Management - Operations Decision - Assignment Example

?Operations Decision Affiliation with more information about affiliation, research grants, conflict of interest and how to contact Operations Decision Introduction: The fictitious business considered for this assignment is a plant operation company named AXEL, located in California US. The pressure to improve effectiveness and efficiency of production writs never ends in a firm like this. Production is a one of the multi-disciplinary efforts that need managers, technicians, supervisors, manufacture workers as well as quality and test or laboratory experts, engineers and financial controllers. These professionals converge as a team to develop and enhance production outcomes to achieve the required level of profitability. Business organizations require outside research to estimate the demand for products and services and will have to entailing information to explore access and capture market places. My role here is as managing consultant to this company, to offer advice that will help them to arrive at a decision as to whether it should shut down totally or continue its operations. The plant operation sector is extremely fragmented in nature, characterized by a large number of small and micro companies. The capacity to react rapidly to emerging opportunity is an absolute necessity to achieve success in the sector. In a swiftly altering atmosphere, it can be complex for small and medium sized companies to cope up with market developments Current Environmental Scan Factors: Current “environmental scan” (Environmental Scan, 2005, Pg.1) factors of this company include an analysis of both internal and external environmental factors that affect the overall functioning of the company, as experienced below: Internal Factors: · Organization of equipment and machinery · Capacity of the technological · Culture of the organization · Management systems · Worker morale · Financial management External Factors Competition Behavior of the customer Economy Political interference and movement Social atmosphere Technological alterations General environmental alterations All these factors have great impact on plant operations and the management’s decision to continue or discontinue their operations. Both internal and external environment are the foundation in which the organization operates. Environmental scanning also concerns the gathering of relevant information about conditions that affect the business. Appropriate information about internal and external factors of the company will help in understanding the overall performance of the company. It is also a process of using information of the environment in decision making. This has to be seen from the perspective of improving the overall organizational capability to deal with quick changes. The external environment of plant operation company refers to both its operational atmosphere such as competition, consumers and suppliers, and general atmosphere such as regulatory, economic, technological, and socio-cultural aspects. A firm scans the environment in order to recognize the external factors of change so that they may build up effective responses, which can improve or secure their position in the future. Scan will also help in avoiding surprises, recognizing opportunities and threats, increasing competitive advantage, long-term and short-term planning of performance. The organization's capability to adapt to its outside atmosphere is dependent on knowing and understanding the external alterations that are taking place. Environmental scanning forms a primary means of organizational learning. Evaluate the financial performance of the company using the information: The firm presently employs 100 workers to produce 6,000 units. The daily wage is $70, and the price of the firm's output is $32. If the firm continues to work in this capacity, its total revenue will be $192000 = $32 times 6000 units of output. This is the advantage of operating the facility. The price of operating the facility is the cost of variable, which equals the amount of labor costs and the cost of other variable inputs. Labor cost = $7,000 ($70 wage times 100 workers) The cost of other variable inputs = $2,000 The total revenue exceeds variable cost; therefore it is sensible to carry on the facility of operations in the short run, although it is losing money. Short run is the theoretical time period in which a minimum one issue of production is fixed in quantity and others are variable in quantity. The long run time period is no fixed factors of creation as to altering the production level by changing the capital stock. Recommend how the company can improve its profitability. The firm has to keep a balance between profitability and liquidity while conducting its daily operations. Reserves in the current assets predict the delivery of goods or services to the final customers. A correct management of the same could bring the desired impact on profitability. “Maintaining profitability during business cycles or other disruptions often requires quick changes in focus to maintain the best fit between a company’s capabilities and changes in the available opportunities” (Nagle, 2009, p.5). Market share frequently is connected with profitability and, therefore, many companies try to raise their sales compared competitors. “Opportunity and threats to the company are also to be analyzed carefully and seriously considered in decision making process in order to improve profitability” (Boro, 2004, p.14). The company also needs to take adequate measures for internal development by best utilizing it external power and removing the weaknesses to the maximum possible extent, to attain optimum profitability. Assess the circumstances in which the company should discontinue operations. Discontinuing a company operation or resolving to sell a main asset is significant financial action. These results are also likely to have important consequences on net assets. Actually, discontinued operations are frequently actions that shareholders can take. If a set of assets meets the situations to be categorized as held for sale and also signifies a main operation, as a discontinued operation and a disposal group arises. On the other hand, the connections between discontinued operations and the detained for sale categorization are not always so clear. “A discontinuing operation may be disposed of in its entirety or piecemeal, but always pursuant to an overall plan to discontinue the entire component” (Discontinuing Operations, n.d, p.383). If a business enterprise sells a component significantly in its total, the effect can be a net loss or net profit. For such discontinuance, a compulsory sale agreement is entered into on a particular date, even though the real transfer of control and process of the discontinuing operation can happen at a later date. Also, expenses to the seller might happen at the time of the contract, on the occasion of the transfer, or in surplus of an extended future period. Reference List Boro, B.R (2004). Master Degree Thesis Profitability Improvement in the Oil Refinery- A Case Study of Bongaigaon Refinery and Petrochemicals. University of LJUBLJANA Faculty of Economics and International Center for Promotion of Enterprises (ICPE), LJUBLJANA. Retrieved from Discontinuing Operations (n.d). MCA. Gov. in. Retrieved from Environmental Scan (2005). MDF. Retrieved from Nagle, T. & Lisa, T.S. (2009). Grow More Profitably by Integrating Marketing and Operational Choices. Monitor Perspectives. Retrieved from Read More