TOPS is a company that manufactures machine parts from sheet metal to specific order for industrial customers. Currently, each of the machine parts is specific to a customers requirement. Consequently, the company does not hold an inventory of finished items but it does hold the equivalent of two days production of sheet metal so as to minimise the risk of being unable to produce goods demanded by customers at short notice.

There is a one day lead time for delivery of sheet metal to TOPS from its main supplier though additional supplies could be obtained at less competitive prices. Demand for these industrial goods is such that delivery is required almost immediately after the receipt of the customer order. TOPS is aware that if it is unable to meet an order immediately the industrial customer would seek an alternative supplier, although it having a reputation for high quality machine parts.

TOPS is also considering to diversify into the production of metal ornaments. The ornaments would be produced at a constant rate throughout the year to smoothen the inventory level. It then plans to sell these ornaments to wholesalers as well as directly to consumers through its online business. The CEO of TOPS, Mr Michael is not aware of the implications of the product diversification strategy on the companys production and inventory policy and practices.

1. Compare and contrast TOPSs present production and inventory policy and practices with a traditional production system that uses constant production levels and holds inventory to meet demand.

(10 marks)

2. Discuss the importance of a Total Quality Management (TQM) system in a just-in-time (JIT) production system compared to a traditional production system. Use TOPS to illustrate your discussion. (5 marks)