Operational and Strategic Issues Facing Terror Tubes - Assignment Example

Operational and strategic issues facing Terror Tubes xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Terror Tubes xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Name xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Institution xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Lecturer Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Date of Submission Operational and strategic issues facing Terror Tubes Operations management is concerned with the careful management of the processes of production and distribution of products and services. These are processes that change inputs for example raw materials, energy and labour into outputs in form of goods and services. Some of the activities related to operations management include inventory control, management of purchases, storage, quality control, logistics and evaluations. Operational management deals with substantial analysis and measurement of internal processes focussing on effectiveness and efficiency of the processes. It ensures that business operations are effective in terms of meeting all customers requirements and efficient in terms of using few resources as possible (Beer 1984). The main purpose of operational management is to improve the content of value-added activities in the given processes whereby the added-value activities are supposed to be linked with market opportunity which is meant for satisfying enterprise performance. Each organization has its own nature of operational management depending on the nature of products and services. Terror Tubes is facing some operational and strategic issues which include marketing issues, limited capacity, inadequate facilities, and financial problems. Transformational processes include the activities that are involved in converting inputs such as labour, land, entrepreneur and capital into tangible goods and services. The transformational processes include changes in the physical characteristics, location, ownership, storage or accommodation and purpose or form of materials, information or customers (Dess 1990). The input value is mostly measured in financial terms whereby organizations purpose is to make profit. Profit is made when the cost of production is less than the revenue generated by sales. Other indicators are used in case of non profit making organizations to measure the value added. Value adding is the perception of the customer to the contribution made by the process to the product or service. The diagram below explains the transformational process. The input resources used by Terror Tubes are qualified workers, one high tech equipment, single facilities, materials, services, ideas, energy and land among others. These inputs are then converted into outputs in terms of goods, that is, custom and standard systems, and services. The transformation used by Terror Tubes currently can be put into various categories. First is manufacturing which is the creation of physical products such as custom and standardized systems (Dennis 1993). Terror Tubes company uses batch production system which is a manufacturing technique that involves creation of components at a workstation then moving them to the next processing step in production. This method requires that a group of items go through the production process together each stage at a time. Terror Tubes uses batch production whereby the only equipment and the same workforce is used for the production of custom and standardized systems. The first step is setting up the production line. One task is completed by each worker and passes it to the next worker in the production line. These workers are known as flexible workforce whereby they switch from one production line to the next. Depending on the customer needs, one line runs for a specific period of time and then change of the product is done. The quality of the products here depends on the design and the skills of the craftsmen (Doyle 1994) whereby the only equipment they have in nature is designed for production of custom systems and also the craftsmen are skilled for the same. This indicates that, the quality of standardized systems is not satisfying to the customers hence the low sales. The batch production has had positive and negative impacts to the Terror Tubes Company. For instance, the company is using the only one equipment which creates inefficiencies with the equipment which needs to be stopped, configuration done again and testing of the output done before another batch of a different product increasing the production costs. This increases the downtime which is the idle time between batches. Storage of different job components may be needed which increases the costs. This system also requires repetition of tasks which is very boring. However, Batch production is useful to the company which makes the products according to the demand or products that have high profit margin. The storage costs of finished products are minimised since the products are made for specific customers. The different demands of the customers are met since the batch system can manufacture different products accordingly. It is also important since it is cheaper than running continuous production lines because it uses automation and specialist machines. The Second category is transport which is the movement of the products to the customers such as Super Car, Australian motor racing industry and private motorists. Thirdly, is supply which is the change in ownership of the products after sales are made? Terror Tubes company has the ability to meet a wider range of customer demands which has enabled the company to be solid which is highly respected as a good supplier to the hot-rod and revhead sections of the market as well as the motor racing industry. Demand is the customer’s wants for a specific product or service. Terror Tube company knows how to manage the demand since they have recognized what is needed in the market place. This has lent to proper forecasts and forecasting processes whereby the company has predicted the demand for its products whereby for now it has realized the need for expansion in order to have enough capacity and resources available in sufficient amounts in advance of the need. This has minimised the forecast error which is the difference between forecast value and actual observation. Below is a diagram indicating the relationship between forecasting and operations (Gardiner 2009). Lastly is the services category which includes the treatment of customers and the storage of the products. The high sales registered by the company indicate that the company has good reputation in the market hence attraction of customers. The company has also sought for warehouse services which are used for storage of the inventory goods especially the standardized systems. Terror Tube has gone into an agreement with Super Car and signed a new contract whereby the company is supposed to supply stock to the new customer. This has had major effects to the company. Terror Tube company’s sales have greatly increased especially for the standard systems with the production line being rescheduled regularly than before though trade-offs are done since the custom systems have higher sales and profit margins hence given the first priority. In order to manage the needed supply to the Super Car (Dougharty 1970), the company has decided to operate overtime with scheduling the production in several weekends. This has effects to the finance and accounting sections of the company whereby due to the increased production of the standard systems money is no longer tied up in the inventory in terms of raw materials and the work in process. This will also reduce the costs of renting an expensive warehouse for the storage of the large volumes of inventory. Due to the increased demand for the standard systems, the production capacity is unable to produce enough hence the new contract has opened the eyes for the operation managers, that is, Sam and Phil, to realize that the company is expanding and the single production facility is in adequate therefore it needs more space. Terror Tubes Company is fairly carrying out its business activities. Its performance is average but it can advance and be excellent. This can be done right away. Basically for a company to make utmost profit, time ought to be considered. To start with, in deed, it is clearly noted that it has one facility. All production and other business related transactions are done in this single facility. In real sense, this enables communication to be hasty, economical and permits face to face conversion where perception is lifted to be almost ideal (Dennis 1990). However this facility has limited space that denies the company the prospect to develop. More constructions cannot be constructed and therefore it would be add to introduce new departments for easy working. The company can be more efficient and effective if a new facility is created. Batch production has facilitated the use of one machine. The productions done by the company are two i.e. standard and custom productions. This equipment is used for custom systems processing. The company can purchase one or more machines to be used. Production will increment thus the delay of supply of units to Super Car company will not be there. This is because, the standard systems will be produced at the right time when need arises. In fact, the new machines that will be bought can smooth the progress of creation of a new facility. The quality and quality of the systems produced majorly depends on the workers as individuals. This is an indicator that the company recruits the persons with respect to the skills they have and basically for a specific job. To improve the amount and the quality, the company needs to plan on how to educate all workers. This training can be done in accordance to the kind of job each work can do best. At the end, this will be of great significance: the refined exhaust systems will look similar thus creating uniqueness of the company’s goods (Dess 1987). Consumers can easily be convinced to buy products from the same manufacturer once they recognize that the quality is always the same and more so when it is the paramount. In the future, the Terror Tubes Company can appreciate that it has retained its consumers and the company is empowered to run consistently with minimal market fluctuations. Inventory has to be managed in the most appropriate way (Guest 1987). Terror Tubes Company can do this by ensuring it purchases an adequate amount of raw resources to be used within a specified duration of time after which some more can be bought. To control the raw materials, it has to process them persistently and steadily fully. The company can then sell to its customers without any delay to ensure the goods that are kept in the warehouse is minimized. This can be done by using software which where one can know the inflow of raw products and outflow finished. The software can assist a person to tell of the goods that have been sold. Terror Tubes need this inventory to be properly managed to ensure cost incurred is low. This is in terms of purchases and inventory expenses. Inventory regulation allows processes involved in the company to be supervised (Beer 1985). Customers like Super Car will be satisfied for supply of the systems will be done continuously and at the right time. The time taken to sell all systems is minimized. Inventory control gives a guideline on how to run the company’s stockpile effectively and efficiently. Currently, the sales for the standard systems are lower than that of the custom ones. The management section together with the sales team should carry out market research. The company should know the cause of the low demand by the consumers. This may be due to high price, poor quality or the fact that the consumers don’t like it. Out of the raw facts they collect, the company can analyze critically and the required measures. It can decide to make few of the standard exhaust systems or educate the buyers on its importance. They can also carry a sales promotion to synthesize people to buy. Since the customs exhaust systems seem to be higher, the company should analyze critically the market research results very soundly and stand to be bold enough to produce more goods of the customs one if they find that there is no likelihood for the standards systems to improve. The company has rent a costly warehouse to keep its systems securely. Once the inventory has been properly managed, it can get a smaller warehouse. It should be low-priced to be of assistance to lessen expenditure. This will facilitated the cutting down of cost the company has been involved in paying the rent bills. It will thus save a lot and have the chance to increase the profit they could not easily make. The company can encourage specialization in production. Here, it has to allow standard exhaust systems to be produced on their own and the custom ones separately. This gives space to have a limited number of workers on each line of product. In return, the amount spent to pay them is decreased. In addition to this, processing time is well utilized and hence the company will have very negligible time to squander. Actually, at the same time, the Terror Tubes Company will ensure value and number of the systems produced is supreme due to specialization where employees get use to the kind of work they are doing and become excellent as time goes by (Dunlop 1997). Financially, the company has been affected by the production of the standard exhaust systems. It is quite important to notify that standards systems have been sold and some profit has been made from the sales. The Super Car Company has been buying its standard exhaust systems thus making profit. Through the sell of these systems it has enhanced the production of the other systems hence growth and development of the company. These systems have helped them to venture into the market to see if they can sell them to consumers who don’t need the custom ones hence making the company to be more popular. However, a lot of capital has been used in the systems. To begin with, rent bills have increased due to the unrefined materials, the refined and incomplete products that have been kept in the ware house for long. Manpower has been hired to control, handle and verify on the number of systems in the storehouse (Weinstein 2003). This indeed is a superfluous expense. Human resources have been employed to manage the running expenditure due to the standard systems. As the raw products were being bought transport expenses were involved. The money spent for the above expenses on the standard systems could have been used to realize turnover without more commotion (Hardin III 2008). This profit would help to buy the unrefined products in small quantities once need arises. To add, on the stock return has been low thus Terror Tube Company has not benefited fully. The standard systems inventory may not be precise due to prolonged storage of large quantities. This may make the comp-any think that they will make a certain amount of profit and due to inaccuracy, fail to meet their goal. The standards systems can be stolen from the warehouse causing a further loss to the Terror Tubes Company (Kochan 1993). This will deny the company the profit it could have made. Consequently, once this is noticed, some workers can be sacked if it was not done by persons from outside the company. Some of the systems can be damaged while in the storehouse thus leading to renovate and preservation expenditure (Coombs 1998). The standard systems are kept with a hope that they will be sold in the future. The consumers may fail to buy thus they turn out to be waste. If this happens, it may make the company to keep the products as a waste. This adds to the cost involved in production. The company should have carried out a market investigation before venturing into this field of production. This would have made them to know if there was a need to produce more systems for other persons or they would have supplied to the Super Car Company only. In conclusion, proper production and operation management ensures manufacture and deliverance of good quality products as fast and cost effectively as needed by the customers. The various important factors Terror Tube Company should consider during production are: - the production cost, the required quality, the needed quantity, and what customers need (Stopford 1994). References Gardiner, D, 2009, Operations Management for Business Excellence, Pearson Education New Zealand, North Shore. Stopford, M, &, Baden-Fuller, W, 1994, Creating Corporate Entrepreneurship Strategic Management Journal, England, John Wiley & Sons, Vol, 15, No, 7, pp, 521-536, http,//www,jstor,org/stable/2486746. Coombs, E, & Deeds, L, 1998, Value Creation in New Firms, Evidence from the Biotechnology Industry, New England Journal of Entrepreneurship, Vol, 1, http,//www,questia,com. Weinstein, L, 2003, From Corporate to Entrepreneurial Life, Risks and Challenges along the Way New England Journal of Entrepreneurship, Vol, 6, http,//www,questia,com/app/direct/SM,qst. Beer, M,, et al,1985, Human Resource Management, A General Manager’s Perspective, Chicago, Free Press. Kochan, T, & Dyer, L,1993, Managing Transformational Change, the Role of Human Resource Management, International Journal of Human Resource Management, Vol, 15 No,4, pp,555-68, http,//www,emeraldinsight,com/Insight/ViewContentServlet?Filename=/published/emeraldfulltextarticle/pdf/0190160701_ref,html. Guest, D, 1987, "Human Resource Management and Industrial Relations", The Journal of Management Studies, Vol, 24, No,5 , pp,503-21, http,//www,emeraldinsight,com/Insight/ViewContentServlet?Filename=/published/emeraldfulltextarticle/pdf/0190160701_ref,html. Hardin III, et al, 2008, Finance editorial board membership and research productivity, Review of Quantitative Finance and Accounting, Dordrecht, Kluwer Academic Publishers, Vol, 31,  Iss, 3,  p, 225-240. Dougharty, L, 1970, Developing Corporate Strategy through Planning, Programming and Budgeting, Long Range planning, Vol, 35, pp 1504 – 1151. Dess, G, et al, 1990, Industry Effects and Strategic Management Research, Journal of Management, Vol, 16, No, 1, pp 7-27. http://www,emeraldinsight,com/Insight/ViewContentServlet?Filename=/published/emera ldfullte xtarticle/pdf/0240250703_ref,html. Dennis, J, & Sharfman, M, 1993, Procedural Rationality in the Strategic Decision Making Process, Journal of Management Studies, Vol, 30, No, 4, pp 587- 630. Dennis, A, et al , 1990, A New Role of Computers in Strategic Management, Journal of Business Strategy, pp, 38 – 43. Doyle, P, 1994, Setting Business Objectives and Measuring Performance, Journal of General Management, Vol, 20, No, 20. Dess, G, & Origer, N, 1987, Environment, Structure, and Consensus in Strategy Formulation: A Conceptual Integration, Academy of Management Review, Vol, 12, No, 2, pp, 313 -330. Read More