Operations Management and Quantitative Techniques

OPERATIONS MANAGEMENT AND QUANTITATIVE TECHNIQUES 12

OperationsManagement and Quantitative Techniques

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The researchresponds to questions about the cases “The Realco Breadmaster”and “Supply-Chain Challenges in Post-Earthquake Japan”. Bothcases delve on issues related to supply chain management. In theRealco case, Mr. Chang’s introduction of a new breadmaker has beena success in the US. The success derives from its suitable featuresas well as better pricing compared to competing breadmakers. However,Mr. Chang demonstrates concern over the lack of formal planning, andquestions the ability of the company to meet current and prospectdemand for breadmakers. The other case study is on supply chainproblems that the Japan auto industry faced following the March 2011earthquake. During the disaster, Japan automakers were using leanproduction, which means that they did not have stored inventory tocontinue supplying car parts after the earthquake and tsunami. Inaddition, the case study focuses on the measures taken by Toyota’smanagement to ensure it recovers from a similar adversity in theshortest time possible. The measures include implementing a new‘foolproof’ plan, and the case study endeavors to assess theeffectiveness of the new plan.

“The RealcoBreadmaster”

Question A

The masterproduction schedule is a supply chain tool that regulates theavailability of a product. It acts, as the plan that determines thematerials needed when making a product and how the product will becreated (Muller, 2011). This is achievable through the master productschedule’s role in calculating the starting inventory as well aspredicted sales for a specific product. The schedule meets theprojected product demand through adjustment of a company’sproduction. Below is the master production schedule for Realco, whichpays consideration to the production levels, product demand and themost suitable business strategy for the company. According to themaster production schedule there is a disparity between the endinginventory and available to promise figures. The estimated endinginventory is negative in week four, six and eight. Nevertheless,predicting the available to promise through the variables estimatedinventory, master production schedule and promised shipments resultsin a stable rise of products available to sell. It is advisable forthe company to progress with the monitoring of orders that havealready been booked.

Futurealternatives should be taken to decrease the prospect demand for thebreadmaker, which will be a move towards matching future demand withthe actual demand. It is also important to reduce production to makesure it matches with the new estimated demand. Instead, the companymay derive an efficient manner of increasing sales by reducing theprice of the breadmaker. Bearing in mind that the available topromise quantity increases all through the weeks, the sales managerhas not made unmanageable promises on the figure of breadmakers meantfor sale. Bust since the company has a constant demand from week oneto three, meeting this demand will require alterations to production.

Starting inventory

7,000

Realco breadmaker

Week

1

2

3

4

5

6

7

8

Estimated demand

20,000

20,000

20,000

20,000

20,000

20,000

20,000

20,000

Promised shipments

23,500

23,000

21,500

15,050

13,600

11,500

5,400

1,800

Forecast ending inventory

23,500

500

19,000

-1,000

19,000

-1,000

19,000

-1,000

Master production schedule

40,000

40,000

40,000

40,000

Available to promise

500

3,450

14,900

32,800

Question B

Jack’sapproach has both advantages and disadvantages. One of the advantagesis that order promising as the approach used at Realco, has beeneffective. Another advantage is that the approach ensures orders aremet in time regardless of any problems emerging during theproduction. The disadvantages are a possible excess inventory plusthe threat of inadequate assets. When there is excess inventory, theoutcome is a rise in the inventory holding expenses of Realco. Therewill be too many products in the company. This will cost the companymore money due to the need for creating more storage space.Inadequate assets mean customers will have to wait longer to receivetheir orders. When customers are compelled to wait longer, they mayopt to make their orders in other companies, which they feel willdeliver their orders in time.

Ensuring thedelivery of customer’s orders in time is very important forbusiness (Evans &amp Olson, 1998). It works towards retaining andattracting more customers. The three-week delivery promise by Realcomakes it possible for the company to have two production cycles. Theoutcome has been that most of the orders have been delivered in time.However, it is not possible to project that the order processingapproach will continue to be effective, given the high possibilityfor customer orders increasing. The company needs to prepare a masterproduction schedule for putting together the orders customers makewith the predicted demand. Master scheduling works to enhance orderprocessing through regulating production to meet demand. It improvesorder processing through adjusting the numbers of production. Anotheradvantage of using master scheduling is that it establishes productlead-time that eases precise booking for prospect deliveries.Organizational changes that are necessary include the productionmanager making changes to the master production schedule.

Question C

Refusing totake the order of a customer or accepting an order and not deliveringare both bad for the company. The issues affect the reputation ofRealco. The company’s reputation is significant to its continuedexistence. A customer’s trust as well as confidence in the companythey choose to buy products from has a reflective effect on thebottom line. When a business has good reputation, customers preferthe company regardless of their being competitors in the industry(Brammer &ampPavelin, 2006).Reputation makes it possible for an organization to set itself apartfrom competitors. Reputation is specifically important in this modernera where social networking and different techniques of immediatecommunication make it possible for word to spread fast (Brammer&amp Pavelin, 2006).If a company cannot deliver, customer may decide to communicate thefailure to deliver through social networking sites. This is bad forthe company because future potential customers may shift their ordersto competitors.

Failing totake a customer’s order due to lack of product supply has anegative impact on Realco’s reputation. Nevertheless, it as wellshows that the company is honest. Honesty is equally as important asreputation because it improves the trust of customer’s. It can alsobe an opportunity for the company to negotiate with the customer onthe most suitable time when they will deliver. The customer has ampletime to seek alternatives and may order with the company in futurewhen they are in a position to deliver.

On thecontrary, accepting an order and failing to deliver has an outrightnegative effect on Realco. The customer does not just feeldisappointed, but looses trust in the company. Any previous trust andloyalty that a customer may have developed towards a company, easilyerodes when the company fails to deliver. The company stands a higherchance of losing more customers by failing to deliver as compared torefusing to take an order. When a customer does not get their order,they fail to rely on the company and choose to order fromcompetitors, resulting in a permanent lose of customers for Realco.By word of mouth or through social networking, the disappointedcustomer informs other customers of Realco’s failure to deliver.This in turn influences potential customers not to place orders atRealco due to fear of not having their products delivered.

Question D

SupposingRealco makes 20,000 breadmakers on a weekly basis, instead of the40,000, the effect on average inventory as well asproduction is that the booked demand becomes lesser when compared tothe anticipated demand.

Starting inventory

7,000

Week

1

2

3

4

5

6

7

8

Predicted demand

20,000

20,000

20,000

20,000

20,000

20,000

20,000

20,000

Placed orders

23,500

23,000

21,500

15,050

13,600

11,500

5,400

1,800

Forecast ending inventory

3,500

500

-1,000

-1,000

-1,000

-1,000

-1,000

-1,000

Master production schedule

20,000

20,000

20,000

20,000

20,000

20,000

20,000

20,000

Available to promise

3,500

500

-1,000

3,950

5,400

7,500

13,600

17,200

The tableshowing a change in production from 40,000 to 20,000 depicts that theforecasted ending inventory from week three is negative. This isbecause the approximated demand from week four progresses to be morewhen compared to the orders placed. Despite the negative endinginventory, there is an increase in the available to promise orderfrom the fourth week. The rise owes to the high projected demand thanthat of placed orders. The production of 20,000 per week means thatat some point the company will not be capable of delivering accordingto the demands of customers. Hence, it is important to work with ahigher production level, which also increases the prospect-projecteddemand for the breadmaker. It is expected that the requirement forthe breadmaker progress to increase, employing a higher productionlevel guarantees that there are enough assets to meet the demand ofcustomers.

“Supply-ChainChallenges in Post-Earthquake Japan”

Question E

According tothe case study, Japanese automakers are recognized for manufacturingquality products. In addition, they have effectively streamlinedmanufacturing as well as supply procedures (Bozarth&amp Handfield, 2013).The Japanese auto industry utilized these supply chain advantagesprior to the earthquake and tsunami. Provided an organization is in aposition to continue delivering quality products, then customersbecome loyal to the company. Quality products enhance customerloyalty because customers are able to depend on the company todeliver and meet their demands. Streamlining the procedure ofaltering or enhancing a product in manufacturing has a positiveimpact on efficiency. The manufacturer gets raw materials from theirsuppliers a few hours prior to production, while the final product issent to the customer immediately after completing the order.Streamlining makes management holistic, reduces waste, capitalizes oncost efficiency and secures a competitive gain for the company.

Onedisadvantage is the lack of a contingency plan for safeguarding thesupply chain from catastrophes like the tsunami or earthquake. Thecase study makes it apparent that Japan automakers solely depended onlean production, which was risky for business. Bearing in mind that“the supply chain in the automotive industry is so fragile” inaddition to the fact that “it is based on just in-time principles”then in the event of a disaster, the automakers had no inventories instore (Bozarth &ampHandfield, 2013).A contingency plan is very important for any business because itmakes it easy to recover fast following a disaster. However, acompany without such a plan losses a lot of resources in coming upwith a plan to deal with the catastrophe, while at the same timehaving to create an immediate back up plan. Another disadvantage isthe Japan auto industry did not have forecast solutions. Due to thelack of forecast solutions, it was impossible to have car partssurplus inventory during the initial phases of the manufacturingplanning procedure.

Question F

Leanproduction is a philosophy that endeavors to supply in precision whata customer orders. It is a philosophy, whose basis is that companiesneed to hold minimal or no inventory apart from that needed duringimmediate production (Bhasin&amp Burcher, 2006).This means that the manufacturer does not hold on to stock of raw orfinal products, which they are not using. The objective of themanufacturing process is to reduce waste as much as possible. Toavoid waste during production, the manufacturer engages inprogressive enhancements to the production procedures. The main ideain lean production is that through elimination of waste all throughthe entire value streams, it becomes possible to generate proceduresthat require minimal capital, human resources, space for productionand minimizes time spent in making goods (Bhasin&amp Burcher, 2006).The philosophy, when utilized efficiently minimizes productionexpenses, reduces the figure of defect goods and ensures fastdelivery of orders to clients.

Hence, the‘foolproof’ plan by Toyota is not consistent to that of leanproduction philosophy. The ‘foolproof’ plan comprises of threeparts. The first involves Toyota endeavoring to enhancestandardization of its auto parts to ensure all carmakers in Japanshare supply. The parts are not made in a central place, ratherdifferent locations to guarantee constant supply. Second, is workingtowards having a larger inventory while opening new alternatives forsupply of parts to reduce reliance on one source. Last, is the planof making every of the international regions self-dependent inregards to supply of car parts (Bozarth&amp Handfield, 2013).With such a plan, any unexpected supply chain issues in a singleregion will not affect the supply chain of Toyota in different parts.The main disparity between the ‘foolproof’ plan and leanmanufacturing is that in the latter there is no surplus inventory. Onthe contrary, Toyota is working towards a plan that ensures they havesurplus inventory to avoid halting their supply in all regions in theevent of a disaster.

Question G

Both leanproduction and the new ‘foolproof’ plan that Toyota intends toimplement have their pros and cons. However, as a global companyToyota needs a supply chain strategy that continues to be effectiveeven when a disaster happens. As a recommendation, the best supplychain strategy begins by creating a “supply risk mission controlcenter”. The center should comprise of a system that has thecapability of assessing an array of actual-time risk aspects onmulti-tier phases. This is achievable by using SAP Supplier InfoNet,which is a cloud-based diagnostic tool that gives supply chainsinsights through the sharing of pooled supplier data, while at thesame time assisting in the identification of upstream perils.

Currently,Toyota’s partners invest only in holding inventory. It isrecommendable for Toyota to motivate its home partners to createoffshore operations that will result in redundancy, while at the sametime enhance competition in regional and upcoming markets.Considering that Japanese suppliers are resourceful, it is possiblefor them to compete efficiently in regional markets. Toyota dependssolely on long-term partners, despite having the capability toutilize a split business approach. Depending on its long-termpartners for supplies enhances the risks for Toyota in case of adisaster. This is because they lack alternatives or a back-up planfor alternative suppliers. By employing a split business approach,Toyota will be in a better position to manage its suppliers, reducerisks, and enhance competitiveness and innovation.

The new‘foolproof’ plan depicts that Toyota has minimally made effortstowards reducing financial risks in its supply chain. There are manyalternatives to managing supply chain risk. For instance, Toyotashould consider taking up new insurance offerings, which make itpossible to shift risk when a disaster happens.

Question H

Relationshipmanagement has an impact on all supply chain aspects. In the case ofToyota, the new plan will enhance dependence on all aspects of thesupply chain. The main objective of the ‘foolproof’ plan is tominimize losses when one of the manufacturing parts is affected by adisaster. This involves ensuring that global demand for car parts ismet in all regions, and disaster does not delay or halt supply.Hence, Toyota’s relationship management will be one where thesuppliers and manufacturers work closely, are in constantcommunication and depend on each other. Suppliers and manufacturersmust work closely because they need to coordinate for the ‘foolproof’plan to be effective. Communication between suppliers andmanufactures is necessary in determining inventory that is requiredin the different parts. It also ensures that suppliers have stand byinventory, which they can supply in the event of a disaster to saveToyota from having to deal with lack of inventory. It is alsoimportant all sectors of the supply chain depend on each other, whichminimizes risk through fast decision-making.

Conclusion

The casestudies demonstrate that businesses face numerous supply chainchallenges. As a result, supply chain managers ought to be equippedon how to regulate supply chain services. This includes having greatand fast decision-making strategies that minimize risk for thebusiness. Most important are skills in controlling inventory andmaintaining good relations with suppliers. Any business must haveenough inventories to ensure it meets customer orders. This isachieved either through creating a master production schedule as inthe first case study, or through employing a production philosophy,which guarantees there is surplus inventory. In addition, businessesshould use supply chain approaches, which reduce losses for thecompany. For instance, Toyota should reconsider its lean productionapproach and use an approach that allows surplus inventory. Insummary, both case studies demonstrate that today’s businesses musthave effective supply chain management.

References

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Bhasin, S., &amp Burcher, P.(2006). Lean viewed as a philosophy.&nbspJournalof manufacturing technology management,&nbsp17(1),56-72.

Bozarth, C. C., &amp Handfield, R.B. (2013).&nbspIntroductionto operations and supply chain management.Boston: Pearson.

Brammer, S. J., &amp Pavelin, S.(2006). Corporate reputation and social performance: The importanceof fit.&nbspJournalof Management Studies,&nbsp43(3),435-455.

Evans, J. R. J. R., &amp Olson, D. L.(1998).&nbspIntroduction tosimulation and risk analysis. Upper Saddle River, N.J: Prentice-Hall.

Müller,M. (2011).&nbspEssentialsof inventory management.New York: AMACOM.

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