Operation Management
1) F&N suppliers requirements : 1) Lower cost of ingredients 2) Quality aluminum, glass, plastic bottle 3) Accurate supply and no out of stock F&N end customer requirements : 1) taste 2) flavor 3) thirst 4) nice packaging The organization that I would like to highlight is F&N Beverages (M) Sdn Bhd. This company is one of the biggest manufacturers of beverages and isotonic drinks in Malaysia. The brands under the belt of this company are 100 Plus, Coca Cola, F&N Orange Juice and many others well known established sub brands. Conversion/ Transformation Process from F&N end user to its suppliers via Product Planning and Marketing Team
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New isotonic products that will have the greatest taste and flavor. It also able to quench thirst and come with nice packaging F&N beverage end product:- 1) New isotonic drinks Input from F&N Suppliers:- 1) Good quality at low cost ingredients 2) Good quality of aluminum, glass, plastic bottle 3) Fast delivery and optimal stocks Requirement of F&N Management: 1) New market penetration 2) More profits 3) Satisfied customer needs 4) Satisfied all other stakeholders Using the minimal resources to create new isotonic drinks that will capture the untapped market opportunity (Diagram 1)
Refer to Diagram (1) above, the scenario depicted F&N Beverage (M) Sdn Bhd decided to introduce a new isotonic product into the beverage market segment. In order to introduce and mass produce this new product, F&N need to deploy a huge sum of investment or money in its product planning unit. F&N will then employ temporarily men or workforce to do market survey to understand the current demands and the untapped needs of the isotonic market segment. Method such as focus group can also be conducted to get each participant feedback on their needs and how F&N can satisfy this need.
The result of the feedback may be in the form of special taste, flavor, nice packaging and most important an isotonic beverage that can fulfilled the customer thirst. After engaging the potential end user and understand their needs, F&N marketing team will need to work closely with the product planning department to derive a formula that can satisfied this users needs. Thus, inter-department communication and information sharing is very much important so that all data collected will be the tabulated and converted or transformed into the special isotonic formula.
Then, this formula ingredient information is supply to F&N supplier. F&N supplier which consists of the material or ingredient supplier, aluminum foil, glass bottler and plastic bottler will follow and execute the demand given by F&N. These suppliers will deliver the materials require to F&N manufacturing plant. The machine which has been equipped with the data will start producing the new isotonic drinks in F&N plant. The new product effectiveness is then measure by conducting again different product testing group methodology.
The new product is then confidently mass produce into the beverage markets. This new products satisfied the consumer taste and flavor. It also comes in exciting packaging and most importantly satisfied the customer thirst. However, for the F&N management team, the most important returns of this new product is money in the form of increase profits. Nevertheless, the motive power could be long term returns in the form of new market penetration and increase of market share for F&N in the beverage industry. It could be also F&N management long term objective of satisfying its customers’ needs.
Lastly, F&N management will be able to deliver the best performance for its stakeholders such as shareholders and employees. 2 (a) i) Productivity can be increased by increasing output while maintaining input constant. This could be by using TQM, JIT or ISO concept that reduce cost and maximize output. ii) Productivity can be increased by decreasing input while maintaining output constant. This could be done by reducing labor force and embracing new technology. iii) Productivity also can be increased by increasing output in greater proportion than increase in input.
This is done by increasing factory space or engaging state of the art technology of production process. (b) Refer to option (i), company may wants to increase the production of their products while constantly maintaining the resources such as factory size, workforce or capital expenditure. For example, Panasonic (M) Sdn Bhd can increase the production of LCD TV by practicing and embracing the Just In Time (JIT) or Total Quality Management (TQM) in its production process. The usage of these methods continuously will reduce cost and maximize output for Panasonic LCD TV.
For option (ii), the company may wants to decrease the input of resources such as workforce, capital or factory while constantly maintaining the output or productions. For example, Panasonic (M) Sdn Bhd can reduce the number of workforce from 500 staffs to 100 staffs by building a computerized manufacturing system for the long term goal of achieving increase of productivity. This in long run will reduce the cost associated on employee wages and benefits. A computerized manufacturing system can also minimized defects or poor quality associated with extensive use of manual labors.
For option (iii), the company may decide to increase the production faster and at a greater proportion compare to the increase of input or raw material. For example, Panasonic may decide to operate in a bigger manufacturing plant that has the state of art facility in terms of computerized manufacturing system. This new bigger plant although may require additional input of capital expenditure such as purchasing of new land or cost associated in building the plant ,in the longer term it generates 10 times more LCD TV compare to its old manufacturing plant. 3 a)
Group technology is a manufacturing philosophy in which similar parts are grouped together in a cell. By doing this, it will lead to simplify design, manufacturing, purchasing and other business processes. Consequently it will leads to high quality level and profitable production. There are many advantages of using Group Technology in the manufacturing process. One of the advantage is it will leads to reduce purchasing cost. Purchasing can group similar parts and achieve quantity discounts. For non-standard purchased parts, grouping helps suppliers achieve savings and reduce price.
For example in Proton, the purchasing department will be able to leverage and get quantity discounts by purchasing similar parts from Proton vendors. Thus this reduce of cost can be pass down to Proton customers which will able to get Proton cars at a reasonable price. Also, as the Group Technology environment encourages the use of information and data sharing on the costing, stocks availabilities and delivery lead times, businesses will be able to leverage this information to negotiate with vendors and suppliers for the best cost and parts availabilities.
For example, Dell Computers can source it parts from different vendor across its vendor list using the sourcing data available and this will reduce any shortfall in its production process. The next advantage of Group Tehnology is it will assist in faster lead time for product reaching consumers. In Group Technology environment, the manufacturing process is speed up by reducing in-process inventories by moving parts quickly. However, in a traditional manufacturing facility, parts may spend lot of waiting time in line for machines to become available.
For example, Sony Erickson will be able to mass produce its mobile phone which reach consumer fast by moving parts quickly and reduce in-process inventories in its manufacturing factories. Another advantage of Group Technology is that it assists in accurately estimating cost. As costs are collected by cell and family rather than individual part, a simple allocation procedure assigns costs accurately within families. For example, the costing department in Apple for example can easily estimate the cost of different parts associated in the manufacturing IPAD by assigning cost accurately within the different parts of the products.
Any fluctuation of the cost can be estimated via data collected from it vendors. This will result in more efficient costing process and save cost in the manufacturing of IPAD. Group Technology also allow quicker design changes. For example, changing moulds of pre cast electrical posts is often required to meet varying standard heights and varying standard sizes. By using Computer Aided Manufacturing technologies which often available in GT environment can automatically adjust the molding structures to meet the sizes and heights rapidly. Lastly, Group Technology also improves better communication between supplier and buyer.
It reduces human errors which is always associated in a traditional manufacturing process. For example in the manufacturing of electrical devices such as Canon digital cameras uses parts coding and classifications to differentiate each parts of the electronic and electrical devices. This coding and classifications are highly versatile in manufacturing, design and purchasing of parts from vendors and suppliers and reduces the risk of human errors. 3 b) There are also disadvantages associate with Group Technology. One of the disadvantages is the high start up cost associated with Group Technology.
As group technology uses Computer Aided Manufacturing technology which requires substantial start up cost to build, many small sizes enterprise or new establish businesses may not able to come up with such huge investment. For example in China, although the uses of Group technology in garment manufacturing may reduces cost and speed up manufacturing of new clothing, many small China garment manufacturers still practice using cheap labor to manually design and manufacture new clothing. This is due to the labor investment is relative low compare to adoption of Group Technology.
Also, adoption of Group Technology in traditional manufacturing process sometimes faces resistance from the traditionally run management. They fear that the adoption of these new processes will result in more investment and time needed to spend in understanding and building the new technology from scratch. For example, many small homemade Malaysian food manufacturer still prefer using human labor rather than group technology to produce package food such as fish ball, belacan and etc. 4 a) Bottleneck is defined as a resource ‘where capacity is equal to or less than the demand being placed upon it’.
Potential bottlenecks are those resources which appear on the shortage list but not the excess list. One of the possible bottleneck area in Dell’s super efficient supply chain in the context of Optimized Production Technology (OPT) is breakdown of the Dell assembly plant due to natural disaster such as earthquake and flood. For example, if Dell major assembly plant in Sichuan, China suddenly stops production of Dell’s computers due to earth quake, it will unintentionally disrupt the production and the shipment of Dell’s computers to its sales and distribution hub all over Asia.
This will result in Dell will not able to meet the demands from its customers on time. However, with the availability of Optimized Production Technology, Dell’s will be able to resolve this issue immediately. Optimized Production Technology objective is to schedule production so that the production output is maximized. The key distinctive feature is its ability to identify and isolate bottleneck operations, then to focus on these bottlenecks to determine production plans and schedules for the entire production process.
This will lead to the better utilization of manufacturing resources, resulting in greater productivity and lower costs. In the above scenario for example, Dell’s will be able to identify the sudden drop of production in Sichuan plant immediately. Dell will identify the factory which unable to produce on time and shift it resources to other Dell’s assembly plant in other unaffected countries in Asia. For example, it may increase or triple productions from its plants in Malaysia in order to meet the demand from its customers.
Another way is that the sales and marketing team of Dell create new demand to something else if the first option cannot be duplicated in its other plants. Dell use its OPT system to get sales forecasts and with product routing of bills of materials data, a resource network can be built up incorporating information relating to the resources. This information will then be used to shift the demand for Dell products to other new product that is not affected by the breakdown in China assembly plant. b) There are positive and negative implications if Dells runs the factory with just five to six hour’s level of inventory. One of the positive implications of this situation is that Dells will be able to reduce high overhead costs which are always associated with traditional manufacturing process. With low inventory, Dell’s do not need to pay for the financing of its raw materials and parts. Consequently, Dell’s will be able to save on capital expenditure and interest in overheads.
This savings in returns will be use for other major expenditure such as increasing more factories or invest in new research and developments. For example, with cost savings from the inventories, Dell’s will be able to use this savings to open up more manufacturing plant in China to build more laptop computers. Besides that, with less inventory, Dell’s will be able to move quicker and speedier in terms of coming out with new design and specifications for its products. As Dell’s inventory of current models is low, Dell’s can use its financial capitals to invest in newer raw materials or different parts.
In another words, Dell’s will be able to shift its designing and manufacturing for newer products without worrying of the assisting current inventories on hand. For example, with fewer inventories, Dell’s will be able to produce and come out with newer version of its current laptop models with newer parts and specifications. Also, it will leads to more high quality finished products for Dell. With lower inventories, Dell’s will be able to closely monitor and continuously check its raw materials or parts from defects or poor quality.
For example, if Dell’s keeps low inventories of the monitor screen parts, its quality inspection units will be able to identify quickly any defects in the screen and make necessary changes immediately. However, there are also negative implications if Dell keeps a low inventories lead time. If there is a sudden drop of supply of raw material or parts from its major suppliers, Dell’s will not be able to deliver the finished products on time to its customers. This will result to unsatisfactory quality products.
For example, with lower inventory level lead time, a sudden drop of its computer parts such as the laptop batteries will result to Dell’s unable to meet the demands from its customer on time. Also, another negative implication is troubleshooting. Due to the low inventories lead time, Dell will not able to solve a particular issue on the spot as productions are running at a speeding rate. Some minor issue which is unresolved in the production process may become a big issue when the products reach its customers. This will again create unsatisfied customers.
