COMPRE QUESTIONS ON Production and Operation Management (DBA)

Case Study Method

Instruction: follow the Guide in answering the questions on this case study)

Note: Production and Operation Management

To compete with other organizations, a company must convert resources (materials, labor, money, information) into goods or services as efficiently as possible. The upper-level manager who directs this transformation process is called anoperations manager. The job ofoperations management (OM), then, consists of all the activities involved in transforming a product idea into a finished product, as well as those involved in planning and controlling the systems that produce goods and services.

To perform this function in today's business environment, manufacturers must continually strive to improve operational efficiency. They must fine-tune their production processes to focus on quality, to hold down the costs of materials and labor, and to eliminate all costs that add no value to the finished product. Making the decisions involved in the effort to attain these goals is the job of the operations manager. That person's responsibilities can be grouped as follows:

• Production planning. During production planning, managers determine how goods will be produced, where production will take place, and how manufacturing facilities will be laid out.
• Production control. Once the production process is under way, managers must continually schedule and monitor the activities that make up that process. They must solicit and respond to feedback and make adjustments where needed. At this stage, they also oversee the purchasing of raw materials and the handling of inventories.
• Quality control. Finally, the operations manager is directly involved in efforts to ensure that goods are produced according to specifications and that quality standards are maintained.
• Supply Chain Group- it is in charge in procuring and purchasing raw material used in production and the safe=keep of finished products pending deliveries to customers:

You can now start answering the questions below

Use the format below in answering the Case Study

• I. Statement of the Problem-State the problems facing the manager/key person

• II. Causes of the Problem -Provide a detailed analysis of the problems identified in the Statement of the Problem

• III. Alternative Solutions -Include two to three possible alternative solution; evaluate the pros and cons of each alternative against the criteria listed.

• IV. Recommendation and Justification -Identify who, what, when, and how in your recommended plan of action; Solution and implementation should address the problems and causes identified in the previous section; The recommended plan should include a contingency plan(s) to back up the "ideal" course of action

Subject Company:

The name of the company in our case study is AFG Corporation a leading manufacturer of Branded Consumer Food. It has a total of 200 brand and maintains around 600 SKU (stock-keeping-unit). The company has a total of 10 plants thus it maintains also the same number of Inbound Warehouses. It also operates 15 Distribution Centers/Outbound Warehouse nationwide. The head of the plant organization is the Production and Operation Manager and under his control includes the Production Personnel, Maintenance and Engineering Department, Quality Control, Production Planning, Supply Chain Group and Plant Human Resources.

Case No.1

AFG Co. basis for Production.

The production department uses the sales forecast as basis for production output and scheduling. The sales forecast is reduced by actual stock-on-hand so as not to produce more than what was forecasted and to prevent surplus products. The product has only three (3) months shelf-life meaning it will expire after 3 months. Thus, the company must not produce more than the forecast. Key Accounts customer are so particular with product shelf-life that you cannot deliver to them more than one month old products. This customer requirements has to be complied by AFG Company because if not the key accounts will reject deliveries and this will result to sales deduction as return.

Performance Appraisal

Part of the performance appraisal of the Production Department is how they were able to produce or meet production quota based on forecast. They must also schedule with maintenance and engineering department regarding preventive maintenance because this requires production stoppage.

Forecasting

The marketing department is the sole party in creating a sales forecast for the company. They usually take into account raw material availability and promotional and marketing activities both has an effect on demand. They also gather a three (3) month average sales as a component in creating a sales forecast.

Warehouse Congestion

On the third (3) week the company experiences warehouse congestion because of too many stocks sitting idly in the warehouse. Sales is not yet picking because it is the lean month as far as the product of AFG is concern. Production personnel were complaining because of non-pull-out of stocks by Finished Goods Warehouse personnel who in return argued that no more enough warehouse space, which by the way during lean month the warehouse is only in half-capacity. Approved deliveries is still few because of the quarantine. Basis for deliveries of Logistics or Inbound is the approved actual order not based on an estimate like a sales forecast.

Production Personnel threatens to stop producing because of congestion in the production floor because of non pullout by Supply Chain specifically logistics group.

This is an operational issue, if you were the Operations Manager how will you solve this impasse between production and Logistics.

Use our template for a guide on case study in making suggestions or solutions to the problem.

Case 2.

Production Personnel and Maintenance department must make sure production are met at the least cost.

Logistics must plan deliveries and likewise process sales order and accredit suppliers

Quality Assurance must make sure that the accredited supplier conforms to a certain standard and the company. They also conduct quality audit to these suppliers

There was a problem in one of the raw materials used in producing AFG products. The supplier for garlic was not able to deliver and the remaining inventory for garlic is only good for one (1) day.

Customers

The Operation manager (OM) called for a meeting, present were the head of the various department and some production supervisors.

During their brain storming someone suggested why not buy all the garlic available in the market, this will certainly solve or lessen the impact of low sales due to non-production. All the members who were present during their brainstorming agreed with the suggestion. If you were the Quality Control will you agree of the plan and why?

Use our template for a case study in suggesting a solution to the problem.

Case Study 3

The personnel assigned to the Finished Goods warehouses is a mixture of regular and 5 month contractual employees. These personnel are the ones who manually locate products inside the warehouse and issue them to a 3^rd party trucker for delivery to customers. The company uses the services of a manning agency provider (not employee of the company) for their transportation and distribution of products. The distribution centers of the company has an average of 3,000 sq. m area. No racking system.

Order-taking

A customer sales representative (CSR) is the ones who process orders given by the salesman. The sales order (SO) is a document given by the salesman to the CSR. It shows actual quantity ordered by the customer. This would be the basis for stock allocation during order processing and this is allocated based on the stocks available in the system, if the customer has no credit issue, this will be approved, said approved SO will be the basis for picking of Finished Goods by warehouse personnel to be issued to the 3^rd party trucker. An order-fill-rate (OFR) report is prepared at the end of every month to determine the total of out-of-stock and customer rejections upon delivery. The report (OFR) will reveal unserved order to the customers.

Unserved Orders

Aside from out-of-stocks, the following are the reasons of unserved orders or customer rejections upon delivery:

1. Ageing stocks delivered.

2. Wrong Item delivered

3. Damage stocks

The last 2 reasons are charged or claimed to the 3^rd party trucker, a deduction to their monthly billing to the company.

Allegedly the main reason of ageing stocks delivered to the customer is non-observance of the First In-First-Out policy by the warehouse personnel. This is further compounded by 5 months turn-over of contractual warehouse personnel.

Use our template for a case study in suggesting a solution to the problem.

Case Study 4.

Majority of their Raw Materials are source abroad. Worker of the company is a mixture of regular and contractual (5 months) employees. In every Manufacturing Plant of the company there is a separate department that handles the sales order processing and Deliveries to customers, this is the Traffic and Order Department. Likewise, a separate department is in charge in sourcing and buying of Raw and Packaging Materials and it is called the Department Plant Logistics.

The Human Resource (HR) of AFG Corporation adapts the Annual Performance Appraisal of each Department and Individual employees concern. Each Department has its own performance parameters agreed upon during their respective Strategic Planning session. Salary increases is dependent how the Total performance parameters were achieved.

Traffic and Order Department

In each Manufacturing Plants a separate warehouse for finished products is maintained. The Department that handles the operation of these warehouses is Traffic and Order Department. The head of these Department is Director for Traffic and Order. The main task of this Department is to provide logistical support to the sales team, maintain the operation of Finished Goods Warehouse only and likewise they are in charge in Sales Order (SO) processing. They are the one who receives stocks transfer from Production and the objective is to have a high order fill rate so that Sales Target will be achieved. They must also maintain the accuracy of Finished Goods Inventory. The Department must also adhere to Good Warehousing Practices (GWP) because they are being audited unannounced. They should always be in close coordination with the Sales Team with regards to distribution protocols and demand forecast adjustment of the customers.

The performance appraisal parameters or criteria for the Traffic and Order Department same with Sales Department are as follows:

Sales Target Achievement based on Forecast - 50%

Inventory Accuracy - 30%

Good Warehousing Practices - Finished Goods - 20%

Plant Logistics Department

Like the Traffic and Order Department, each plant has a Plant Logistics Department. This is headed by a separate Director. The main task of this Department is to buy the necessary raw and packaging materials needed by production, likewise they handle the operation of the Raw and Packaging materials Warehouse. The goal is to buy the necessary materials that conforms to standard and more importantly at a least cost. They have separate truckers from the Traffic and Order Department. To track the total Inventory inside their warehouse and assures availability of Raw and Packaging Materials, they maintain a Min-Max Inventory system. Once the Raw Materials Inventory reached a minimum level it prompted the Department to make an order to the suppliers to reach the Maximum Inventory level. Since majority of their Raw Materials (RM) are imported they have to make sufficient buffer in order to compensate RM inventory while the raw materials are in-transit. The Plant Logistics is more concern on the total cost of the raw materials purchased, thus there are instances that they have to purchase beyond the maximum inventory level in order to avail discount prices abroad. On the other hand if cost of the raw materials gets high they purchase a little of those items while trying to source or look for other suppliers. Thus, they are instances that production stops operating because of non-availability of raw materials.

Plant logistics Department personnel is consistent in garnering a high performance appraisal thus giving them the highest salary increases per year.

The Performance Appraisal Parameters or criteria for Plant Logistics Department are as follows:

Cost Target RM purchase Achievement based on Budget - 50%

Inventory Accuracy - 30%

Good Warehousing Practices - Raw/Packaging Materials - 20%

Operational dilemma

Both Traffic and Order Department and the Sales Department suffers the consequences of Stock-outs due to no production output, also a low Performance Appraisal due to non-achievement of sales forecast. Customers are complaining of stock availability especially if what is involve are those saleable or Fast Moving Consumer Goods (FMCG). These Department argued that if only there is no stock-outs they could have generated more sales for the company. The Plant Logistics on the other hand argued that they were able to purchase those raw materials it so happen that it was not made available on time due to sourcing and delivery lead-time. Furthermore, they argued that the company was able to save money because of good procurement decisions and purchase initiatives. Other department cannot say that we are remiss with our task because we are consistently generating a high performance appraisal or they are meeting or even exceeding their performance appraisal parameters. They also argued that the Plant Logistics is working within their mandates. Added to this problem is that the 2 Directors of Traffic and Order and Plant logistics have problems on coordination and goal parameters.

Management during a meeting ask suggestions how to address these operational dilemmas. If you are part of the Management Team what could you suggests. Use the template above to come with a recommendations.

=======