Operations Decision - Research Paper Example

? Operations Decision AFFILIATION: Operations Decision Introduction to Operations Decision In today’s dynamic and ever changing environment, the organizations have to make decisions on a continuous basis. According to Banarjee (2012), the managers of the companies are also the decision makers and they have to make sure that they make their operational decisions after carefully evaluating all their options. In order to get a competitive edge in today’s highly competitive environment, management is pressurized to make economical decisions. The managers need to develop the skills of handling all the operational problems that arise during the course of decision making. It is important that all the environmental factors are taken into account so that the managers have all the information about the internal and external factors important for the organization’s improved performance and make effective decisions with utmost ease. In order to achieve the maximum level of operational efficiency, the managers need to make sure that they allocate the resources appropriately and utilize them in the best possible manner; the decision for resource allocation is very crucial and it is important that all the factors are properly taken into account. In case of small companies, the environment tends to be less competitive and the decisions can be made on the basis of intuition that require minimum quantitative analysis; while, in the case of large organizations that are operating in a huge market, the managers need to use both qualitative and quantitative methods so that economical decisions are taken (Matasniemi, 2008). The most common qualitative techniques are the experience, common sense and intuition; on the other hand, there are numerous quantitative techniques that are available for the managers of the organization and the most commonly used ones are Operations Research, Decision Trees and Linear Programming (Lee, Oh and Pines, 2007). Other techniques that can be used as well are Games Theory, Simulation Methods, Models, Probability Method, Program Evaluation and Review Technique (PERT) and Critical Path Method (CPM). Among all the aforementioned techniques, the best one applicable for the company in the case is the Operational Research method as it is the most scientific method of identifying the problems that arise in the management of operations of the business that comprise of employees, machines, material, resources along with macro environment factors such as government, defense, business and industry (Banarjee, 2012). Inline Skating Industry The company “Skating International” has its own market and currently, there are few competitors that are making foils and sails that are used by few skaters. The brand name is “Achievers” and it will be the only brand that will provide superb quality skating shoes at reasonable prices. The main aim of the company is to provide the customers with skating accessories that will help them in fulfilling their desire of having exceptional sensation towards enjoying skating. Research has shown that the companies that are manufacturing these accessories don’t use the sails that must be designed for skating; in fact, the sails are suitable for skateboards and windsurfing. Although there are many manufacturers of skates but still there is no single company that is manufacturing the skates’ accessories. The products that are being offered by the company will be Skate Sails, Blade Boots and Skate Aid. All of these products will be made from superb quality raw materials so that they are durable and the customers get their value for money. Competitor Analysis In order to survive in the dynamic environment in which changes are taking place at an accelerating rate, it is important that the companies do their environmental analysis on an ongoing basis. The skate sales have increased drastically in the last couple of years and the distribution within and outside the country has doubled as well. Although Skating International is targeting entirely different target market that is not being serviced by the existing manufacturers of skates but they do pose threat as they can enter the market in the long-run. The main factors that will affect the operations and management of the plant will be dependent on major ones such as political scenario of the country, economic condition of the country, resources availability, consumers’ buying behavior, technological advancements and finance availability. In US, the political condition is stable and the rules and regulations for launching the new product will be easy to follow. The company has strong presence virtually as well but it allows limited access to the customers. Hence, the company’s management team needs to ease the policies for online marketing activities so that they can take advantage of online marketing services simultaneously. Since the transactions are mainly done online via credit cards and other payment systems, the company will have to ensure that the contents of the website are secured and no one can access the private information except for the authorized personnel. The technological advancements happen on a continuous basis so it will be vital for the company to ensure that effective mechanisms are in place to be assured that the computers are up to date and have all the latest features that are demanded by the customers. The economy is getting out of recession and the rise in people’s incomes and earning power ensures that people will buy skates for their personal uses. The social environment is also conducive as people are now shifting to online shopping for all their purchases. The number of skating companies in the last couple of years has increased and it is expected that there will be new entrants in future as well. The biggest competitors in the skating industry are Rollerblade, Roces, Solomon and K2. The market share of each company can be represented as follows as given in SGMA (2011) report: Since Skating International is targeting an entirely new segment so these competitors do not directly pose any threat to it but if these brands target the market that the company is targeting via its products, then it can lose its market share. Therefore, the company will need to create differentiating factors to maintain its competitive position in the market. The main purpose of the financial plan of the company is to give it a snapshot of how the company can achieve its goal of making profit in the long-term. It has already applied for a loan at the bank and the duration of the loan is ten years. The plan of the company is to use the money that is borrowed for financing the first year’s operating capital. If adequate amount will be input in the form of cash, then the company will be able to cover its operating costs and salaries easily. It is expected that the company will be able to achieve break-even point in first year of sales by following the current strategy. The company is expecting that the sales will grow steadily till third year; if the sales don’t meet the expected level, then the management will have to add additional capital for six months in the form of $20,000 and it will mean that the company puts it in the form of credit card. Hence the key performing indicators of the company’s financial plans are as follows: 1. The company will manage all the costs and expenses in the form of cash flow. Although the revenue will be bit slower but the sales will increase in future with proper implementation of promotional activities. 2. The inventory turnover is the competitive edge of the company as it will be able to cover the inventory costs with the help of scheduling production on monthly basis. 3. It is assumed that the economy is slowly growing and there will be less technological innovations in the field. Financial Figures and Tables Break-even Analysis Monthly Units Break-even 100 Monthly Revenue Break-even $130,000 Assumptions: Average Per Unit Revenue $130 Average Per Unit Variable Cost $35 Estimated Monthly Fixed Cost $10,000 Recommendations The company should continue with its operations if it finds that it is able to earn good stream of revenue. The skates need to be sold online so that it is able to curtail its costs to a greater extent. The company should discontinue its operations when it is unable to meet the demands of its customers and earn a good revenue stream. CEO needs to create an innovative, collaborative, proactive, risk management and open communication culture in the organization. Since the changes in technological world is rapid which is similar to the video game; the target is always on the move and the opponents attack the target from various angles. Hence, being focused on one target will mean losing the game to unexpected enemy who has been overlooked in the game. Therefore, new skills are required for playing the game efficiently along with the anticipation of challenges and simultaneously making fast and rational challenges for the enemies. Conclusion All the performance factors will be reviewed monthly as the technological advancements take place on an ongoing basis and new products are introduced quickly as well. The initial source of evaluation for the company will be the difference in the estimated and actual sales of the product. However, some of the evaluation tools that will be used to measure the performance are as follows: 1. Keep track of the current and potential customers of company both online and offline by tracking the traffic clicks and exposure to banner ads on the website from cross-linked and redirected links created for promotional purposes of company on media channels or websites targeted in the marketing tactics and key browsers or key search engines. 2. Carry out customer satisfaction surveys and gather information from customer reviews on various blogs and review the customer feedback by selecting the users from Beta test market both current and potential ones. 3. The evaluation of direct sales and surveys and e-mails designed for follow-up purpose with products recently purchased will give a proper indication about the customer’s satisfaction level and how successful the product is in the customer’s view. The company should monitor its performance for five years; if by the end of third year, it is unable to cover its costs and get in the break-even range, then it must discontinue its operations. However, with effective mechanisms in place, there are chances that the company will be able to survive in the tough competitive environment. References Banarjee, A. (2012). 7 main Techniques of Decision-making. Retrieved July 13, 2012 from http://www.preservearticles.com/2012051832380/7-main-techniques-of-decision-making.html Lee, E., Oh, Joon-Yeoul & Pines, E. (2007). Practical Managerial Decision Making Tools: Operations Research. Retrieved July 13, 2012 from http://www.cipmnigeria.org/PDF/e-BOOKS/Practical%20Managerial%20Decision%20Making%20Tools.pdf Matasniemi, T. (2008). Operational decision making in the process industry: Multidisciplinary approach. Retrieved July 13, 2012 from http://www.vtt.fi/inf/pdf/tiedotteet/2008/T2442.pdf SGMA (2011). 2011 Manufacturers Sales by Category Report. Retrieved May 24, 2012 from http://www.sgma.com/reports/278_2011-Manufacturers-Sales-by-Category-Report Read More