Operations Management - Fonterra Co-operative Group Limited - Case Study Example

Operations Management Group’s name: Instructor’s name: Course code: Date of submission: Executive summary Top performing organizations in different markets such as Fonterra Co-operative Group Limited and Unilever have exceptional operations management strategies that enable the organizations produce quality products and services for their clients.Indeed Fonterra Co-operative Group Limited has gained so much from its exceptional operational management and utilization of available sources. The main inputs of the organization are water, fresh milk, ingredients, flavors and human resources that are involved in the value adding transformational process in order to produce quality outputs that are dairy products, cheese, butter and ice cream.The organization faces stiff competition from other dairy companies in Australia but has strategies in place such product diversification, differentiation among others to counter this competition. Introduction Operation management basically deals with the design and the management of organization’s products, supply chains, services and processes and also considers acquisition, development and the utilization of resources needed within an organization for it deliver goods and services that can fully meet needs of its customers (Kumar, Massie, and Dumonceaux, 2006). Due to the high growth of globalization and international trade, competition in the market is high due to existence of so many firms offering same products and goods in the whole world. This competition has forced firms to come up with effective competitive advantages to compete in their respective market exceptionally well and meet their objectives and goals. An effective operations management system is one of the competitive advantages that are being used by organizations to compete (Ajzen, 2001). In most cases, top performing organizations in different markets such as Fonterra Co-operative Group Limited and Unilever have exceptional operations management strategies that enable the organizations produce quality products and services for their clients. These organizations have highly skilled operations managers and team that utilizes their innovativeness and creativity to develop outstanding operations method that deliver the expected results. In this report, the researcher will attempt to analyze and explain the inputs, value adding transformation processes, outputs, strategy and competitive setting, designing the operating system, managing supply chain and ensuring quality with respect to Fonterra Co-operative Group limited. Company background Fonterra Co-Operative Group Limited is a manufacturing and retail company that was founded in the year 2001 by a merger of two largest co-operatives that are Kiwi co-operative dairies and New Zealand dairy group and is owned by 10,600 farmers in New Zealand (Fonterra Co-operative Group website). The company has about 17,000 employees who are selected solely on qualifications criteria hence proving the level of competence of the organization’s employees. The headquarters of Fonterra are in Auckland in New Zealand and the products the company specializes in are milk, butter, cheese and ice cream. Fonterra Company used in this report is located in Melbourne Street, Adelaide in Australia. The main competitors of Fonterra are all companies that produce dairy products in Australia and globally since the organization competes in the global market. The organization operates globally and is associated with supplying daily ingredients in the global marketand the products that the company specializes in are milk, butter, cheese and ice cream. In the factory, the company produce, packages and sells dairy products in whole sale to domestic traders and some of its products are exported.The peak customer time is mostly in the morning when consumers are need in dairy products especially fresh milk used for breakfast. Fonterra has food manufacturing and processing operations that generate exceptional revenues for the organization. The organization acquires its raw material for producing its products by collecting and distributing milk from firms. The success of the organization comes from effective leadership that propels the organization forward towards its strategic goals and objectives (Kim and Chung, 2011). The operations manager and his team works tirelessly to ensure that the organization’s production processes are highly effective and efficient in order for the organization’s dairy products to be of the highest quality in the global dairy industry which is very competitive. The organization’s chart, physical layout and operation plans are outlined below; Organization’s chart Operation plan Physical layout Interview questions The researcher used the interview technique to acquire all the relevant information needed in this report from employees of Fonterra Co-operative Group. 200 employees operating in the operations/production department were targeted in this research as the main respondents but only 180 of them cooperated well and made the interview process flow smoothly. Among the 180 respondents that participated in this study, 80 of them were female and 100 of them were male and most of them had worked in the organization for more than five years hence showing that they possess good understanding of the company’s operations. The interview questions are as outlined below; 1. What are the values, mission and vision statements of Fonterra Company? 2. What are Fonterra’s inputs and how does management source them? 3. What are value adding transformational processes of Fonterra? 4. What are Fonterra’s outputs? 5. Who are the main competitors of the company? 6. What is Fonterra’s strategy and competitive setting? 7. How is Fonterra’s operating system designed? 8. How is the supply chain managed in Fonterra? 9. How does the company ensure quality? Research Findings and analysis Mission statement According to (Kotler and Keller 2009), a mission statement is simply a statement that outlines the main purpose of existence of a business organization. The statement guides employees and all organization’s members in their day to day activities. The mission statement of Fonterra is as follows; “We are dedicated to upholding the Fonterra’s standards, while maintaining the leadership position in the dairy industry when delivering advanced customer service in significantly efficient and profitable manner, we create a culture where employees share best practices dedicated to coaching and developing our organization as an employer of choice”. Vision statement The vision statement of a company is simply a statement that outlines the long-term ambitions of the company. All organization activities and plans are always in line with the vision of the company. The vision statement of Fonterra is as follows; “To be a natural source of dairy nutrition for all young and old, everywhere, every day”. Values Values are those principles that guide the behaviors of organization’s employees. They outline ways in which company’s members should carry out assigned duties and responsibilities (Kumar, 2005). They in most cases play an instrumental role in the success of a company in terms of reputation and performance. The values of Fonterra are as follows; co-operative spirits, do what’s right, challenge boundaries and make it happen. Fonterra’s inputs In each and every business organization, inputs have to be in sufficient quantity and quality for an organization to produce outstanding outputs. Inputs are basically those resources that are taken into a company to be used in the company’s operations for it to produce the desired outputs (Chaiken, 2009). The inputs in Fonterra are milk from the farms and other suppliers, water, flavors, packaging materials and human resources. Among all organization’s inputs, the human resources are the ones which play the most vital part in the production of outstanding outputs. The energy of Fonterra’s employees is very instrumental in all the operations of the organization. Their skills and knowledge are well utilized and applied in the operation process hence resulting to generation of exceptional outputs. Since Fonterra Company is highly focused with producing milk products, milk from farms and suppliers is another significant output which is usually sourced in plenty. In all organizations producing food and beverage products, water is a very essential form of input to such organizations (Ajzen, 2005). Fonterra uses a lot of water in its day to day operations to produce its end products and therefore one of its significant inputs together with different flavors that are used to produce milk and ice products of different flavors. Fonterra’s Value adding transformational processes andoutputs In manufacturing and processing organizations, value adding transformational processes must be well created and designed to ensure that inputs are tarnished into expected outputs of the highest quality (LaPorchia, 2013).The quality and quantity of outputs is determined by the value adding transformational processes of a company. If the value adding transformational processes of an organization are highly effective and efficient, it becomes very easy for such an organization to produce high quality and quantity outputs. On the other hand, when the value adding transformational processes are weak and poorly designed, it becomes very difficult for such an organization to produce quality products. In Fonterra, the values adding transformational process are well developed and designed. The milk received from the company’s farms and other suppliers is pasteurized and homogenized to kill any bacteria in the milk in order to make it safe for consumption and to create boxes of milk. After the milk has passed through the pasteurization and homogenization processes, some of it is passed through the packaging process and packaged as fresh milk to be sold to consumers. The remaining milk is further processed into other milk products such as yoghurt which are produced in different flavors, packaged and availed to consumers. The fat that is acquired from milk is being proceeds further to produce butter and cheese. The cheese and butter produced in packaged differently and availed to consumers in the market. Note that before organization’s products are availed to a market for sale, they are first priced in a manner that is fair to both consumers and the organization (Schiffman, 2007). Fonterra has an outstanding costing and pricing strategy that prices the company’s products in the appropriate manner. The organization’s accountants and financial experts sit down, calculate all costs incurred in producing a single unit of all products and then prices each product slightly above its total production cost so that the organization can a gain a profit. Competitors In the dairy industry, competition is very stiff due to the high number of dairy firms operating in the global market. In real sense the dairy industry in Australia is concentrated with dairy factories due to high demand of dairy products in the country and the high demand of their dairy exports globally. Fonterra is facing stiff competitions domestically and globally due to the high number of dairy firms within Australia and from other parts of the world.Some of the companies that are giving Fonterra stiff competition are Baskin-Robbins Australia, Bellamy’s organic, Bulla Dairy food, Warrnambool Cheese and Butter, National foods, Murray Goulburn Co-operative, Norco Co-operative, Illawarra Central Co-operative Dairy Factory among others. Competitors chart Strategy and competitive setting For any business organization to compete effectively in its respective market, it has to have a nice strategy to do so. The top management of an organization is responsible for formulating competitive strategies that will enable its organization acquire a good competitive position in the market (Batil, Bakkapa and Somashekhar, 2012).In other words a competitive setting is same as a competitive advantage. The organization’s management has to ensure that its organization has a certain competitive advantage that is over its rivals for it to have a good market share. Fonterra is headed by directors and managers who are well qualified and very competitive in their respective fields. The organization’s leaders involve organization’s employees in all organization’s decisions and this has facilitated development of exceptional competitiveadvantages.The organization has diversified its dairy products and this gives consumers a variety of choices to make. Its products satisfy the varying needs of consumers and this has enabled the organization establish a large customer base way above those of rivals. Secondly, the organization focuses on production of high quality dairy products that are safe to both consumers and the environment at large. This strategy has enabled the organization to compete effective with other firms in the dairy industry and in most cases came out the top organization in the industry. Product differentiation is also a strategy that the top management of Fonterra has implemented to ensure that the organization remains as competitive as possible in its respective market.Product differentiation is whereby an organization differentiates its products from those of competitors through branding and packaging in a manner that they are very attractive to consumers (Solomon, 2007). Design of operating system An operating system is basically the steps and procedures that are carried in business organizations to produce their targets outputs (Veltkamp and Custers, 2010). For an organization to have high possibilities of achieving its set goals and objectives it has to have an effective and efficient operating system. Fonterra has an effective operating system that produces dairy products that are of the highest quality in the market. First, the organization ensures that all cows in their farms are well fed and looked after to ensure that are not sick and if so receive proper mediation from highly qualified veterinaries. All waste in the farms is well handled to ensure that a clean environment exits. The organization has milking procedures that have to be followed thoroughly by all organization’s employees in these farms. The purchasing manager of the organization has the responsibility to make milk orders to suppliers who meet international standards of suppliers. The milk is then transported to the processing company through trucks that are very clean and quick to ensure that the milk does not go bad while still on transit (Kim and Chung, 2011). In the company, the milk is well pasteurized and homogenized to kill any bacteria and then further processed to produce a variety of products. Fonterra has plans in place to ensure that all its products are well distributed to local and global consumers through effective means. Due to the urgency of orders from global consumers and perish ability of food products, the company uses planes to distribute its products to different parts of the world. The operating system of Fonterra has been a success due to the effective leadership exercised in the organization and competent employees who are committed highly to the success of the company. Supply chain management Kotler and Keller (2009) argue that supply chain management is simply the management of flow of goods. It involves storage and movement of finished goods, work in progress and raw materials from the point of origin to the point of consumption. In most top performing organization, their supply chains are effectively managed in manner that their respective organization acquires sufficient raw material and all their finished products are easily availed to consumers in their respective markets. Fonterra is one of the organization in which the supply chain is wellmanaged. All raw materials that are needed in the organization are availed on time and in the right quantity and quality (Ajzen and Fishbein, 2004). The purchase manager ensures that this happens and then allocates all required resources in various production departments. The production manager ensures that these raw materials are well utilized and that they meet the needs they were meantfor. Themanagement of Fonterra ensures that all work in progress inventory and finished products are well stored in the organization. The transportation and distribution manager of the organization ensures that all required products of the company are availed in time and in right quantity to all consumers be it globally or domestically. Finished products are distributed by roads domestically but via air when it comes to global distribution. Ensuring quality Consumers in all market go for products and services that are of good quality. Production of quality goods and services is one of the reasons why Fonterra has an exceptional customer base. The organization creates quality by ensuring that it acquires raw materials from suppliers who meet international standards and have a good reputation when it comes to quality supplies. The organization also has the latest technology and this makes its production processes high effective and efficient. The organization has an effective recruitment and selection strategy that enables the company possesses highly competent employees who deliver quality outputs. Fonterra focuses in producing goods that are safe to health of its customers, this principle and its abidance to the international standards of trade makes the organization produce quality dairy products. Conclusion An operating system is basically the steps and procedures that are carried in business organizations to produce their targets outputs.Fonterra has an effective operating system that produces dairy products that are of the highest quality in the market.The inputs in Fonterra are milk from the farms and other suppliers, water, flavors, packaging materials and human resources.The organization’s value adding transformational processes are highly effective and efficient that result to production of quality outputs that are a variety of milk, cheese, butter and ice cream products (Kumar, 2005). The organization creates quality by ensuring that it acquires raw materials from suppliers who meet international standards and have a good reputation when it comes to quality supplies. The organization also has the latest technology and this makes its production processes high effective and efficient resulting to production of quality products. Fonterra is one of the organization in which the supply chain is well managed. All raw materials that are needed in the organization are availed on time and in the right quantity and quality.Finished products are distributed by roads domestically but via air when it comes to global distribution. References Ajzen, I. (2001). The Theory of operations management. Organizational strategies and Human Decision Processes , 50 (2), 179-211. Ajzen, I. (2005). Organization’s operations strategy(2 edition ed.). Milton-Keynes, UK: Open University Press. Ajzen, I., & Fishbein, M. (2004).Understanding the operations strategy in the dairy industry.Englewood Cliffs, NJ: Prentice-Hall. Chaiken, S. (2009).Communicator physical attractiveness and persuasion. Journal of Personality and Social Psychology, 37, 1387−1397 Kim, H. Y., & Chung, J.-E.(2011). Relationship between organization’s operation management and consumer satisfaction in Fonterra. Journal of Consumer Marketing , 28 (1), 40-47. Kotler, P. & Keller, K. L. 2009.Operations management.Pearson International Edition. 13th Kumar, S. (2005). Exploratory analysis of global Dairy industry: major players, technology and market trends. Technovation , 25 (11), 1263–1272 Kumar, S., Massie, C., & Dumonceaux, M. D. (2006).Comparative innovative business strategies of major players in cosmetic industry. Industrial Management & Data Systems , 106 (3), 285-306 LaPorchia C. D.(2013). African American women's use of Dairy products in relation to their attitudes and self-identity .Graduate Theses and Dissertations.Paper 13208 Patil 1, Bakkapa B.2 and Somashekhar I.C.(2012). An Empirical Study of Personality and Dairy Consumer Behavior Research Journal of Management Sciences ISSN 2319–1171Vol. 1(4), 12-15, November (2012) Schiffman, G. 2007. Operation management and the four V’s.9th ed. New Jersey: Prentice Hall. Solomon, M. R. 2007. The four V’s of operations management.7th edition. Pearson Solomon, M., Bamossy, G., Askegaard, S. & Hogg, M. K. 2006.Operations management, A European Perspective.3rd edition. Pearson Education Limited. Essex Veltkamp M & Custers R A (2010) Motivating consumer behavior by subliminal conditioning in the absence of basic needs: Striking even while the iron is cold .Journal of Consumer Psychology 21 (2011) 49–56 Wyer, R. S., Hung, I. W., & Jiang, Y. W. (2008).Visual and verbal processing strategies in comprehension and judgment.Journal of Consumer Psychology, 18, 244−257. www.fonterraco-operativegroup.com Read More