Production and Operations Management
December 10, 2017
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Production is one of the hardest businesses to organize. There exist numerous techniques that can be used by managers to overcome production organization issues, however, every situation is unique. Every situation should be analyzed in different contexts, and environment conditions should be taken into consideration. Turbo Exhausts is a rapidly growing company that has faced difficulties connected with effectiveness of expansion management. It has faced such rapid growth that managers even did not understand when problems with production have started. The company is well known for high quality of its exhaust systems. However, difficulties with the delivery can destroy its image of reliable partner. Therefore, now it is essential for the company to cope with its problems and continue its growth.
Company is working in three fields: custom-made systems, off-the-shelf, and the Performance Shop systems. Firstly, company was operating in the sector of custom-made systems. According to the information from case, this type of production brings the highest profits to the company. Custom-made systems production requires much time and specific attention of engineers. However, the selling price covers all costs. With the growth of the company, it gained recognition from customers, and company’s management decided to grow and set the off-the-shelf systems productions. At this stage of business development of Turbo Exhausts the company had not faced any problems connected to the production process organization and stocking. Then, company has signed the contract with the Performance Shop and started to produce specific exhausts systems for them. The company is setting regular but low volume orders. However, the number of orders is growing. Production process is complex, time consuming, and costly. With every change of definite systems production, Turbo Exhausts faces difficulties with reconfiguration of production lines. This process consumes a lot of time and creates gaps in production process, which creates the need to work overtime. However, that is not the only problem that was caused by the growth of the company.
With the approach of the Performance Shop systems production, Turbo Exhausts faced difficulties with stocking. Since the production process is organized poorly, production lines are regularly changing. This causes difficulties with deployment of raw materials, semi-finished products, and finished systems. Such problems have occurred because of the priorities that company gives to orders. It is essential that orders with higher profit margins bring more money. However, production of big volumes of exhaust systems can bring additional earnings. Hence, it is essential that such indefinite management of production process brought new problems to the company. These problems are connected with the increase of premised delivery times. The felt in meeting delivery time can play a “bad game” with customers’ loyalty and brand image of the company. The company can lose its reputation of high quality production company and lose its clients. In this situation, the company can rapidly change its growth of production to the declining strategy (Assaf & Al-Hejji, 2006).
According to the analysis of the situation that the Turbo Exhausts is facing, it is necessary to make quick but effective decision about how to overcome these problems. In current situation, management of the company can cope with faced problems in two ways: reject one of the production lines (custom-made systems, off-the-shelf, and the Performance Shop systems) and work in the previous pace, or introduce new operation production management methods and techniques and continue with the growth of the company.
The aim of any business is to grow and satisfy as many customers as it is possible with its products and services. Therefore, Turbo Exhausts company needs to introduce new production management that will radically differ from the previous one and solve all problems that the company has. Thus, in order to meet all company’s needs it is rather important to identify all problems that exist in the company. First of all, the main problem is connected with a range of orders that should be done at the same time. This is the issue of day-to-day operational problems of management (Gunasekaran, Patel & Tirtiroglu, 2001). As the company does not have strict plan what should be produced and it has tree productions line, which technologies are different, company faces all the range of problems that it has. Day-to-day operational issues of management of Turbo Exhausts include: include: planning, decision-making, organization, assessment and management, problem solving, process control, communicating and negotiating with colleagues and clients.
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Planning of production performance is one of the biggest problems that company facing with. Effective planning of orders fulfillment allows company to manage the time and meet delivery dates of orders (Chan, Simchi-Levi & Swann, 2006). Planning could help to establish schedule of production batches of its own production and the schedule of purchases of materials and needed components. In this work, certain algorithms of calculating the size of orders and orders start dates are based on network models (Kusiak 2000). In this case, planning capacity in the Turbo Exhausts is not organized.
Absence of production planning in previous decades of company’s performance dues to the fact that company did not work with the client that offered big volume of products and employees had enough time to perform production with actual planning. However, with the raise of orders, company faced problems with the orders delay, stocking and wasted time for the changeovers of technological production lines that are needed for the product production for one of the segments: custom-made systems, off-the-shelf, and the Performance Shop systems.
The challenge of planning in the Turbo Exhausts company is to determine the exact dates and to download the resources, build an optimal sequence. Determining the correct sequence, the first demand from the customers production planning systems that is totally non-complying in the day-to-day operational decisions of the company. They all want to optimize loads, minimize changeovers and reduce costs. In this case, only a few understand that the main purpose of planning – it stands to delivery times to customers. Focus Production plan focuses on how best to load the equipment in terms of shipping products on time.
In the article “Operations management in context” authors stress that company can achieve an objective characterization capabilities and production volumes for certain type of production line based on specific technology, graphics equipment availability, and other factors. (Galloway & Rowbotham, 2012). This happens, because only in this way, it is possible to analyze performance of different variants of volume-production schedule, as a result company can calculate the planned cost of production more accurately.
The next one is connected with the longing of premised delivery times. When the customers receive more than they expected to receive while offering products or services from the company, their brand loyalty increase and they will obviously use this company again. Delivering issues is one of the most important problems that companies facing. In order to continue performance, Turbo Exhausts should deal with the problem of missing or longing of premised delivery time. This problem is caused by ineffective time management of order implementation.
The third problem is increase of production costs of off-the-shelf and the Performance Shop systems. Cost increase is caused by the growth of the space needed for inventory stocking for the finished as well as for semi-finished systems and by the increase of needed for production raw materials. However, this part of increased cost involves variable costs, which are the part of product costs that will be covered by the price of products sold. Therefore, the third problem with the increase of off-the-shelf and the Performance Shop systems cost is connected to ineffective time-management of the production process.
The next problem that Turbo Exhausts has faced is the increase of inventory and stocks. It is essential that all problems that the company is facing are connected with ineffective production process. Therefore, with incoherent orders fulfillment, the company should add more space not only for finished, but also for semi-finished and unfinished exhaust systems.
The problem with the increase of space that it is needed for inventory, stocks, unfinished and semi-finished systems, and raw materials will not be so urgent if not the inability of a company to increase space. This is the next problem that was caused by poor production management.
The last but not the least problem that the company is dealing with is the increase of orders and its volumes from the Performance Shop. Since the aim of any business is to grow, this is the right thing that should happen with company like Turbo Exhausts that has positive image, and its name is the guarantee of high quality and in-time delivery. However, the management of the company cannot cope with the increased number of orders. Ineffective management made company’s growth to become the problem. However, this can be the result of the company’s problem with identification and specialization.
The performance of Turbo Exhausts is made in three different markets: custom-made systems, off-the-shelf, and the Performance Shop systems. The increase of problems in the enterprise can be connected with the fact, that management of the company wants to provide services of the company for every segment that they could, however without the increase of production capacity. It is essential that increase of production orders will bring more profit for the company, however without complex approach to the production process company can face difficulties with the organization of productions lines and increase of fixed costs. This has happened with Turbo Exhausts. Therefore, company has faced problems with orders fulfillment that were caused by different sizes of the orders. Thus, the custom-made systems characterize the one-off type of production; off-the-shelf systems production refers to the small-batch type of production performance and the fulfillment of the Performance Shop’s orders is batch production.
These findings mean that Turbo Exhausts needs to pay attention to the product specialization and identification production. Economic importance of specialization for the company can be seen in the decrease of inventory space usage and production costs. Therefore, management of the company did not pay enough attention on the advantages of the production specialization, as it offers great opportunities for mass production at a rhythmic industrial basis (Heizer & Render, 2004). It can give the opportunity to improve the technology and increase profit margins. Specification creates opportunities for technological progress and implementation of scientific achievements and best practices with a view to the most efficient use of land, machinery, equipment, labor and financial resources (Kleindorfer, 2005). Along with the increase in gross production is improving quality, increasing crop production, increase skills. However, what is the most important company can achieve cost reduction and increase of production profitability.
The main indicator of the level of specialization is the specific share of the main industry in the commercial products. With the increase of orders volume and intensity from Performance Shop company will face more problems with the delivery delay and stocking spaces. Performing in different segments of the market, company loses possibility to increase the volume and improve product quality, increase productivity and reduce production costs and increase profitability through the specialization.
The problem of enterprise specialization determined first volume production of similar products. The larger the volume, the lower the fixed costs per unit of production, and on the other hand can be a perfect production technology. Selecting the most economically viable technologies and corresponding hardware determines the size of the production. The optimality of the production or business depends on the selected criteria. Practice has proved that production should be such that the set of machines and equipment was loaded completely. In this case the cost of production will be lower. Thus, specialization of production is the concentration of Turbo Exhausts to produce a limited range of products and technologically similar products.
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Production of off-the-shelf exhaust systems will cause some changes in the financial structure of the company. First of all, the company has decided to work in this market because of growing amount of customers that want to buy high quality systems of Turbo Exhausts at good price. Performing with this customers’ sector makes managers organize the batch production. The main advantage of batch production is the decrease of the finished price of the product. It happens because administrative and fixed costs that relate to the produced batch are being distributed in the same amount for each product unit (Blanco 2005). For setting up full cost accounting in the enterprise, the objective process control should be performed. It should be connected to automatic data collection (Choe, 2004). At any time, the information about what, how much, and of what quality is produced should be available (Gupta 2006). Quality control is very important in the production of exhaust systems. It is the main advantage of the company that formed the image of Turbo Exhausts. High quality guarantee is a competitive advantage of the company in the market. Technical and organizational characteristics of batch production are responsible for a number of economic advantages over a single production. These include reduction of production cycle, improvement of product quality, increase in productivity, and decrease of costs. Therefore, the production of the off-the-shelf exhausts systems will bring changes to company’s financial structure.
According to the previously mentioned arguments, Turbo Exhausts needs to overcome its problems with the introduction of new effective system of production management that will help the company complete all orders and increase its production volumes. As a result, the best suggestion for the company is to use the following methods of production performance management: implementation of logistic methods of production organization, implementation of coherent and consistent production techniques, production planning techniques, and day-to-day operational decision technique.
Any business performance is a war. If the company does not apply effective managerial techniques, where it is necessary, success will not be achieved. Bottlenecks exist in any enterprise, but one and the same equipment, which is traditionally considered to be a bottleneck, with proper planning can yield better performance (Kleindorfer, Singhal & Wassenhove, 2005). Correctly set goals can determine what prevents enterprise to the ineffective performance. Therefore, company should be consistent in achieving these goals: to build a logistics, warehouse logistics and production so that the company can faces barrier that are caused by the objective factors, such as market share and competitors.