Operations Decision - Assignment Example

Operations Decision Operations Decision Scenario Econ is one of the reputed footwear companies and has been the mostlypreferred brand in the market for the past several years. However, the company now confronts uncertainty as it failed to make reasonable level of profit out of its operations. The company comprises 100 workers to manufacture 6000 thousand units of products per month with 20 working days. The employees are given $70 per day and the product was manufactured at the rate of 32. As the total revenue is below the total fixed cost, the company is running without any profit.

Every firm has fixed costs, which are independent of other variable costs. Both these costs (fixed costs and variable costs) are important to determine whether the production can be continued or discontinued. Environmental Scan In order to fix the problem, it is important to assess the current environmental factors that are relevant to the decision making process. A holistic approach is applied in this regard that involves assessing organizational culture, supply chain, and the collective external world.

The findings are listed below; 1. The company does not have a specific research wing to test the predictive validity of various models across the organization 2. Inappropriate resource-skill ratio is identified. In the current environment, resource is not sufficient to meet the company’s production requirement 3. The company needs to inject capital into its supply chain 4. It needs to utilize modern technology rather than employing more labor 5. Needs to make each model markedly different in addressing the environment 6.

The company is highly vulnerable to external changes as it lacks flexibility to deal with changes 7. And finally, it does not have a process for exploring the possible future and for listening to the views of its stakeholders Financial performance The given performance of the company makes it obvious that the company’s return on investment (R/I) ratio is not proportionate. In other words, the cost of production is not proportionate to the company’s current spending limits. When the product is sold at the rate of 32 in the market the cost of production is 180000 that involve employees’ daily wages and the cost of other input variables.

Evidently, the company can proceed with its production only if it reduces the cost of production or if it increases the price of the production from the current levels. According to the given data, the money given to the employees is much higher than the money spent on the other input variables per day. First of all the total cost of one unit of product must be evaluated. Increasing working days would only increase the cost of production and not the profit. In brief, company should a bit innovative in this context to improve the total production without increasing the number of labors or working days.

Recommendations Referring to Seuring and Goldbach (2002, p. 82), the cost of production must be reduced by minimizing wastages and by negotiating with suppliers for lower prices. These two are the most important and primary actions Econ must take to confront the current contingency. The employees also must be given opportunities to take part in decision making process. In order to position the organization effective in the external environment, the internal factors of the organization also must be renovated.

Management must develop strategic thinking from a future perspective which involves identifying plausible future operating environments for the firm. Strategy has been defined as “the match an organization makes between its internal resources and skill…….and the opportunities and risks created by its external environment” (Grant, 2001). Company should depend more on the application of new technology that can improve the production using the same resources available. However, employees must be informed of the changes and must be trained in every aspect so as to meet the challenges associated with change.

Evidently, in order to apply the technology and hence to improve the working environment, firm must raise some immediate fund. Maintaining brand reputation is important and therefore company has to focus more on new designs and models that would par with the current trends. Also, the company must develop a strategic culture so as to meet the unexpected changes associated with its external environment. As Bate (2012, n.p.) states, it is important to remember that individuals initiate the cultural change should perceive themselves as involved in organizational change first.

Meeting the interests of shareholders must be the prime focus of the company in its future operations. If yet not working There are situations when managers are forced to dissolve their companies. Though the factors in this regard vary, in the case Econ, if the current R/I ratio does not improve even after the implementation of the above said strategies, managers must cease its operation. If it continues with the current level of performance, it will plunge in huge debts and will affect the shareholder interests.

However, managerial decisions taken must be on long term results. Short term decisions taken may force managers to change the policies of the company frequently. Decisions should be made in terms of demand and supply analysis, cost, marginal cost and so on. Economic mode of thought is essential to analyze the business situation accurately. This would help managers to avoid flaws while making decisions. It also considers particular situations where significant decisions are relevant. As such analysis sheds light on possibilities and impossibilities, the problems are made clear and simple to a great extent.

References Grant, R. M. (1991). The resource based theory of competitive advantage: Implications for Strategy formulation. California Management Review, Spring, 33 (3): 114 – 136. Paul, S & Bate, P. (2012). Strategies for Cultural Change. US: Routledge. Seuring, S & Goldbach, M. (2002). Cost Management in Supply Chains.US: Springer.