Production and Operation Management - Grandiose Motors - Case Study Example

Running Header: Production and Operation Management Student’s Name: Instructor’s Name: Course Code & Name: Date of Submission: Table of Contents Table of Contents 2 Executive summary 3 Introduction 4 Operation and Production Management 5 Structuring the purchasing and inventory functions 5 Variation of Purchasing and inventory management policies 7 Space and investment requirements and supply-chain management 9 Conclusion 11 Recommendations 12 Reference list 13 Executive summary This report covers various strategies, procedures and recommendations that Grandiose Motors require to take into consideration in order to perfect their inventory and purchasing policies. This report summarizes the importance for purchasing and inventory management to structure properly the entire dealership network in order to increase efficiency and effectiveness of its operations. There is difference between purchasing and inventory management policies and procedures mainly due to variation of service parts and materials that are used. The availability and originality of parts and materials makes purchasing and inventory vary greatly. Genuine parts purchasing and inventory policies require a lot of management due to their originality and adequacy of suppliers like the manufacturers and wholesalers. Other items like lubricants and oils do not require a lot inventory management due to their availability. They can be purchased anytime at large quantities without shortage due to high number of suppliers. This report also focuses on ways that supply-chain and inventory management can reduce investment and space requirements while maintaining high levels of service delivery. Planning and sourcing require to be managed properly in order to ensure there are no strains on the space and finances or investments. This report recommends that proper purchasing and inventory management should be taken into consideration with proper care. Purchasing and inventory management should be as per the customers services and parts requirements. Seasonality should be a great factor that should be taken into consideration. The purchasing and inventory management policies for different service parts and materials are in most occasions different due to availability of those materials. It is important for Grandiose Motors to take into consideration that inventory and purchasing management policies and procedures should be different for diverse materials and items. Introduction Inventory management is important especially when trying to protect production from running out of spare parts required in ensuring services are delivered as planned. Grandiose Motors requires putting into place strategic inventory supply and inventory management in order to ensure items and service delivered are up to standards and are perfect. Good management of supply chain and inventory is vital for Grandiose Motors to be able to acquire quality delivery of goods and services to consumers. Grandiose Motors fourth dealership is of great significance as it supplies different makes of cars hence diversified services delivery. This calls for a different inventory and purchasing management of items. Grandiose Motors should take into consideration three factors that include maintaining high volumes of sales, adapting a “hassle-free buying experience” with “one price-lowest price”, and after sale service that is of high quality. High qualified trained staff, use of latest technologies, and using wide range of materials will also ensure delivery of quality service without delays in Grandiose Motors. Purchasing and inventory management department should ensure support cost is hassle-free with only lowest price while providing right parts or items at the right time and ensuring reliability in after sale service. Operation and Production Management Structuring the purchasing and inventory functions Hoeffer (2004, p. 135) argues that Supply chain management in an integrated approach to producing, obtaining, and delivering quality services and products to consumers. Supply chain management includes materials management as well as cash flows and information flows. Inventory is extremely vital for Grandiose Motors to take into consideration. Inventory which is stock of items that is kept in order to meet the demands in future, it is also important in knowing the number of orders to order and exact time to order. The fourth dealership by Grandiose Motor’s is of great significance as it would enable selling of multiple car makes at the same location. This dealership would enable selling several lines of cars including Volkswagens, Nissans, and Toyotas. According to Aquilano (2001, p. 165), it is important to manage well the functions of purchasing and inventory department. Purchasing and inventory functions in Grandiose Motors need to be taking into consideration the requirement of more new spare parts and services that are in great demand. Lowering the cost of materials in order to support the hassle-free purchase is of great concern. This will in a great extent lead to success of the new dealership and the overall purchasing and inventory functions of Grandiose Motors. The functions of inventory in Grandiose require assessment and management so as to cope with increasing sales and demand of services. Emphasize on inventory management is of great importance especially in spare parts and supplies. This also applies to equipments and tools that are required in order to maintain and service after sale service vehicles. It is important to take into consideration the space available when determining how many units to order. The time to order is also of great concern so as to be able to utilize the available finances levels when it comes to investing in materials and parts. This would ensure there is no pressure or strain being put into the finances as well as space in Grandiose Motors. It is vital to provide the right materials and parts in time, this is vital in making sure reliable and fast after-sales services. This will ensure reduced carrying cost or cost of holding an item in the inventory. It is important to ensure that the materials and parts are delivered depending on when the demand rises. This is an inventory control systems referred as continuous system or fixed-order-quantity. This is ordering certain amount after inventory declines to a certain level especially when demand is high. This would ensure there are no high carrying costs as materials are held in inventory for a long time mainly due to ordering high amount of orders. This would also ensure that the services are carried out in time without delays as well as delivering required materials to customers in time. There is need to plan and control systems in order to ensure the existing policies on inventory and supply management are achieved effectively and efficiently as insisted by Wilson (2006, p. 126). According to Wailgum (2006, p. 35) Delivering materials and orders should meet demands by customers at the right time and at the right supply. Demand management which involves the function of demand recognition of services and goods in order to support the market place. There is need to ensure the amount of stock or items in the stock or in inventory list and supply list are according to demands. It is important for Grandiose Motors to make sure demand chain management is managed properly. Demand chain management is the process of viewing supply chain from a perspective that is customer based. Supplying goods according to customer demands and sales ensures effective management of supply and inventory functions at Grandiose Motors dealership network. This will ensure the company is able to compete effectively without outgrowing its existing policies and other control systems. Purchases based on forecasting from historical demand and seasonality ensures effective supply of items at the required time without excessive inventories and delays. Sales forecasting or demand management needs to be utilized in ensuring good management of inventory system in Grandiose Motors. Sales and operation planning is another basic block that require to be utilized in ensuring inventory management is utilized effectively. Grandiose Motors also require inventory reduction in order to have well established inventory management. A lot of inventory in Grandiose will not be vital especially due to pressure it will impact on finances hence it should be controlled with demands in the markets. Variation of Purchasing and inventory management policies Jack (2009, p. 185) maintains that Variation of materials also results to diversified strategies in purchase and inventory management. Some materials like “guaranteed genuine parts” require a totally different inventory process like that of oils and lubricants. This is mainly due to variation in demand and location of purchasing those commodities. “Guaranteed genuine parts” are only found in specific wholesales and car manufacturers outlets. This results to an inventory and purchasing strategy that varies with other commodities that can be found in a number of suppliers like oils and lubricants. Purchasing of items like “guaranteed genuine parts” require being as per the demands from consumers. Inventory of items like “guaranteed genuine parts” require low inventory as well specific amounts that is required at a particular moment. Their management strategies requirements are different due to their complexity and delicacy involved. Inventory management policies of items like oil are not limited with the complexity of the items or products. These items are required in great quantities and can be purchased in larger quantities and therefore high inventory than other materials. “Genuine spare parts” require ordering with longer lead time due to the limitations of the areas where they are found. The scarcity of such materials requires a purchasing policy that has longer lead time due to delivery and purchasing procedures involved. Other items like oil are found in several outlets with high number of suppliers hence their purchasing and inventory policies do not require longer lead time. Purchasing and inventory management policies as well as procedures are different as dealerships purchase variety of materials and service parts. Each dealership has different variety of customer who requires different types of services and products. This definitely makes a difference in purchasing and inventory concepts. The procedures that other dealerships utilize are different from the recent dealership in that new concept and operations are unlike. The fourth dealer or auto supermarket will sell multiple makes of cars at the same location. This will include Toyotas, Volkswagens, and Nissans which will definitely make its inventory and purchasing management totally different. Each dealership requires different parts and materials or supplies hence varying inventory and purchasing management policies. The difference in demands as well variety in types of parts demanded leads to dealerships adopting different inventory and purchasing policies. Dealerships have different product as that they deal with different types of services which makes these dealership have varied policies and procedures in purchasing and inventory process. The fourth dealership of Grandiose Motors “Auto supermarket”, deals with multiple cars at the same location unlike the older dealerships that deals with single type of car. This automatically makes the “Auto supermarket” adopts a totally different purchasing and inventory policies. Customer who requires Volkswagen will need different spares and services with the one who has Toyota. Variability of materials and parts used in every dealership results to diversity in policies related to item purchase as well as inventory. This may also vary due to number of customers who attend every dealership at a particular time. Space and investment requirements and supply-chain management Mabert (2008, p. 25) argues that Supply-chain management is art and science combination that helps in improving the ways in which a company gets raw materials required to make products or services and deliver it to the consumers. Supply chain is a network of distribution and facilities options which perform procurement functions of materials, transformation of those materials into finished or intermediate products, and eventually delivering these products to consumers. Supply chain management has five main components that include plan, source, make, deliver, and return. The strategic portion of supply chain management is planning (Lukas 1996, p. 25. There is need for Grandiose Motors to manage all parts and materials as well as services in order to meet customer’s goods and services demands. The main part of supply chain management planning is raising a set of metrics in order to monitor supply chain in order to make it less costly, effective, and deliver high quality and good value to the customers. Planning will help in ensuring that only the required amounts of items are delivered and at the required time. This will assist in ensuring that the space does not become an issue. Proper planning results to proper utilization of available space as items are delivered as they are required with no need of necessary storing them in the stores. Planning can also assist in managing the investment because only the required items will be supplied at a time. This will not require a lot of investment hence no strain on the finance or investment. This will in a great extent help the Grandiose Motors hence it requires to be taken into consideration according to Hartness (2001, p. 25). Source is also extremely crucial when taking into consideration the issue of space. Supply-chain management takes into consideration the issue of source in order to ensure the items or products required are delivered at required time. Good and effective source be it manufacturers or other dealers or hardware need to be competent in order to deliver goods at the right time. It is vital that Grandiose Motors choose the right sources in order for the required goods to be supplied at exact time they are required without necessary being at huge quantities that may put a lot of pressure on the space and finance or investment. Sourcing process also involves receiving and verifying shipments as well as transferring them to manufacturing and other related locations. This will help Grandiose Motors reduce investment and be able to meet space challenges if supply-chain is well managed (Gardiner 2006). Delivering in time will as well assist Grandiose Motors in overcoming space challenges. Delivering the produced goods without storing them does not require a lot of space and this assist in resolving the space problems. Seasonality inventory is of great important consideration in order to avoid usage of space. This is assist in planning the amount of items in the inventory depending on the season of the year. Seasonality inventory will only ensure items are delivered at the required moments. This ensures that there is no need for storing extra materials or space but increased delivery of items without necessary storing them. Barbara (2010, p. 5) argues that Inventory management is the specification of the size and placement of goods or items that are stocked. Inventory management concerns replenishment lead time, inventory forecasting, availability of physical space for inventory, and demand forecasting among others. Inventory management is crucial in ensuring physical space is always enough for the inventory at all the time. Inventory management ensures effective management of stocks by ensuring there is balanced product availability while minimizing stock holdings or stocks available. Therefore, effective inventory management is important in ensuring space does not become an issue and investments or finances. Grandiose Motors need to ensure inventory management is well looked after so as space and investment do not become an issue. Proper management of all parts related to stocks, this is through balancing the amounts of stocks hold or the amounts of spares required at any moment. Conclusion Effective inventory management ensures delivery of quality services and products to consumers at the required moments without delays due to lack of materials. It is important for inventory managers to take into consideration the importance of effective inventory policies. It is important for Grandiose Motors to embrace good inventory management policies so as to ensure solid reputation and timely response to consumer’s needs is met in time. It is extremely crucial for management to know that purchasing and inventory management policies differ with variation of service parts and materials. All materials or service materials have different policies and procedures due to their availability, prices and originality. Grandiose Motors need to adapt supply-chain and inventory management concepts so as to be able to manage space and finances effectively with much pressure on them. Recommendations Purchasing and inventory department at Grandiose Motors should lower costs to support the hassle-free, one price—lowest price concept and provide the right parts at the right time to support fast, reliable after-sales service. This will ensure there are no delays, and services delivered are of good quality. It is essential for Grandiose Motors to take into consideration that inventory, and purchasing management policies and procedures should be diverse for different materials and items. Seasonality of inventory should be a great consideration when determining the amount of stocks and type of stocks to keep and to order at each moment. The type of items to be ordered should as well be taken into consideration. Some materials like genuine parts require a different purchasing and inventory management policies that other like lubricants and oils that can be found in several suppliers outlets. Genuine parts are only found in recommended areas only like car manufacturers and some wholesales. Therefore, it is the role of purchasing department to come up with different policies for different items. Reference list Aquilano, N 2001, ‘Production and inventory Management’, Production and Inventory Management Journal, vol. 34, no. 5, pp. 165-194. Barbara, F 2010, ‘Global Supply Chain Management’, Journal of supply Chain Management, vol. 46, no. 2, pp. 3-10. Gardiner, D 2006, Operations management for business excellence, Pearson Prentice Hall, North Shore. Hartness, J 2001, ‘Business processes and operations’, International Journal of purchasing and supplies, vol. 7, no. 3, pp. 23-45. Hoeffer, K 2004, ‘Inventory and supply management’, Inventory Management Journal, vol. 12, no. 6, pp. 134-153. Jack, M 2009, Intellectual Structure of Operations Management evolution’, Operations Management International Journal, vol. 27, no. 3, pp. 185-202. Lukas, J 1996, ‘Supply chain Management’, An international Journal, vol. 1, no. 3, pp. 23-56. Mabert, V 2008, ‘Inventory Management and control’, Purchasing and Inventory Journal, vol. 23, no. 8, pp. 12-46. Wailgum, T 2006, ‘What is supply chain management?’ Inventory management international Journal, vol. 45, no. 13, pp. 34-89. Wilson, M 2006, ‘Inventory management and supplies’, Journal of operations Management, vol. 23, no. 4, pp. 123-134. Worthen, B 2010, ‘Supply chain and purchasing Management’, Journal of Supply Chain Management, vol. 34, no. 24, pp. 231-254. Read More