Operations Management Principles - Essay Example

After investigation of the situation, following problems are identified: The first problem is concerned with the fact that the copiers that need to be rehabilitated arrive at irregular intervals in varying quantities from the distributors. So there is no established process of copiers’ arriving, and there is no possibility for the staff to plan theirs rehabilitation. The second problem is connected with the lack of trust of purchasing department. I think this problem occurred because the purchasing department does not track purchasing history. So it should validate every purchase request, because they do not know if they can trust to the author of the request. The third problem is concerned with old Economic Order Quantities. I think it is an issue because old data about EOQs do not reflect current state of affairs. The Economic Order Quantity model (EOQ) is a mathematical model for deriving the optimal purchase quantity. The EOQ model seeks to minimize total carrying and ordering costs by balancing purchase costs, ordering costs, carrying costs and stock out costs. In order to compute the economic order quantity, the supervisor needs the following information: forecasted demand during a period, cost of placing the order, that value of the purchase price, and the carrying cost for maintaining the total inventory. The fourth problem is impossibility to engage trained or trainable temporary workers. I think it is associated with lack of process planning and therefore should be solved in connection with it. I think that the plan must to consist of strategic decisions that are made typically over a longer time horizon. These are closely linked to the corporate strategy and guide supply chain policies from a design perspective. (Ganeshan & Harrison, 1995) The strategy includes development of a management information system that will store the data about company’s activity and help to make operational decisions. Management information systems (MIS) are information systems, typically computer-based, that are used within an organization. A management information system may be defined as "a system that collects and processes data (information) and provides it to managers at all levels that use it for decision making, planning, program implementation, and control." An information system is comprised of all the components that collect, manipulate, and disseminate data or information. It usually includes hardware, software, people, communications systems such as telephone lines, and the data itself. The activities involved include inputting data, processing of data into information, storage of data and information, and the production of outputs such as management reports. (Management information system from Wikipedia, 2006) The plan for correcting the problems includes: 1. Establish Performance Standards. 2. Measure Actual Performance. 3. Compare Measured Performance Against Established Standards. 4. Take Corrective Action. Following action should be taken at each step: 1. Establish Performance Standards. A standard is any guideline established as the basis for measurement. It is a precise, explicit statement of expected results from a product, service, machine, individual, or organizational unit. It is usually expressed numerically and is set for quality, quantity, and time. Tolerance is permissible deviation from the standard. (Allen, 1998) A set of controls should be developed. Time controls relate to deadlines and time constraints. Material controls relate to inventory and material-yield controls. Equipment controls are built into the machinery, imposed on the operator to protect the equipment or the process. Cost controls help ensure cost standards are met. Employee performance controls focus on actions and behaviours of individuals and groups of employees. Examples include absences, tardiness, accidents, quality and quantity of work. Budgets control cost or expense related standards. Financial controls facilitate achieving the organization's profit motive. One method of financial controls is budgets. Budgets allocate resources to important activities and provide supervisors with quantitative standards against which to compare resource consumption. They become control tools by pointing out deviations between the standard and actual consumption. Operations control methods assess how efficiently and effectively an organization's transformation processes create goods and services. Establishing performance standards will help the company to identify its needs and give occasion to next steps necessary for solving the problems. For example, it is not the best solution to engage extra personnel to manage with the periodic surges in workload. Much better is solution when no significant oscillations in workload occur. 2. Measure Actual Performance. Supervisors should collect data to measure actual performance to determine variation from standard. Written data might include time, material, equipment, cost, employee performance and financial indexes. Personal observation, statistical reports, oral reports and written reports can be used to measure performance. Management by walking around, or observation of employees working, provides unfiltered information, extensive coverage, and the ability to read between the lines. While providing insight, this method might be misinterpreted by employees as mistrust. Oral reports allow for fast and extensive feedback. (Allen, 1998) 3. Compare Measured Performance Against Established Standards. Comparing results with standards determines variation. Some variation can be expected in all activities and the range of variation - the acceptable variance - has to be established. Management by exception lets operations continue as long as they fall within the prescribed control limits. Deviations or differences that exceed this range alerts to a problem, for example, too long average time of copier’s rehabilitation or too expensive materials. 4. Take Corrective Action. Strategic decisions are made when the supervisor finds the cause of deviation from standard and takes action to remove or minimize the cause. The implicit cause of the problems is lack of information about processes and their participant. So information system should be created that provides the newest data about distributors, copiers that are ready to arrive, time of their arrival, estimated time of rehabilitation, estimated materials, equipment and human resources necessary for rehabilitation and estimated purchases. The information system should include a database where distributors can input information about quantities and estimated time of arrival for the copiers that need to be rehabilitated. So personnel will be able to plan rehabilitation of the copiers. The information system should also store data about purchases, so purchasing department will be able to track purchasing history. So it will be able to give a status to each distributor, such as trusted, normal or doubtful. Also, up-to-date data will be used for calculation of Economic Order Quantities, so this method will give more precious values for purchases or maintaining the inventory. Supply chain management and management information system concepts were used in the solution. Management information system was defined above. Supply chain management (SCM) is the process of planning, implementing, and controlling the operations of the supply chain with the purpose to satisfy customer requirements as efficiently as possible. Supply chain management spans all movement and storage of raw materials, work-in-process inventory, and finished goods from point-of-origin to point-of-consumption. (Supply chain management from Wikipedia, 2006) References Allen, G. (1998). Controlling Process. Retrieved February 15, 2006, from http://ollie.dcccd.edu/mgmt1374/book_contents/5controlling/ctrlproc/ctrl_process.htm Ganeshan, R., Harrison, T.P. (1995). An Introduction to Supply Chain Management. Retrieved February 15, 2006, from http://lcm.csa.iisc.ernet.in/scm/supply_chain_intro.html Management information system from Wikipedia. (2006). Retrieved February 15, 2006, from http://en.wikipedia.org/wiki/Management_information_systems Supply chain management from Wikipedia. (2006). Retrieved February 15, 2006, from http://en.wikipedia.org/wiki/Supply_chain_management Read More