Operation Management - Essay Example

OPERATIONS MANAGEMENT Operations Management Monisha Chattopadhyay Academia Research Q1) A supplier provides parts to a manufacturing company thatdemands JIT deliveries. At the present time it takes 6 hours to make a round-trip between the suppliers warehouse and the customer, including loading, travel and unloading time. The lot size is 12 pallet loads on a truck, and the manufacturer uses 2 pallets per hour. How many trucks are needed to ship the pallets to the manufacturer? What is likely to happen if the trucks break down? How can the supplier ensure that the customer does not run out of parts even in the face of delivery problems or other uncertainties? What will happen if the manufacturer runs into trouble and shuts down for a period of 6 hours? If unexpected overtime is required, how do you effectively communicate the need to your workforce? Hello Please answer question toward an overall A+ final grade. Your assistance is greatly appreciated. Regards Introduction: Let us suppose you are the supplier and you are in the business of selling pallets. Naturally as a sound business person you would try to maximize your net profit.Net profit means Gross profit less total cost of selling. How can you maximize your net profit ?You can ask for more price per unit but if you are in a competitive industry and if you are charging more than your competitors you are likely to loose the contract you have bagged from your customer to a competitor who provides the same quality as yours but charges less. You can reduce your costs but reducing the necessary costs may prevent you from running your business. What is the next option? The next option is naturally as you might have guessed is to sell more number of units. Suppose the profit per unit is $5.If you sell 100 units per day your profit would be $5*100 i.e. $500 profit. Now suppose you sell double the number of units i.e. 200 units per day then your profit would be $5*200 i.e. $1000 .Alas it is not as simple as it seems; to double the number of units you sell you have to manufacture twice the number of units which will have its own costs. Your operations have to be perfect in order to satisfy your customer requirement and give you credibility in the market so that you can get more orders. If you commit any mistakes your reputation may be harmed and that may prove to be a deterrent in your getting more contracts and at the same time you cannot limit yourself to produce only a certain number of units as that way you will never grow, your competitors will get ahead of you and will eventually make better offers than you and you may even loose what you have. So you see there is not much choice, it is a tight rope walk you have got to master. Also you aught to know what is your maximum capacity utilization; you must not underutilize or over utilize your capacities. Your operations should over a calculated period of time be able to provide economies of scale. Your concern here is maximizing your gross profits and minimizing your total costs and knowledge of Mathematical Programming.1 (Linear Programming) can help you some what if your operations become very complex. As a manager it is helpful for you to know basic quantitative tools used by managers. If you yourself do not know much you can take the help of a professional or a friend. You might observe that your net profit forms into an equation which has to be maximized as in a Linear Programming problem. Your constraints that are your fixed cost items like your manufacturing capacity, plant, machineries, locations may also form into an equation. The Present Problem: The present problem is very simple but it helps us to visualize complex situations. Usually industry procedures are more or less standardized. If you at present are supplying pallets to a manufacturer who uses two pallets an hour, it is logical to think that he is using some standardized process and that there are other manufacturers who might be using the same standard procedure and requiring the same number of pallets per hour. Also you may think in another way; your present manufacturing unit or department or store setup is geared up to service a customer who uses two pallets per hour, therefore to achieve your net profit maximization goals you would logically try to obtain similar contracts from similar manufacturers. If your customer i.e. the manufacturer gets 2 pallets per hour, his requirement is fulfilled and similarly for other manufacturers as well. Answers to Questions: Q1. How many trucks are needed to ship the pallets to the manufacturer? 1. You should have efficient supply systems. You must be able to provide on time deliveries. Your transportation (trucks) should be according to the number of customers you are serving. In the present problem one truck can carry a load of 12 pallets one time. You can do one of the following: I. It takes six hours for the truck to take a round trip from you (the supplier) to your manufacturer. At one time the truck should download 12 units of pallets at one customer and pick up another 12 units for delivery to next customer. Therefore you may have store points at each customer place. You can do this because industrial deliveries are usually taken on contracts. You may work out the net profit and see what it comes to. In this case the transportation devices (trucks) will be lesser. II. You truck may also carry lesser than its full capacity of load and periodically offload 2,4,6,8,10,12 units of pallets each 1,2,3,4,5,6 hrs respectively to various customers on a route as per your demand situation. In this case you need not have storage points at each customer location; you will need to have more number of transportation devices. You can work out your net profits in this case also. You will naturally choose the option which maximizes your net profit . Fig.1.The transportation route Q2. What is likely to happen if the trucks break down? You should be prepared before hand for such eventualities. At no cost must your deliveries be delayed. To do this you can do the following: i) According to the number of customers you are serving you must have figured out the number of trucks you require, the drivers should carry mobile phones, so that they may be able to communicate with each other and the supply office and execute necessary orders in emergency situations. ii) Keep buffer stock with your customers. iii) Keep contacts of transportation companies providing such trucks and who can send trucks at a short notice. Q 3.How can the supplier ensure that the customer does not run out of parts even in the face of delivery problems or other uncertainties? As the supplier you can i) Maintain buffer stock at your customer place and at your own unit(s) ii) Develop effective coordination and communication systems with your truck drivers, and suppliers of truck services and all your customers. Q4.What will happen if the manufacturer runs into trouble and shuts down for a period of 6 hours? If your manufacturer runs into trouble and shuts down for a period of six hours you will be in a situation of more supply and less demand and this has a cost. To avoid this you should clearly tell your customer(s) that whenever such a situation arises you should be immediately informed failing which extra charges may be imposed. Immediately after receiving such information you have to communicate across your whole supply network to adjust procuring/production of pallets accordingly, to match the demand. Q.5. If unexpected overtime is required, how do you effectively communicate the need to your workforce? As the supplier you should calculate the number of hours overtime is required and communicate clearly to your staff what is required and follow the overtime related payment rules. References Adam E.E. (1996). Production and Operations Management-Concept, Models and Behavior. (Ebert R.J.Jr.).New Delhi, India. Prentice Hall of India Pvt. Ltd. Chatterjee Dipak. (2005). Linear Programming and Game Theory. New Delhi, India. Prentice Hall of India Private Limited. Kapoor V.K. (1996).Operations Research .New Delhi, India. Sultan Chand & Sons. Read More