Operations Planning and Control in the Project Increasing the Number of Flavors - Report Example

Operations Planning and Control Contents Contents 2 Evaluating Gillian proposal for purposes of increasing farm visitors by 40% in the year 2011 5 Apr 5 Capacity constrains experienced by the business on the farm visit sides 6 Analyzing the ice-cream sales for 2010-2011 7 Level Capacity Plan 7 Factors to be considered when increasing the number of flavors from four to ten 8 Suggestions for Gillian to manage her capacity and demand without further capital investment 8 Sharon Construction Company Original Project Plan 9 Other factors considered when making decisions 12 Conclusion 13 References 15 Introduction The ability to meet the customer demand for different products and services is critical for ensuring the profitability of any organization. Moreover, whenever the customer demand is met, organizations are able to ensure quality customer service thereby ensuring that the firm locks in customers and positions itself strategically to compete with its competitors. However, demand for organizational products is influenced by many factors as explained by Ahlersten (2008, p. 87). These factors include the price of the products, time of the year, price of other substitute and complementary products, taste and preferences of customers and the income of the population. In addition, demand is determined by the expectations of customers in changes of price and quantities supplied in the market. This however depends on all other factors remaining constant. Dilts (2004, p. 68) asserts that demand must be backed by the purchasing power of the customers and is always related to a specific price and time. Consequently, it is critical for organizations to optimize the supply of products during the peak demand period to ensure that the customers are able to access the services demanded. This is the greatest dilemma facing Holly Farm. The Farm at the beginning of 2007 decided to open its doors for paying visitors to view their Farm. The organization is involved in both dairy and arable livestock rearing. To ensure the comfort of their visitors, the company invested its entire savings constructing a 50-space car park and a six park for the 40-seater coaches. Furthermore they invested in constructing a safe area for viewing the milking parlour, purchased special trailers to transport passengers around the farm on guided tours and a children’s recreation playground. Behind the shop, the farm constructed a small facility for making dairy ice cream. Through aggressive advertising and events organized in local schools and organizations; the number of visitors to the Farm has grown steadily and by the end of 2010, the annual number of visitors was over twenty one thousand. There are great variations in the number of visitors during different months of the year and time of the day. Although the allowed visiting hours are from 11.00 am to 6.20 after milking is completed, approximately 90 percent of the visitors in cars and coaches arrive after midday picnic until around 1.30pm and make a tour of the farm in the afternoon. By 3.00 pm about 40 percent would leave the Farm while 60 percent wait to view the milking process and there after visit the shop for ice cream and other products. There are more visitors from April to October while demand is too low outside this period. Moreover, visits are high from Friday to Monday, the demand peaking on Saturdays and Sundays. The period between November and March is usually too cold for tractor rides and the animals have to be kept inside. Gillian who is charged with the responsibility of managing the visitors has initiated an ambitious plan to increase the number of visitors to the Farm by forty percent in 2011. Moreover, a state of the art milking parlour has been launched by the Farm where cows are milked on a slow moving turntable and milking is to last from 3.00 to 6.00 pm. To optimize the number visitors visiting the Farm, Gillian has to determine whether concentrate on individual advertising or promoting visits by coaches during the peak time. In case study two; Sharon Construction Corporation has been awarded a contract to construct a 20,000 seat stadium. The construction must be carried out within the stipulated time frame; starting on 6th February, 2012 and be finalized in one year. Failure to meet the conditions set out in the contract will lead to a penalty of £15,000 per week starting from Monday 4th February, 2013. Completion of the construction depends on the availability of labour and only unionized employees can be used in such a project. Moreover, the term of agreements with the unionized construction workers expires by November 23, 2012 beyond which a strike can occur affecting the work. The company also faces another problem which may impede their work since December was being predicted to be colder than expected. This would increase the expenditure in the contract by £500 per week since concrete pouring in December would require special heating. The alternatives available for the company include, expediting pouring of seat gallery supports which would cost £20,000 and cut the duration of the activity to six weeks. They can also undertake alternative one and allocate a double shift in the filling of the field. This would cost a further £ 10,000 and bring down the activity by five weeks. The third alternative would be to put three shifts and some overtime in roofing activity which would lead to a reduction of the time allocated for this activity by six weeks but at an additional cost of £ 9,000. However, the management can wait and see if a strike and December will be colder as predicted and then expedite the activities after things normalize. The construction has to adopt the most optimal alternative in the project to ensure that it beats the deadline to avoid penalty. Evaluating Gillian proposal for purposes of increasing farm visitors by 40% in the year 2011 From Gillian’s proposal, the peak months are from April- September after which the number of visitor’s declines rapidly reaching zero in the month of November and December. This is because of the beginning of winter season and many individuals and families have gone for vacations as illustrated in the table below. Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total 0 0 0 1824 2687 3925 4350 4651 2688 962 0 0 21087 According to the table, the trend has been increasing from April to August after which the demand decreases. However, in 2011, Gillian can improve on the number of visitors by taking various initiatives. For instance, she should focus on creating demand for her products via more and more advertising. According to an economist point of view, advertising not necessarily creates demand but attracts customer’s attention to have an idea of the availability of the product. It is true, when an individual try to create demand; he or she is deemed to fail. Therefore, Gillian should identify un-or- underserved market segments such as institutions among others. She should strive to build the loyalty with various customers and her market reputation. These will consequently increase client numbers for his products and those visiting the farm Capacity constrains experienced by the business on the farm visit sides The limited facility of the farm is a challenging factor and this can negatively affect the number of customers visiting the business. For instance, the number of spectators often doubles on weekends unlike weekdays. This forces the farm to organize for three shows in order for the visitors to have a view on how milking is done. These might result to killing of visitors’ morale and affecting the number of visitors in the farm and consequently the business investments. Fred, one of the business owners admits that, neither him, nor the cows are ready to commence earlier and similarly he cannot allow an increase in the number of individual in one show. These shows how arrogant he is because this problem needs adjustment via expanding the area to accommodate a larger population. Even though individuals are willing to wait and view the high form of technology, for some they will not allow to be handled like that. This might be the cause of low turnouts on the farm. Analyzing the ice-cream sales for 2010-2011 According to Gillian, she does not expect any change in sales in 2011 because of low capital return investment used in 2010. She expects the same number of visitors to visit the farm in 2012. In addition to that, the business has received few contracts thus their expectation of a reduction of 9% in sales to their major outlets. However, this can change if Gillian develops a proper marketing strategy. A steady stream of products and services that are new should be developed due to fast changes in consumer tastes and competition among companies. In her endeavor to develop new flavors, she should analyze, which market is she aiming, the expected benefits, the business plan in positioning the product in the market (“How to increase product sales despite market competition.”). Level Capacity Plan There are four typical areas in business where level capacity plan is needed. At level 1, we have business planning, then development, sales and operation management, process scheduling and lastly process management. The capacity plan utilized in 2010 for the final goods and ice cream factory was level 2. In level two there is coordination of capacities among cells or sections e.g. ice cream sales and final goods inventory. Capacity constraints experienced at this level is that, when demand approaches capacity, there is a disproportionate increase in lead-time. The results are promises that are unachievable being made to customers. This affects the customers’ loyalty to a business product. The use of the equipment over two years will eventually degrade its efficiency. There will be production of low quality standards of product unless investment on more machinery is done. Increase in input results to increase in outputs and the opposite is true. Factors to be considered when increasing the number of flavors from four to ten As an entrepreneur, there are various fundamental factors to examine when introducing a new product in the market. These factors are such as, ideal customers, competition in the market, advertising campaigns, exceptional selling preposition and product life cycle understanding. If Gillian understands the above factors, then she will be capable of developing a market plan that stabilizes the company’s profits (Ulaga & Reinartz 2011, p.5). From the proposals, there are various limitations. For instance, the business capacity is low and cannot accommodate the new products. According to Holly Farm case, the available freezing equipment cannot fully and safely fast freeze in a single day. Furthermore, it lasts an hour to clean between the flavours. It takes one day to create one flavour. If the farm does not improve on its operational management, then the increasing of numbers from 4-10 will not make any significant on their sales. Despite the limitations, they have various advantages. For example, the marketing of the new products would not be a problem. The sales and marketing is not an obstacle, their main buyers will do it. They comprises of farm visitors, retail shops and local customers. Suggestions for Gillian to manage her capacity and demand without further capital investment The most essential step before developing a new product is to understand the importance of undertaking an approach that is methodological, measurable and persistent. Gillian should know that success can only be achieved via collaboration with other organization members, input from customers, analysis that is objective and deliberate testing (Brand 1998, p.1). She should not rely on pure innovation alone as this may result to failure. The combination of all these components results to production of high standard products at a low cost. Off-peak prices are often lower than peak prices. Therefore, it is important for Gillian to announce prices of both peak and off-peak. The reason for the mentioned step is to allow the shifting of the demand to off-peak periods. This is vital due to the capacity constrains unable to satisfy the customers. Hence, individuals not sensitive to prices are will to pay higher prices for the services. It is quite significant for the business to announce peak prices when the demand is unpredictable. Unpredictable demands have shorter waiting times and high service probability unlike in demands that are predictable. This will enhance the survival of the company in the markets that are competitive (Shugan, 2000, p.10). Sharon Construction Company Original Project Plan In the construction of the stadium, clearing activity should start on 12th February, 2012 and take a duration of eight weeks to complete on 30th March, 2012. This activity can only be undertaken alone after which other activities may be undertaken simultaneously. After its completion, work on the site and the structure can be carried out concurrently. Consequently, subsurface drainage and excavation will follow with both activities commencing on 2nd April, 2012 but since excavation takes four weeks, it will be completed by 27th April, 2012 while subsurface drainage will be completed by 12th May, 2012. Since pouring of concrete footings can only be undertaken after excavation has been done, this activity will follow excavation and will begin on 30th April 2012 and after four weeks; the activity will be completed on 25th May, 2012. Filling of the playing field must come after completion of the subsurface drainage and therefore this will commence on 28th May, 2012 and after 14 weeks the activity will be completed on 31st August, 2012. This activity will be followed by installation of the playing turf an activity that requires 12 weeks to complete. Installation of the playing turf will therefore commence on 3rd September, 2012 and be completed on 23rd November, 2012. In the mean time other activities will be taking place with pouring of the support of seat gallery and construction of steel structure starting on 28th May, 2012 following the completion of pouring of concrete footings. Construction of steel structures will be finalized after four weeks on 22nd June, 2012 while pouring of the support for seat gallery will take twelve weeks and be completed on 17th August, 2012. After the construction of steel structure, Sharon Company will start erecting a roof which takes eight weeks starting from 25th June to 17th August, 2012. In addition, completion of pouring of the support for the seat gallery will allow the company to begin creating pre-cast galleries starting on 20th August, 2012 to 16th November, 2012. Completion of erecting a roof will allow for the installation of lights, scoreboard and construction room. The three activities would be started simultaneously on 20th August, 2012. Construction of a scoreboard and dressing room will take four weeks and will thus be completed on 14th September, 2012 while installation of lighting system can only be completed in six weeks therefore it will be completed on 21st September, 2012. Pouring of seats will take place after creating of the precast galleries and requires four weeks. This activity will commence on 19th November and be finished on 14th December, 2012. Following the completion of these activities, painting of the stadium facilities will start on 17th December and be completed on 4th January, 2013. This will mark the completion of construction of the stadium in an ideal situation. Limitation of the Original Plan For the operations to be undertaken as scheduled in the original plan there should be optimum supply of labour throughout the construction period. Moreover, the climatic conditions must be favorable. This is however bond to face many limitations since the unionized workers are the only ones who can be used in the project although their agreement comes to an end on 23rd November, 2012 after which they may go on strike. This would affect the activities of the company and slow down the construction. Furthermore, it is predicted that weather conditions will be unfavorable in December for the concrete pouring since this would demand for more heating. From past experience; the probability of a strike is a half. Moreover, there is 70 percent chance of a strike lasting for eight weeks. In case of a strike the activities that would be affected include; pouring of seats scheduled to start 19th November and be completed after four weeks will also be affected midway in case of a strike. Moreover, painting of the stadium could be delayed by a strike as the activity is supposed start on 17th December. Occurrence of colder December as forecasted will not greatly affect the operations of the construction company since concrete will already have been poured. However, this may impede the work of the construction workers working in the outdoors as it may be too cold to work. Analysis of the Four Proposals The first proposal recommends that the company expedites pouring of seat gallery support which would raise the cost by £20,000 but reduce the duration of the activity by six weeks. This proposal would lead to the time of creating pre-cast galleries being undertaken faster but would not help the company overcome the two limitations since the preceding activities also depend on the erection of the roof. Therefore I recommend that the company avoids incurring this cost as it has no overall impact to the project. The second proposal is the expedition of pouring supports for the seat gallery and deploying a double shift on the field filling. This proposal will lead to the company incurring more costs although it will not have ultimately helped it ensure that most activities are completed before the expiry of the agreement period. The proposal helps the company hasten the installation of steel turf but installation of the steel structure will remain unaffected therefore erecting a roof will be delayed. The third proposal is to use three shifts during roofing at an extra cost of £9,000. This proposal does not help the company much since even bringing down the time required for roofing will only waiting time for installation of lights and construction of dressing room but not pouring of seats. I would therefore shun recommending this proposal. The fourth proposal is to wait and see and incase of a strike the company would expedite the remaining activities. I recommend this proposal since it has no big cost implication to the company and in any case only two activities may be affected. In case a strike occurs the eight weeks would elapse at the end of January and therefore the company can expedite painting and pouring of seats. Moreover, during the strike the company could continue with the remaining activities although at a slow pace. Other factors considered when making decisions In addition to considering the expected cost of adopting any of the four alternatives, I have considered the sequence with which the activities must follow. Moreover, a consideration of the behavior of the employees has been considered from past experience. In case control of the project team is effective, the activities of the project will be completed within the schedule as asserted by (Department of Finance, 2005, p. 22). Therefore in Sharon Construction company control of the employees has to be maintained to complete all projects within the stipulated time. In addition, team work of an organization has to be evaluated since in organization where team work is upheld, work is accomplished within the schedule (Touwen, 2001, p. 23). The other consideration that has to be done as proposed by Touwen (2001, p. 23) is on the internal and external organizational environment. In the evaluation, experience has shown that laws only allow for unionized workers to work in such a project. Furthermore, evaluation of the past organizational behavior indicates a 50 percent probability of a strike. The strike can only last for a maximum of 8 and 12 weeks in a probability of 70 and d30 percent respectively. Prestige Business Consulting (2005, p. 36) observes that in deciding to defer a project the level of work accomplished must first be determined. In case of delayed schedule, a company can fast track the activities or reassign the resources to critical paths in the project. As the president, I would go for proposal four since the organizational behaviour had shown an equal chance of a strike happening. In case it happens, work in the company would only be slowed but not halted and therefore the contract could be completed within the contract at no extra cost. Conclusion Service providers marketing strategies are impacted by capacity constraints. However, not all face this constraint but it affects majority of them. Capacity dictates service delivery. In addition to that, competition on capacity occurs when distinct buyers need distinct service levels. Operation adjustments become an essential element in changing capacity. These consequently have an impact that is direct on demand and customer satisfaction. Changing of marketing strategies must occur during peak demand periods for purposes of emphasizing services or service aspects needing less capacity. Entrepreneurs should be keen on how they converse with their potential customers as they determine the success or failure of the business. During peak demand, rationing of capacity non-pricing develops an opportunity for rewarding those customers that are loyal and selling of new services or products. Essential conflicts often arise when more service is provided to a single customer and when longer waiting times are created thus diminishing the total quality of the service. Price rationing is has been recognized as the most form of rationing that is gainful. However, it causes issues and its implementation is quite difficult. There is expected continued research on various strategies of marketing in capacity constraints presence. The research has to focus on unique strategies. Achievements can be via technology advancement. The new strategies will comprise of pricing that is complex, advanced selling strategies and formation of strategies that can adjust continuously to dynamic conditions. Individuals need to have an understanding that is deeper on marketing service bundles facing distinct capacity limitations. Planning the operations and controlling is critical during project implementation. In Sharon Construction Company control will be critical to ensure all the activities are completed within schedule. Moreover it is important to make a provision for any eventuality that may happen during project construction. The alternative chosen must take into consideration economic and organizational behaviour of the company. References Ahlersten, K. 2008, ‘Essentials of microeconomics’. BookBoon Publishers: Pp 87-100 Brand, M. 1998, ‘New product development for microfinance: Design, testing and launch’. US, Agency for International Development. Department of Finance, 2005, ‘Guideline for the appraisal and management of capital expenditure proposals in public sector.’ Accessed 22nd February, 2012 from http://www.finance.gov.ie/documents/publications/other/capappguide05.pdf: pp 1-35 Dilts, D. 2004, ‘Introduction to Microeconomic’. Purdue Publishers: Pp 67-84 ‘How to increase product sales despite market competition’. 22nd February, 2012 from http://www.scribd.com/doc/26155318/New-Product-Development-Strategy Prestige Business Consulting, 2005, ‘Community capacity Building Project’ Accessed 22nd February, 2012 from http://www.ibrd.gov.nl.ca/regionaldev/Proj_Mgmt.pdf: Pp 36 Shugan, SM. 2000, ‘Service Marketing and Management: Capacity as a strategic marketing Variable’. Florida, University of Florida. Touwen, A. 2001, ‘Handbook For Projects: Development Management and Fundraising’. International Federation of University Women 8, rue de l’ Ancien-Port, 1201 Geneva, Switzerland. Pp 18-23 Ulaga, W, and Reinartz, WJ. 2011, ‘Hybrid Offerings: How manufacturing firms combine goods and services successfully’. Journal of Marketing, vol.75, pp.5-23. Read More