Operation management - Essay Example

?INTRODUCTION: There has been increasing competition in the market place and organisations are looking for different methods to improve and enhance the overall productivity and performance. One important aspect in this regard is of the operations management (Krajewski, Ritzman, and Malhorta, 2007). The output or final results are dependent on the efficiency and effectiveness of the operations. For this reason, it is important for the organisations to carefully plan and control the overall operations of the organisation (Loader, 2006). With the passage of time organisations are using different operations management tools and techniques in order to make sure that all activities and business processes are performed in effective and efficient manner (Gourdin, 2006). In this paper, an attempt has been made to understand the business operations and processes with the help of a case study. By exploring and analysing the business operations of the company presented in the case study it will become easy to understand the practical implications of the operations management tools and techniques and at the same time it will be easy to comprehend the different issues and challenges which are being faced by the organisations in the quest of improving the overall operations and activities of the organisation. OPERATIONS MANAGEMENT: Operations Management is the field of business which deals with managing the resources of the business that will be used to produce the output of the business (Schemenner, 1984). This field deals with the creation of a transformation system which takes the business inputs and uses the business process to produce the business output (Schonberger and Knod, 1991). This field also produces the controlling protocols for the transformation process (Gaither, 1984). These protocols consist of: layout strategy, operations strategy, and design strategy, which are augmented by a planning stage. Examples of most common operations include: retail operations, banking operations, manufacturing operations and etc (Flint, Larsson, Gammelgaard, and Mentzer, 2005). Operations management also help the company in the planning of the following aspects of the business (Chase and Aquilano, 1977): Capacity Inventory Supply Chain Quality Failure Prevention and Recovery By helping the company answer questions related to these domains, operations management enable the company to become more productive and effective in its operations and resource utilisation. Thereby, enhancing the company’s chances of survival in its marketplace and later go on to strengthen it place in its market (Fugate Mentzer, and Stank, 2010). One important element in this regard is of the planning and control. It is important for the organisations to carefully plan and control all operations and materials input in order to make sure that the final output or result is according to the demand and requirements in the market (Fitzsimmons, and Fitzsimmons, 2007). ANALYSING THE OPERATIONS OF A FROZEN VEGETABLE FACTORY: Business Analysis: Overview of the Company and Market: The company is operating in the frozen vegetable industry; it is backed by a strong specialist food group. As the group philosophy suggests that it focuses on speciality food segments, the factory’s operations are consistent with this philosophy. The factory produces a range of frozen vegetables like: carrots, cauliflowers, beans, peas, petit poi’s, broccoli, and sprouts. Most of the factory’s output consists of peas, which undergoes a very tedious process before a final version for the customers is available. The peas market is highly competitive and is dominated by five players. One of the players in this market is privately owned and is most of the time involved in changing the dynamics of the competition. It does this by reducing its profit margins, and thereby price, which leads to an increase in the number of customers going to this supplier of peas. However, major variables which influence the demand for peas include the quality and size of the harvest. The price of a particular consignment depends upon the quality of the peas sought by the customer. But in this case also the factory has to offer competitive rates in order to acquire self space for its product in a major retail store (Johnston, Chambers, Harland, Harrison, and Slack, 2003, pp. 269-280). The factory heavily depends upon accurate demand forecast supported by sufficient supply. Complicating this process is the requirement to perform this task a year ahead of the actual performance of the activities needed to accomplish the set out objectives. High profit margins in this industry heavily depend on the factory’s ability to reduce its fixed cost. And in these factories major component of fixed cost is the factory’s capacity. If a factory is able to utilise its capacity fully than it will reduce its fixed cost and, simultaneously increase its profit margins and vice versa. John Lincoln is focused on doing exactly that. He is utilising his factory’s capacity completely in order to generate high profit margins and simultaneously offer competitive prices to its customers (Johnston et al, 2003, pp. 269 – 280). The main market of the company, United Kingdom, is having a constant yearly demand for peas. Thus, competitors have to fight aggressively for a larger piece (market share) of a constant size of a pie (Pea market). The pattern of supply and demand of peas is also very tricky. Most of the supply comes in the summer season whereas demand for frozen peas fall drastically in this season, because end customers prefer to consume fresh peas. This trend reverses in the winter season in which demand for frozen peas sees a sharp hike. In order to cope with the seasonal demand the company not only operates round the clock but also hires additional staff. This creates the need for the business to undertake proper planning and controlling. The factory’s foremen/operations manager has the responsibility to ensure constant and sufficient supply in the peak season, so that the factory’s operations are not disrupted due to insufficient supply (Johnston et al, 2003, pp. 269 – 280). Customers: It is also important to analyse and evaluate the customers of the factory in order to come up with a strong operational strategy. The main customers of the company are the retail chains of the country. Some of the largest retailers in the market place are Asda, Safeway, KwikSave, Iceland, Somerfield, Tesco, and Sainsbury, etch. Apart from these customers the factory also exports its products, but the volume of its exports is not that huge. For the retailer customers’ high quality and timely delivery of the end product is very important (Johnston et al, 2003, pp. 269 – 280). Marketing and Competitors: As mentioned earlier, there is strong competition in the industry and the competitors are even going for aggressive pricing in order to capture market share. The company under discussion is focused on capacity utilisation and cost reduction, whereas other factories are looking to penetrate the market further and drive out competition from the marketplace. These factories are less concerned about capacity utilisation, which is evident from the fact that they have spare capacity available in their factory space (Johnston et al, 2003, pp. 269 – 280). Marketing is an important function that heavily supports in the planning of the operations of these factories. The main task of the marketing is to build strong and healthy relationship with retail customers and forecast accurate demand for each coming year (Holt, 2009). Business System and Processes: The overall operations of the organisation can be viewed and analysed in the context of the systems view of the organisation (Zairi, 1997). In the systems view of the organisation, the organisation is viewed as system in which certain inputs are transformed into outputs by going through a set of processes and activities (Barlow, 2005). In this case study, the raw peas are the inputs which are harvested by the consortium of farmers, which are then transformed into high quality frozen peas by passing them through different processes in the factory. In order to make sure that the final products are of highest possible quality, it is important to manage all activities and operations of the supply chain in an effective and efficient manner (Jeston and Nelis, 2008a). Factory Operations: The factory operations require continuous addition of new technology to bring improvement in the quality of the final peas. Not only does the factory operation of peas require expertise but also new and upgraded machines to stop the enzyme reactions in the peas, in order to preserve their flavour and freshness. The factory also has to work closely with its retail customers in order to impart the relevant protocols with regards to the handling of peas (Johnston et al, 2003, pp. 269 – 280). The entire factor operations depend upon the sharing of information between departments. All departments need to be close to the factory floor in order to get a clear idea about the dynamics of the factory operations. These departments should incorporate the intricacies of the factory floor in their own planning process (Johnston et al, 2003, pp. 269 – 280). The factory operations are heavily dependent upon external factors like the harvest yield, the weather, and the order volume. Augmenting this are internal factors like machine performance, machine jamming, machine overhauling and maintenance. All these internal and external variables impact the productivity of the factory. Since these variables lead to the disruption in the factory operations, resulting in loss of vital time, they have the potential to damage the harm the output quality of peas. And in an industry which depends heavily on quality, these factors can lead to a very damaging impact on the future sales performance of the factory (Johnston et al, 2003, pp. 269 – 280). Marketing and Sales: This department performance the most vital role of demand estimation and ensures that there are sufficient customers who can fulfil this demand. The process of demand estimation is very complex, since this process has to be performed a year earlier than actual sowing and harvesting is done. Not only this the marketing depart has to ensure that the factory receives order volume that is required to fully consume the ordered supply. Once the marketing department gives its recommendations regarding the quantity to be sowed and harvested, the operations department takes over (Johnston et al, 2003, pp. 269 – 280). Operations and Production: The factory works very closely with a trading group, comprising of five farmers, which collectively share equipment and hire farm workers. This trading group sow seeds and harvest the peas in the summer seasons. Once the factory foreman has assessed the quality of the yield, he gives the go for harvesting. Once harvested the peas are transported to the factory through Lorries. The time it takes to harvest and transport the peas to the factory should be under 140 minutes, because after this time the peas would lose their original flavour richness. So it is of utmost importance that the peas reach the factory in this time period so as to ensure highest pea quality (Johnston et al, 2003, pp. 269 – 280). This entire process is monitored and coordinated by the control room, which links the harvest process with the transportation and factory’s production processes. After the peas are dropped into the factory, they are segregated and put in three production lines, from where they go into a small hoper called “scacos”. After going through the processes in the scacos the peas via water pipes go into the steam blanchers, over here the peas are heat to a temperature of 98 degree Celsius in approximately 90 seconds. After this process, the peas go through a cooling down process and are than sampled to assess the starch content. Having gone through this process the peas via water pipes are transfer to the freezers (Johnston et al, 2003, pp. 269 – 280). The entire process has strict quality control protocols in place to ensure superior qualities of the final peas. Peas which are rejected are put under quarantine. Packaging: The final peas are than packaged and dispatched to the final customers. Customers: As mentioned earlier that the major customers of the company are retailers, who also want to provide superior quality peas to their customers. So the factory and the retailers work in unison to utilise equipments and machines which enable them to provide superior quality peas to their end customers (Johnston et al, 2003, pp. 269 – 280). Relationship between the Factory and its Channel Members: Since the chain of command in the factory is very small and the external customers do not have to go through a cumbersome process to meet someone in the factory, this ensures a free flow of information between channel members which nurtures healthy relationship between channel partners. The company is having a very sound relationship with its channel partners, which allows it the luxury of being flexible and sensitive to changes in the external environment. It was because of this very reason that the company never had to go to the open market to replenish its supply, whereas most of its competitors often visited the open market to find more supply (Johnston et al, 2003, pp. 269 – 280). Since the factory is also concerned with the performance of their customers with regards to their frozen vegetable segment, in this regard the factory has transferred its expertise of this business to their customers to ensure that they also offer superior final products to their customers. This attitude of the factory has been one of the reasons for its success, because customers like to have channel members who care for their well being (Johnston et al, 2003, pp. 269 – 280). The strong relationships which the factory had with its channel partners, coupled with effective controls in place to monitor the entire production process, were the main reasons behind the company’s success. It was this synchronisation of different activities across the supply chain that was lacking in other factories of this industry. The customers of the factory found the strong cooperation between different departments highly attractive and encouraging (Johnston et al, 2003, pp. 269 – 280). Translating organisational objectives into operations objectives: The factory’s early mission is broken down into number of specific, measurable and achievable operational level objectives. The factory’s mission is set by the top management which most probable will include the opinion of the group backing the factory. It is of utmost importance that the factory links its organisational objectives with its operational objectives. The smaller operational objectives should be contributing to the achievement of wider organisational goals. In this case, the final objective or target of the factory is to provide the customers with the highest quality of frozen peas. One more objective which the factory seems very eager to pursue is that of cutting their fixed cost (Johnston et al, 2003, pp. 269 – 280). To give shape to its first objective the factory is continuously investing in new and upgraded technology and processes. Not only is it improving its own processes but also it is imparting its expert knowledge of this field onto its retail customers. The factory is trying to provide the end customers with highly fresh frozen products. Whereas for its other objective the factory is utilising its full capacity, and by doing this it is trying to reduce its fixed cost. This action will allow it to offer competitive price along with sustainable profit margin. ISSUES FACED BY THE FACTORY: Marketing and Sales Issues: This function of the factory has to make educated demand estimations. This task has to be performed a year earlier than the actual sowing and harvesting. After recommending the demand estimate the department has to find potential buyers with order quantity that would contribute in consuming the demanded output. The department has a very stiff job in its hands; there are chances for mishap at both ends. The department might not be able to add some potential buyers in the demand estimate as a result the farmers would not sow the seeds and the factory would lose on potential sale opportunity. The department might also not be able to bring enough customers to the factory even though it has included the arbitrary order volume of these departments in the demand estimate of the company. This would lead the factory to bear inventory holding cost, which would increase the factory’s fixed cost. Operations and Production: This department has to work under strict time constraints. Not only does it have to ensure continuous supply of peas from the farmland but also it has to maintain a productivity level in the factors operations that would allow the factory to absorb the supply of peas. This requires close coordination between the farmland operations and the factory floor operations. There are other issues surround the operations of this department. These issues include frequent machine breakdowns, machine maintenance issues, production losses, scheduling issues etch. One of the major problems which arise in the factor is that of new employees, hired during the peak season, who have to be given training every season. No matter how much train is imparted upon these workers, these workers are a potential source of disruption in the factory operations just because of their unfamiliarity with the factory operations. Packaging: This department which ideally should be packing peas for the customers has to deal with quality assurance problems. Due to this the productivity of the department is hurt badly. In order to ensure consistent quality of the peas, the packaging department has to run these peas through a Sortex several times before packing. This process seriously slows down the entire packing processes of this department, which is of annoyance for the workers of this department. POTENTIAL IMPROVEMENTS IN THE OPERATIONS: The factory’s problems stem from the uncertainty that engulfs its operations. This uncertainty starts from the marketing department, which makes a demand forecasts based on assumptions and historical trends. This uncertainty compounds when on the basis of this presumptuous figure the factory and its farmers go on to lay seeds. With no confirm orders in place the factory and its farmers make a relatively risky investment in the seeds and farming process. Than without considering the productivity of the factory machinery the marketing department take on orders. This step has the potential to alienate the customer when the company does not fulfil his order. With so much uncertainty prevalent in the factory’s operations, which are subjected to changes in productivity level due to factors like machine breakdown and machine clogging. Not only these factors are creating uncertainty, but the biggest source of uncertainty lies in the yield of the crop. Since the industry is highly quality conscious, in case of a poor yield the company will be unable to sell such a harvest to its already booked customers. There are number threats surrounding the operations of the business but even than the factory has successfully managed to continue its operations and build strong equity in the marketplace. One remedy to all these problems can be the implementation of an enterprise system in the factory’s departments. This system has the ability to give company managers a holistic view of the operations of the business (Oz, 2009). This system will enable marketing manager to estimate demand taking into consideration all the pertinent variables. This will add confidence into the estimate. Not only will it allow marketing manager to forecast demand accurately but also it will enable him to take orders which the production floor will be able to manage. Since the production process is frequently severed by unplanned problems, there needs to be some sort of provisioning done to avoid the repercussions arising out of this disruption (Jeston and Nelis, 2008b). Enterprise systems will ensure that the factory avoid such repercussions (Johnson and Clark, 2008). It does this by alerting all concerned parties or functions with the prevailing problem and the potential problems which will arise in there concerned functions as a result of this. It will also help them to prepare counter measures (Simchi-Levi, 2007). Since the entire factory operations are heavily dependent upon timely sharing of operational information across the factory, enterprise system has modules in place which allow one department to convey its message across the factory to other departments as well (Simha and Word, 2009). The packaging department can use this system to convey to the marketing department their current order position. Since they have to engage in a very sticky process, which slow down the departments own productivity along with increasing the delivery time of the consignment to the customers. Through this system the packaging department can communicate the most accurate time of delivery. Thus, an enterprise system helps the factory to avoid having an alienated customer on its hand. The potential benefits of an enterprise system are enormous, but it implementation is a very tedious task. Not to mention the cost of such systems, that can lead the company to make an enormous amount of capital expenditure. Also the company will have to tailor its existing processes according to the modules of this system. This can prove to be a very laborious task and can possible hurt factory’s current productive capacity (Oz, 2009). Proposed Solution: Benefits of Solution Proposed: CONCLUSION: Even though the company is operating quiet efficiently in the market place but there are much too many risks involved in its operations. Not only do these risks have the potential to raise the factory’s fixed cost but also they can make the company lose its current market share to competitors. In order for the company to reduce the magnitude of the above mentioned risks, the company should undertake the courage to implement an enterprise system. Since this system will make the company sensitive to its surrounding environment and the risks prevalent in it, thereby enabling the factory to adapt its internal processes to these risks and the factors which are causing them. List of References Barlow, J (2005). Excel Models for Business and Operations Management, New Jersey: John Wiley and Sons. Chase, R.B. , and Aquilano, N.J., (1977). Production and operations management: A life cycle approach, R. D. Irwin, Homewood, Ill. 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