Production Planning and Control - Example

READING HEADER: PRODUCTION AND OPERATIONS MANAGEMENT Your institution: Your name: Course name: Course instructor: April 9, 2010 PRODUCTION AND OPERATIONS MANAGEMENT In many instances, growth in sales of an organization’s products fails to lead to an equivalent increase in profits. In most of these circumstances, organizations face various operational and strategic issues that dampen their ability to attain profits that correspond to their sales levels. Challenges faced in quality control, management of productivity, management of facilities and management of projects affect the ability of organizations to attain maximum profits. Consequently, organizations operations from day to day require a myriad of knowledge on salient issues in production and operations management if the organizations sales are to lead to meaningful increase in profits. Among the issues affecting the ability to attain significant profits even with growth in sales, includes failure in an organization’s operational process. A major failure involves delinking the organizations production and operational process from the organizations strategic objectives. In such an instance, an organization may become less competitive due to lack of strategies or lack of strategies linking organizations processes of production to strategic objectives of the organization. Additionally, an organization may enter into production of new products without the capabilities to meet new demands. An organization should have enough expertise to manage, forecast, and meet demand by ensuring that the organization posses the necessary capabilities. At other times, some products may affect the financial structure of the organization. Perceived differences in quality and value such as in production of customized goods over standard goods may contribute to consumers willing to pay different prices for goods that are of equivalent standards in terms of quality. Production of standardized products should be able to reflect the prices that consumers are willing to pay. Other products may require different production process and levels of expertise from existing ones. Similarly, an organization may enter into contracts where they may find it difficult to attain substantial profits due to inefficiencies in production leading to wastage of resources such as expert labor, storage space, time, and so on. Such factors among others contributed to Terror tubes finding it difficult to meet demand and to attain profits that are commensurate to its increased sales thus highlighting the need of awareness of various management theories and techniques by an operations manager. Production and operations management refer to an area in business that is concerned with services and goods production involving the responsibilities of making sure that operations of business are efficient as far as utilization of the scarce resources is concerned. The organizations operations are the tools and activities that an organization undertakes to create value for customers and achieve the objectives of the organization (Mehra & Inman 2004). It also involves ensuring that business operations are effective in terms of satisfying the requirements of customers, hence operations management basically entail management of processes that are used to convert inputs that are inform of labor, materials, capital and energy to obtain outputs in the form of consumer services and goods(Murthy, 2007). Since it permeates the entire framework of an organization, process management is an important element of an organization and consequently, it should be included in an organizations business strategy (Chryssolouris 1996). The organizations process in aiming to satisfy customers' needs seeks to create value to customers and to increase organizations competitiveness (Kenneth 2004). Traditionally, operations has been taken to refer to production of services and goods though distinctions between these two major operations forms is progressively becoming more cumbersome to make since manufacturers are tending to merge service and product offerings in the market. On general terms therefore, operations and production management aims at increasing the substance of value-added activities in any given procedure, and fundamentally these creative activities of addition of value should be aligned with the opportunities in the market in order to attain organizational optimal performance (Chryssolouris 1996). Therefore according to the Education Department of the United States, the term production and operations management refers to the field that is concerned with the management and direction and can be technical or physical functions of an organization/company, and especially those that relate to production, development, and manufacturing (Kenneth, 2004). The programs that are involved in this kind of management include productions and manufacturing systems, management of plants, management, and maintenance of equipment, control of production, industrial labor relations, and supervision of skilled trades, materials planning, cost control and productivity analysis, analysis of systems, strategic manufacturing policies, and also includes the instructions in principles of general management (Chary 2004). It is against this backdrop that this essay would discuss the operational and strategic issues that are facing Terror Tubes while identifying the operational aspects that affect this organization and, specifically the strategic implications. This essay would also discuss issues integrated within the current production processes that Terror Tubes utilizes, the effects of the new contract with Super Car on the operations of Terror Tubes including the daily operational decisions that are required under the conditions of the current operations for the firm’s operations to run as usual i.e. effectively and efficiently. This essay also postulates the effects that moves to production of standard systems have actually had on the financial structure of the company. CURRENT PRODUCTION PROCESSES USED BY TERROR TUBES Production process involves transforming resource input such as raw materials, technologies, and labor, into output goods and services that meet the needs of customers (Heizer & Render 2006).Production process refers to the way a business creates services and products. The three main parts of a production process include inputs, transformational process, and outputs (Kenneth 2004). The inputs may include machinery, labor, raw materials, and land (Heizer & Render 2006). The transformational process may involve designing, shaping among other activities. A firm that is successfully able to meet its production process in a well-organized manner enjoys productive efficiency and it can be a competitive advantage. The aim of an efficient production process is to use a minimum number of inputs to attain a specific desired output. In this case, the cost per unit would be reduced and an organization is able to sell at reduced prices while at the same time making good profits. Current production system for Terror Tubes involves a single facility for custom made and standard systems. The engineering equipment is general to increase flexibility. Equipments layout include cutters, tube benders, wielding and other equipments located in different locations. An individual undertakes a system from beginning to end and thus the design and artisanship of the employees are reflected in each final product. Scheduling for production is made depending on the required system. Some materials are left lying at different stages resulting to wastage and inventory and storage costs. The organization thus requires a more efficient production process to reduce Terror tubes supplies custom-made exhaust pipes to “rev heads” and “hot rods”, streetcars and to the motor racing industry. The company also supplies standardized exhaust systems to the wider market at a cheaper price. The organization further supplies Super Car Company with specialized exhaust systems. The same employees in a single factory make all the products. The current production process is thus a challenge as the organization expands. The increase in demand for products for the new contract by super cars is causing strain to the production process. The challenge of products lying idle in different stages means that more inventories are held resulting to space becoming a problem thus requiring the organization to rent extra space at an extra cost. In addition, use of expert labor for routine standardized procedures is one of the issues that management must address for more efficiency. THE EFFECT OF THE NEW CONTRACT WITH SUPER CAR ON TERROR TUBE’S OPERATION Terror tubes embarked on a contract to supply Super Car with specialized exhaust systems. The new contract and increasing demand for standardized products has resulted to challenges in the process of planning, production among other challenges resulting to reduced profits margins outcome despite growth in sales. Terror tubes face the challenge of meeting the demand on time. Terror tubes also faces the challenge of forecasting demand of its products as was evident in the earlier projections of demand by Super car and which were lower than the actual demand. The contract to supercar while increasing sales is not followed by similar increase in profits. This may be because of inefficiencies in production increasing the cost of production. It is thus possible that Terror tubes will improve its position by employing various management techniques such as batch production, job production among others (Singhal 2003). Terror tubes further faces the challenge of increased stocks requiring more space for storage of finished products, raw materials, and work in progress. Terror tubes should therefore employ techniques of stock control such as providing materials based on sales forecast, ordering correct quantity, and only the necessary buffer quantity (Bullinger 2006). To avoid increasing the cost of business Terror tubes should only hold to necessary stock. Such practices may give the firm competitive advantage through efficient production resulting to lower prices and costs and to satisfied customers as the firm is able to meet demand. Terror tubes is finding it difficult to meet deadlines even from other products due to the high demand by Super cars. As more stock is held, Terror tubes risks increasing its storage costs, warehouse, insurance, money tied in stocks and which could be in use elsewhere, chances of deterioration and increased losses and even additional security needs may make it more expensive. THE EFFECT THE MOVE TO PRODUCING STANDARD SYSTEMS HAS HAD ON THE COMPANY’S FINANCIAL STRUCTURE Terror Tubes management has recognized that even with increased production, the business is not making high returns on investments. While 40% of the business demand is from the standardized products, which are of comparable quality to the customized products, consumers are prepared to buy at a cheaper price thus the returns from standardized products account for only 25% of the total income. Accounting and finance manager has thus indicated that the costs that are connected with the standard line are increasing, while dollars are being tied up in the inventory buffers, both of the work-in-progress and of the raw materials. Furthermore, the increased demand is straining the organizations capabilities and facilities creating need to increase space, facilities, and its production capabilities. The company has also rented a public warehouse space that is expensive to help in accommodating the inventory buffer volumes. The owners are also worried about the lead times that have increased lately for both standard and custom orders, which are causing delivery times to be longer. The capacity also is being pushed, and with the present layout, no extra space is preserved in the factory/plant that can help in expansion. It is also getting increasingly difficult to meet the demand that has been created by their new agreement contract with the Super Car consequently, the organization must determine the best way to produce standardized products while at the same time increasing the profits generated from them through use of various principles of process and production management in the organizations operations. THE DAILY OPERATIONAL DECISIONS REQUIRED UNDER CURRENT OPERATING CONDITIONS FOR THE COMPANY’S OPERATIONS TO RUN EFFECTIVELY The plant management is also paramount to achieve required standards of products; hence, plant would always comprise bulk of the firm’s fixed assets. In determination of the kind of plant to use, the operations manager of the company should consider areas including the future demand including timing and volume. The plant should be able to accommodate any future expansion programs to met increased demands. The element of plant design is also vital including layout of the factory, offices and the equipments used in manufacturing the components should be high standard. The reliability and productivity of the equipment should of unquestionable standards, while the need for maintenance costs should also be taken to account. Safety and health is also very vital especially that is connected with the operation of the equipment, and finally the environmental issues should be considered by the managers to help in checking the levels of waste product creation (Singhal, 2003). Another area of active decision is that related with the processes since there very numerous varied ways of service and product production. Hence, operations manager should be able to choose the best processes series. They should consider the availability of the required skills in production, the availability of capacity, the type of production itself, the costs of production, safety and the maintenances requirements. The programmes is yet another vital element and it concerns the times and dates of the products that are to be supplied to consumers after successful production. The decisions that would be made as regards programmes would be influenced by the transportation mechanisms, the cash flow, the need for and availability of storage warehouse space, and the patterns of purchase of the finished products like the lead times (Murthy, 2007). Finally the decisions that involve people are to be made by the production mangers since production heavily depends on people power, whose experience, skills, and motivation are varied. The people-related decisions would consider areas as communication management, unionization, motivation and leadership, training and safety, work conditions including salaries and wages/remuneration. The management of all these daily operational decisions is required under current operating conditions for the firm’s s operations to run efficiently and effectively. The operations managers are expected to undertaken to purchasing or procurement activities hence should be well aware of the guidelines used for purchasing the various materials from prospective vendors and suppliers, with services include those for lawyers, and insurance companies, while materials involve computers and so forth (Gardiner, 2008). The manager should also undertake control management and functions of coordination which include broad range of activities that help ensure that organizational goals are being attained consistently in an efficient and effective manner (Chary, 2004). The managers are also expected to carry out management of services and products while ensuring quality management is conducted appropriately. This is important for continuous improvement by the operations managers and the manager should strive to adopt recent advancements in quality management like the use of the Total Quality Management and benchmarking skills. They should on the other hand perform management of inventory since costs form a substantial part of company profits hence should be minimized like those that may arise due to poor storage and during inventory movement. The manger should adopt innovative methods like the Just-i-Time inventory control management systems, which is in a position to save costs and allow movement of services and products to consumers more briskly. Other techniques include the supply chain management through help of ABC techniques, software packages etc. the transportation and logistics management would also help mangers focus on material flow and raw materials from suppliers, through the firm and then to consumers with emphasis on effectiveness and efficiency. The distribution channel management is also paramount for operation managers, which depend mostly on the nature of the services and the products under consideration. While on the other hand, the configuration management is vital for tracking the various services and products through help of relevant software. Lastly, the facilities management is a function of the operation managers who ensure that effective management of facilities like signage, lightings, buildings, and computer systems are of high standards. CONCLUSION The term operations management focuses on management of the processes of production and distribution of services and products, though usually small firms normally do not realize they are performing operations management. However, the management schools and thoughts typically connect their activities management with OPM. The main general activities involved include the creation of product, product development, production, and distribution to final destinations. This hence is concerning the entire operations in the organization related to product lines within the firm. Other activities that relate with operations management that should be handled by operations managers include purchases management, storage controls, logistics, quality control, inventory controls, and evaluations among many others. The operations manger should focus particularly on effectiveness and efficiency during the processes of production. Hence operations management is expected to include substantial measurement and analysis of the internal processes. Ultimately, the nature of the production processes of services and goods in firms would highly rely on the nature of these services and products for instance wholesale goods, retail, or manufacturing products. REFERENCES Bullinger H. J & Schweitzer W. 2006. Producing enterprises, International Journal of Production Research, Vol. Nos. 18-19, 15 . 3575-3584. Chary T., (2004), Production and Operations Management, 3rd Ed., Tata McGraw-Hill: ISBN0070583552, 9780070583559 Chryssolouris, G 1996, Flexibility and its measurement, CIRP Annals – Manufacturing Technology, vol. 45, no. 2, pp. 581-587.Wiley, New Jersey Kenneth, R 2004, `Project procurement management: contracting, subcontracting and teaming', Project Management Journal, vol. 35, no. 2, p. 53 . ProQuest. Mehra, S & Inman,2004. The coming decade', Production Planning and Control, vol. 15, no. 7, pp. 718. Online. ProQuest Murthy P. R., 2007, Production and Operations Management, 2nd Ed., New Age International,: ISBN812241558X, 9788122415582 Production and Operations Management Society, 2008, Production and operations management: an international journal of the Production and Operations Management Society, 7th Vol., Production and Operations Management Society, University of California Singhal K., 2003, POM Journal, Merrick School of Business, University of Baltimore, 1420 N. Charles Street, Baltimore, MD 21201, USA, Ksinghal@ubalt.edu . Read More