Milking parlour. Car parking As it has been identified in the case study, the parking capacity is 45 car spaces, and 6 spaces for 40-seater coaches. Assuming that the number of visitors arriving in one car will be 4, it is possible to say that the maximum car parking capacity is 180 people, and 240 people by coaches. Therefore, the maximum capacity of car parking per day is 420 people. Taking into consideration the fact that the forecasted number of visitors for 2015 during peak season in peak days can exceed 479 people per day, car parking capacity is limited for farm visitors. However, in addition to the factor of car parking capacity, it is important to consider the percentage of cars versus coaches, as it is mix dependent variable. Milking-parlour viewing According to the information given in the case study, safe viewing area for the milking parlour operates in fact only 3 hours a day from 3:00 pm to 6:00 pm. It means that there are only 150 min/day available. Because of limited equipment (explanatory tape record), the total number of visitors per hour can be 90 people per hour. Therefore, the total maximum capacity for milking-parlour viewing is 270 people per day. Assuming that during a peak season and peak days (Sunday/Saturday) the number of visitors in 2015 will be 479/day, it is possible to assume that approximately 287 people will want to wait for milking-parlour as only 60% of total visitors remain. It means that the farm will face capacity constraints at this level, as the milking-parlour viewing space capacity is limited for a projected number of visitors. Analysis of the capacity plans for the ice-cream production business Comparative analysis of the ice cream sales for 2014 and expected demand in 2015 As of 2014, the ice-cream was produced on a ‘Level Capacity’ plan with 425 litres/production day. The total ice cream output per year is 81 600 litres of ice cream, or 6 800 litres per month. According to the sales of farm shop for 2014 the total sales were 21 277 litres of ice-cream. The forecast for 2015 is that the sales of farm shop will be 24 736 in total. Taking into consideration the fact that in average 1 of 2 visitors buy 1 litre box of ice-cream per visit, it is possible to assume that the average increase for the period from 2014 to 2015 should be approximately 17,5% in sales (35% increase / 2 = 17,5). The calculations show that the growth varies from 16% to 18% for the period from April to September and can be viewed as reasonable forecast of expected demand in 2015. The forecast is also reasonable in terms of production capacity plan, sales of farm shop in 2015 will take capacity approximately for 70%, while the total sales will comprise approximately 91% of total capacity. The level capacity plan analysis The level capacity plan for 2014 suggested production of 81600 litres of ice-cream a year, which means approximately 6800 litres of ice-cream every month. Taking into consideration the fact that the farm’s business is highly dependent on the season, the level capacity plan might not be the best option for the company’s efficiency as the inventory costs can be significant. However, taking into consideration inventory levels it is possible to say that there were no shortages over some months in 2014, and there was sufficient freezing capacity to stock products. An effective level capacity plan for the Ice Cream Factory Taking into consideration the plans set for 2015 to increase the number of visitors by 35% it is necessary to take into account that sales of ice-cream at the farm will increase by 17,5% in average. It means that the company will have to manage its inventory in order to satisfy demand. As it has been identified, an effective level capacity for the ice-cream factory is 5970,273 litres/month. By producing this amount of ice-cream on a monthly-basis, the farm will be able to meet seasonal peaks in demand. Capacity constraints of an effective level capacity plan Jan Feb March Apr May Jun Jul Aug Sep Oct Nov Dec Cumulatve monthly production 12050,00 12491,40 14885,72 13970,88 15758,62 15998,54 13431,27 10766,51 8192,76 7457,54 9322,55 10212,39 Ending inventory 2015 8991,40 8985,72 8970,88 8968,62 8998,54 6431,27 3766,51 1192,76 957,54 2822,55 6212,39 4032,79 Demand change Capacity plan 5500 3500 5900 5000 6790 7000 7000 7000 7000 5000 3000 4000 There are several capacity constraints that impact on the effective level capacity plan. These capacity constraints include the following: litres/day (450/7); 4 working days; 7 operating hours. However, in addition to the above listed capacity constraints one of the most critical constraints is storage capacity of fast freezer (9000 litres). According to the ending inventory 2015 data, during the period from January to May 2015 inventory level will exceed 9,000 litres and the company will have to handle this issue. Chase demand plan In order to solve this problem with demand and inventory management, there can be used a chase demand plan. According the data presented in the table below, during the period from January to April the prediction capacity will not exceed 5500 litres of ice-cream per month. In May the production capacity will increase up to 9500 litres of ice-cream till August, and in September will decrease to 7500 litres. The above presented model suggest different scenarios for the farm. Level capacity plan was a suitable plan for 2014. However, if the company is planning to increase the number of visitors by 35%, and therefore, to increase sales and production, the capacity constraint of fast freezing equipment makes this option impossible (unless some technical modifications/upgrade will be made). A scenario proposed based on the chase demand plan is more suitable in terms of the company’s production capacities. However, this scenario will require staffing, scheduling, and production process adjustments during a year. The factors to consider when deciding to increase the number of flavours from 4 to 10 When deciding to increase the number of flavours from 4 to 10 Gillian should consider how this strategy will influence on the production level and the overall production efficiency of the organisation. This decision implies that the volume per flavour will decrease, while the product assortment will increase. On the one hand, it can attract more customers, on the other hand, the company might reduce the effect achieved due to the economies of scale and increased lead time (Slack and Lewis, 2008). If there will be 10 flavours, it would mean that 1 flavour will be produced during 1 day (10 flavours = 10 days), which will lead to stock rotation problems and freezing capacity constraints (Slack and Chambers, 2007). Some of the key advantages and disadvantages are summarised in the table below. Advantages Disadvantages Opportunity to engage new customers and increase loyalty; Costs for product innovation (Research and Development) Potential for increased sales; Problems with stock rotation Competitive advantage due to diversified product line (Krajewski, Ritzman and Malhotra, 2013; Slack and Chambers, 2007). Increased inventory costs because of additional products and raw materials New costs for updating equipment Significant time losses in production as the equipment should be cleaned for 1 hour between flavours Need for additional training Increased costs because of new packaging (Krajewski, Ritzman and Malhotra, 2013; Slack and Chambers, 2007). Recommendations In order to manage capacity/demand more smoothly without further investment in capital, Gillan is recommended to do the following: To develop special promotions for attracting more visitors during the working week from Monday to Friday (these can be special hours, bonuses for visitors, discounts, special visits for children groups, etc.); To promote visits during the first half of the day so that people were motivated/interested in visiting the milking parlour area; To find alternative car park spaces in high-peak season; To increase productivity during less busy days such as Tuesdays and Thursdays; To make staffing changes (part-time, additional hours, 6 days a week, etc.) as the proposed demand change capacity model requires obvious flexibility in production facility (increased staffing in high-peak times and reduced staffing in low season; To carry out marketing research on the demand and consumer’s interest in 6 new flavours of ice-cream. Conclusion Analysis has revealed some critical aspects which Gillian should take into consideration while developing their business and operational plans. These issues include the following: necessity to set up necessary infrastructure in order to be capable to admit 479 visitors during peak seasons and weekends (car parking space); necessity to address space constraints at the milking parlour viewing space during the peak seasons and develop queue management tactics; to address the capacity constraint of fast freezer if there will be made a decision to follow level production capacity model, or to consider a chase demand plan and necessity to adjust production processes, staffing and scheduling. In order to make a decision to increase the number of flavors from 4 to 10, there needs to be carried out more detailed demand analysis and developed a business plan for this idea, as it can be very costly and ineffective in result. PART 2: THE DEVA CONSTRUCTION CORPORATION Introduction The Deva Construction Corporation has been awarded a contract for the construction of a 20,000 seat stadium. The project is a great opportunity for the project, as it can bring the company £3 million. However, it is also quite risky as the deadlines are very tough and there is a number of identified external factors which might cause delay/additional costs on the project and increase the risk of penalty clause. The aim of this report is to provide a detailed project plan for the Deva Construction Corporation, to analyse critically the four proposals given in the case study, to discuss some other external and organisational factors that might have impact on the project implementation process and to provide some recommendations based on the analysis. Project plan The project plan shows that the project begins on the 2nd of February, 2015 and is to be completed on the 8th of January, 2016. There have been identified several critical activities, on which are dependent other activities, and delay in critical activity will cause delay of other activities. These critical activities are highlighted by red in Gantt chart and are listed below: Clearing the site Subsurface drainage Filling for the playing field and track Installation of the artificial playing turf Pouring the seats The estimates in the project plan are based on the information given in the case, and it doesn’t include potential delays, upcoming holidays, weather and other factors which could impact on the project implementation duration period. Some other limitations include: lack of information on project costs, more detailed breakdown of tasks, responsibilities and resource allocations. Analysis of the four proposals The management team has proposed four alternatives for coping with potential risks of delay and increased budget. Below is provided a brief analysis of each alternative. Alternative 1: Expedite the pouring of seat gallery supports. This would cost £200,000 and cut the duration of the activity to 6 weeks. This alternative might be more time-effective as the process of pouring of seat gallery supports could be reduced due to more intensive labour work. However, this task does not have critical dependencies and there is no urgency to rush with this task. This alternative should not be viewed as viable option. Alternative 2: The same as proposal 1, but in addition, put a double shift on the filling of the field. A cost of £100,000 would result in a 5-week time reduction of this activity. Filling of the field is a task dependent on the subsurface drainage activity, which means that if subsurface drainage activity will be delayed, filling of the field will not start. However, putting of a double shift can be a reasonable decision, as 5-week time reduction will enable to start the installation of the artificial playing turf earlier for 5 weeks, and thus will help to safe more weeks for other critical tasks, such as the pouring of the seats. This alternative is viable, as it will help to begin pouring of the seats 5 weeks earlier (approximately on the 9h of November, 2015), before the labour agreements expire (November 20th, 2015). The expected cost for this plan is £100,000. Alternative 3: The roof is very important since it precedes several activities. The use of three shifts and some overtime could cut 6 weeks off the roofing at an additional cost of only £80,000. This alternative can’t be viewed as reasonable as even though the roof precedes several activities, all these activities are not critical and can be implemented in parallel with construction works activities. Alternative 4: Do nothing special until November 20th, 2015. This alternative should be viewed as the reasonable one. According to the initial estimates, the pouring of the seats will be finished by the 8th of January. It means that there will be 3 more weeks in order to wait for better weather conditions. However, assuming that the strike will occur, the project can be delayed for minimum 5 weeks, whereas Expected Costs will be £750,000 (minimum of £150,000 of penalty cost*5 weeks). This weakness makes the strategy cost-ineffective and not valid. Other factors to consider It is quite difficult to identify some organisational or cultural factors in case of Deva Construction Corporation as there is no company-specific information is given in terms of corporate governance, cultural diversity management, etc. However, it is possible to assume that some typical behavioural and organizational factors will play part Turner, 2014). Conclusion The company faces various risks associated with additional overhead costs. It is recommended to focus on implementation of the alternative #2. As it has been already discussed the project management team will save up to 5 weeks in critical path activity and will enable to start installation of playing turf 5 weeks earlier. The team should aim to finish works before the labour agreement expires. There should also be found some options to reduce the duration of installing playing turn by 5-6 weeks. Otherwise, it will be necessary to wait until the strike is over. Assuming that there will be some fixed costs incurred during 8-12 weeks, it might be reasonable to focus on more intensive work prior to the data of strikes. References: Krajewski, L., Ritzman, L. and Malhotra, M. (2013). Operations management. Boston [etc.]: Pearson. Slack, N. and Lewis, M. (2008). Operations strategy. Harlow: Financial Times Prentice Hall. Slack, N. and Chambers, S. (2007). Operations management. Harlow, England: Prentice Hall/Financial Times. Turner, J. (2014). Gower handbook of project management. Appendix RINGINGLOW FARM THE DEVA CONSTRUCTION CORPORATION Gantt chart Network Diagram Read More