Production and Operation Management: Grandiose Motors - Case Study Example

Production and Operation Management Summary Grandiose Motors is a company that deals with motor vehicles and has been doing well over a long period of time. They had recently made a new dealership with an automotive network, where they would have the advantage of selling different makes of cars at one location. This was beneficial to both Grandiose and the customers as this would mean that the customer had a wider variety to select from and the company would enjoy high demand. With this new adjustments led to the emerging of new issues, the CEO Felix Fabulous discovered that purchasing for the different types of parts for the dealership was very difficult and required a lot of money since they only use genuine parts. Storage of the parts for the company and the customers has also proved to be a problem. As a purchasing manager I have come up with several ways to help Fabulous deal with theses issues appropriately. Purchasing and inventory being the first step he ought to take, where they had been practicing inventory before, now they would have an advantage of practicing it at a more knowledgeable level. Forecasting is also very applicable where the company had been applying long term; I have advised that they try short term due to the storage issue they are facing. Supply chain management can also be very helpful in this situation if the company uses them, appropriately. This is possible since it is the main network link between the Grandiose Motors and other businesses as well as their customers. Introduction Every business organization has a production and operation management sector, which involves a lot of skill and determination to be ran successfully. This branch normally deals with the production of the goods and services and makes sure everything is handled appropriately and according to customers’ expectations. With the world currently adjusting to globalisation and adapting the new trends of technology, the operations managers in charge of the department find themselves faced with more complex operations. Whereby if not managed properly may lead to a company facing serious issues, which might be hard to recover from. Grandiose Motors find themselves in a similar situation where the production and operation management has had to endure certain issues due to lack of quality control of operations in the department. Therefore, this report is addressed to the CEO of the company, Felix Fabulous on the case study carried out on his company to determine the cause of the various problems they are currently dealing with. Grandiose Motors deals with car dealership although they recently acquired an automotive dealership, which by the look of things seems to be very successful. This is because the dealership is able to serve a wide range of customers in the area where it is located. In all the networks associated with Grandiose Motors this was the first auto supermarket, this meant that they would be able to sell different makes of cars in the very same location. This new dealership specialised in selling cars such as; Nissan, Toyota and Volkswagens, which is a big advantage since the customers can have a wider variety to select from. As much as this is advantageous to the customers, it poses a problem for the Grandiose Motors when it comes to purchasing and storage. Dealing with different types of cars requires one to purchase different spare parts as Grandiose Motors was doing but it has proved to be more of a problem with time since they are purchasing spare parts that will be used for fixing the customers’ cars and at the same time parts that the customers can purchase over the counter. The main problem was the storage of the different parts and the purchasing of genuine parts, which has proven to be rather expensive. Inventory The company has a reputation to protect for being able to serve customers on time and get their cars fixed with the latest technology and parts, this brought out great satisfaction to the customers. The technicians employed were also highly trained and serviced the customers efficiently and with the current problem Fabulous is facing, he has to deal with the issues and maintain the same reputation. Therefore, as a purchasing manager, I would advise Fabulous to approach the issue with caution; first of all Fabulous should be able to determine appropriately how much inventory he has at the moment, this is to make sure that he will be able to deal with a situation like the one he has at hand. This type of inventory is known as the safety stock, this stock will enable you to know the level of demand that the company can be able to meet (Babaar & Prasaad, 1998). The other entire necessary inventory should be outlined carefully so that they can be bale to determine the main cause of the problem. Excess inventory The inventory management of the company should be accurate and delivered appropriately. In no circumstance should there be a case of excess inventory, this would only mean that the money invested in purchasing the spare parts was not used wisely hence, the company ended up with having excess inventory. In most cases excess inventory usually comes up when some parts of a product were not fully utilised and there were some parts left unused (Gardiner, 2006). The purchasing in such cases was done incorrectly and the company ended up getting more parts than necessary. Aspect of minimization The other major reason why the inventory is to be used well in such a situation is due to the aspect of minimisation. Grandiose Motors know the level of demand they get and what products or parts are usually on high demand, this can be done by using the Economic Order Quantity (EOQ). Therefore, with this information, they can be able to make purchase of the important items first since they are usually on high demand and will not take up a lot of storage space. This is really important especially on the issue of storage because when Fabulous invests on goods that are on high demand rather than the ones which require storage over long periods of time, they might just be able to solve their problem as the goods will be just put on display and when they are over they can just replenish on time. Although storage of goods and other spare parts might be wise for the company incase prices increase in the future or there is shortage of stock in the market, not storing is a risk that one has to take since being an entrepreneur involves taking of risks (Mouhtaz & Robbins, 2003). Most companies invest in storage of surplus products so that they can be on the safe side in case the prices rise or other emerging issues take over the market. In cases like the one facing Grandiose they can not be able to invest in storage as space is their major issues so the best way to handle their problem is through investing on goods that are on high demand. Purchasing and inventory management policies and procedures Purchasing equipment plays a big role in inventory and how the company views the equipment is equally important. According to Simon (1997), in purchasing and inventory management some policies and procedures apply and they may differ with the way the Grandiose Company handles such operations since they purchase different types of service parts and materials. Fabulous main aim is to satisfy the customers so as to maintain the reputation they have always held as a company, in most cases while purchasing they opt to invest in the genuine parts other than buy lubricants, this can be a major cause for their money shortage. This is because they have to buy many different parts, which makes them spend a lot of money on this new dealership although other dealerships purchase its service part and materials. Saving money The main policy of the inventory is to be able to save money in a company and at the same time improve on wanting areas. When Grandiose purchases the genuine materials it proves that they are focused and want only the best for their customers which is a wise decision but when their economic condition is threatening to tarnish the reputation that they so wish to sustain, they have to cut back on some of their expenses. While getting genuine parts is beneficial to them they spend a lot of money on the different spare parts, therefore, they should try and get the genuine parts for the very important reasons but may also try to get cheaper but good spare parts as well. In the recent study of Liu & Zhang (2010), the company should try and acquire lubricants to work on the faulty spare parts since they have qualified and skilled technicians; they are bound to deliver an equally beautiful job. Forecasting Purchasing requires the company to follow some procedures to make sure that they will be able to spend their money wisely and with Grandiose, that is very necessary. Forecasting is a major aspect of purchasing and all companies should be able to exercise it (Gardiner, 2006). This is the ability of the company to recognise and estimate future demand by using either qualitative or quantitative analysis methods. Grandiose has already been making its purchases based on forecasting using historical data, which is a very healthy activity. This made the company to realise that certain equipments and parts were on high demand during certain periods such as; during winter, batteries and alternators are on high demand. Therefore, when the winter season is almost, that’s when the company should make their purchases and store them but they should not make them much earlier because the parts which will be on sale during winter will be taking up the space for the parts that are currently on demand (Malhotra & Shama, 2002). I believe that the Grandiose Company should practice the short range forecasting at the moment due to their storage problem, which although it serves for a short period of time is advantageous and will be able to make sales. Gardiner (2006), in his work says that when they carry out long range forecasting they will be forced to make purchases for items that will be sent directly to storage, leaving them with little money to purchase items that are currently required and lack of storage space as well (Nilsson & Bergman, 2003). In the event that demand changes in the future, since forecasts are not always accurate and a forecast error may occur and they had made purchases based on long forecasting, they will experiences due to high supply and low demand. Technology Inventory is supposed to make the company make wise decisions when it comes to purchasing and therefore, Grandiose dealership should look into some factors. Technology used to develop the spare parts being purchased is important because that will determine the price of the equipment. With improving technology prices are bound to go up and this would mean that the company might have problems purchasing their parts at cheaper prices. Since the dealership insists on using the latest technology in their production process, they should be able to increase prices of the finished products slightly so that they are not the only ones incurring the expenses. Negotiation Negotiation should also come in handy while purchasing the products, since one can be able to the genuine products at a fairly lower price than what they are used to. Since Grandiose is popular in the region, it should be able to purchase its parts from one dealer and develop a relationship with the managers, this way loyalty is built and one can be able to negotiate without a lot of problems. The dealers may recognise the way the company has been loyal and strike a deal to be getting them cheaper but genuine spare parts for their production. Supply chain and inventory management Supply chain and inventory management concepts can be able to help Grandiose Company and Felix Fabulous take care and solve the issues they are currently facing in the company. Supply chain management is necessary in every company as it helps deliver a strategic way in dealing with production of raw materials, delivery of the finished product and other processes in the middle of production (Dilip & Chiang, 2003). The supply chain management is responsible for providing the company with necessary information and feedback from the customers as well as maintains a steady cash flow for the company (Anders, et. al, 2003). With Grandiose dealership starting to experience the cash flow strains they ought to turn to the supply chain management and inventory management. Collaborative supply In the supply chain network there is what is known as a collaborative supply chain, which is very important as it involves planning systematically and in an agreeable manner, proper forecasting in a more accurate manner when one has gathered all the necessary information. In a collaborative network all the links involved from the manufacturers to the consumers have a good working relationship where all want to make profitable progress. According to Powels (2006), since they are in direct contact with the customers and other stakeholders involved the supply chain can be able to look at the desires and expectations of the customers and the company will be able to work towards these goals, therefore, helping Grandiose have more demand and be able to make money to even expand their current structure and storage facilities. This is possible because with the collaborative supply chain management, the demand gets high and therefore there will be no need for storing items for long due to the nice flow of sales (Gardiner, 2006). Since their products will be going at a high rate, the only items that will need storage are those of forecasting only. Collaboration in supply management helps the company deliver effective use of resources. Since they are in charge of delivery of raw materials, they make sure that the items needed are fully delivered according to the inventory prepared. Purchasing is a major problem for Fabulous and therefore, taking advantage of the services offered by the supply chain management is beneficial. The dealership should come up with a good purchase plan and present it to the supply chain, this way they will be able to know where they can acquire all the different parts they need at lower prices. Conclusion In general, the Grandiose Motors have been known to have the best products and their services are admirable in the areas where they serve. They have managed to maintain this trend and all their customers are satisfied and willing to continue purchasing equipments from them and acquiring other related items. Although, they have been enjoying the streak of good luck, they have been faced with emerging issues, which they did not know how to handle. These problems started ever since they acquired a new dealership with an automotive network. This dealership allowed them to be able to sell multiple makes of car at the same location, which proved to an advantage at first since the customers would have a wide variety of selection. With time Felix Fabulous, found it difficult to be able to purchase the tremendous number of parts that had to be available. The storage facility was also insufficient and Felix wanted to maintain the reputation they have for a long time. Therefore, as the purchasing manager I have been able to come up with several ways to help deal with the issues. Purchasing and inventory functions would be one of the ways to deal with the issue where minimisation inventory and supply chains as well. If the company can be able to recover from these issues if they try to apply some of the suggestions I came up with. Reference List Anders, et. al, 2003. Exploring the customer feedback process, Measuring Business Excellence. 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