case study final presentation

5/26/2018 Case Study Final Presentation

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Executive Summary

Major problems faced by the manager

Considering the need for the increase in production scale with thecurrent situation, the process has improper production scheduling,insufficient workforce and improper coordination among the teams.

Summary of recommended plan and its justification

Recommended plan is to optimize capacity requirement withcoordination of sales and production and then translating it in the formof optimal order quantity.

To control and manage the inventory the first step should be planning

the production accordingly. This is the basic criteria for all the inventoryrelated problem.

To organize the production capacity, planning should be done by theplant manager (considering the plant equipment and workforce).

Capacity planning should be exercised with proper coordination withproduction and sales department. Based on the capacity available,optimal order quantity should be determined. (EOQ)


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Statement of the problem

Statement of the problems

The important issue is the uncertainty in inventory which is

currently difficult to manage.

Supplier relationship management is not given required

priority.

Symptoms of the problems

Even though the inventory problem seems to be the major

issue, the actual problem in this given situation is mainly

due to improper production scheduling and capacity

requirements analysis.


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(Contd..) Root cause of the problems in AWP

Bulk ordering of raw material based on discount and rebate.

Poor coordination between departments in the organizationalstructure.

Comparing the size of the workforce, 120 employees areemployed in production out of the total 130 employees. Lessworkforce is available for managing, analyzing, andsupervising.

Short term and long term problems faced by the company Short term problem: Existing demand and supply uncertainties.

Long term: Currently there are no issues with inventory, butproblems may arise in future as the business grows due to lackof inventory management with the growing competitions infuture markets.

Also increase in production scale will result in an unfairsituation.


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(Contd..)

Conclusion for the problem faced by the manager

Austin woods have planned to increase production by 20%,this increase in the production scale by 20% under currentworking conditions would be challenging task to thedecision makers.

Unrealistic inventory conditions would be a challenging task

without knowing the capacity of the equipment andworkforce

Managers should come with a plan to reorganize thebusiness in increasing the production. In this case variouscost like inventory, purchasing, production costs must betaken into account while making decisions.


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Causes of the problem

Analysis of the problems faced by AWP

The major hurdle in maintaining the inventory is the uneven production schedule and workethics. If the production is increased by 20 % in future, it will create further confusions andmight end up in wear and tear of employee and equipment. Proper setup and maintenance isto be carried out periodically for machineries or it may end up in serious consequences likework interruption during high demand.

And also may require to change the equipment with updated technology that require furthertraining to operate. Once the reputation from the customer is lost it is difficult for the companyto gain it again since it is a durable product. Unmanaged inventory has the disadvantage ofmaterials in inventory been unnoticed which results in loss due to reduced or no salvagevalue.

The purchasing strategy followed would increase the total cost by increasing the holding costof the inventory. Another serious concern about the problem is the lack of workforce forproper maintenance of inventory, purchasing analyst and production supervisors. There is noproper coordination between the purchasing agent and the plant manager. Purchasing agentshould report to the production vice president. AWP concentrates on fulfilling the order andquality lagging in other critical areas like cost, coordination, and process, these criteria wouldbe difficult achieve in time if they face any competition or any kind of loss.

Theories and models from text helpful in solving the problem

Total annual costEOQ, Capacityproduction planning, Supplier relationshipSRM,Materials managementquantity discounts are some of the respective models suitable forthe problems faces by Austin Woods Company.


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Causes of the problem

(Contd..)

The implications of not solving the long term problems

If production is increased by 20%, the current process will

result in over utilization of equipment which leads to wearand tear.

Inefficient inventory system may result in stocks being

unnoticed or overlooked when required for production. This

may result in holding costs and also opportunity cost.

As competition increases, urge to deliver a high quality

product at low cost is created.


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Decision Criteria and

Alternative Solutions

Basic challenges in the evaluation of the solutions

Organizational structure to be changed such that proper hierarchy is maintained.Management should be supportive of these changes in organizational structure.

Recruitment of new employees for inventory management with an ability of takingadditional responsibility.

Employees need to be trained in a new process which is both time consuming andrequires additional cost.

Existing inventory has to be managed and utilized properly, holding the optimalquantity along with the older one can nullify the good outcome of the new process

Increased responsibility for the production department when purchasing department

reports to the production department, that requires a detailed idea about raw materialinventory.

There will be problems in choosing the type of sourcing, as different suppliers arerequired for different materials, supply base should be chosen carefully based onoverall business strategy and needs.


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Alternative Solutions (Contd..)

Alternative solutions associated with the problems

Strategic supplier is required to satisfy the needs of the customer.

Implementing an Inventory control customized software would be one

of the alternative solution. The cost of implementation andmaintenance is less. Improves efficiency and easy to track and userfriendly. But getting adapted to the new software is difficult for theemployees, and high cost is involved in training the employees.

Cross sourcing among suppliers is one of the methods for continuousand strong supply base.

Organizational structure to be changed such that proper hierarchy is

maintained. In the current situation purchasing manager is reporting tothe finance division, which is not advisable.

Purchasing and production department should have propercoordination. Communication between the departments has to bemore transparent.

Change of work style and timings and also recruiting more employees.Employees can be encouraged by giving benefits and other

allowances.


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Pros and cons of alternate solutions listed

Reduction of suppliers when going to cross sourcing leads

to a bad image on supplier relationship.

Changing organizational structure is not an easy task which

also affects the employees mind set and threat of getting

fired.

Change of timing and style is difficult to adapt from both

management and employees perspective.


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Additional pros/cons

An alternative solution is to get an ERP tool to track their entireenterprise system such as RFID and Kanban production

control system (card). But cost for implementing the softwareand training the employees on the new software would be largeand it takes time for the employees to adapt to the newsoftware.

Improve relationship with current suppliers and cost can bereduced in the form of discounts by maintaining goodrelationships. Proper contacts can be maintained such that

communication can be made more clear and efficient. As aresult, waste of time on non value added areas can bereduced.

Implementation of the JIT system. The system increases profitby reducing inventory levels and product quality can beincreased along with increased customer satisfaction. But thesystem costs more to implement. Also takes time to implementand employees find difficult to manage in the new system. Thiscould lead to reduced coo eration from su liers.

R d d l ti


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Recommended olution,

Implementation and

Justification Recommended solution and its details

Raw material acquisition must be first translated into capacity

required and then the requirement should be provided to thesupplier such that holding cost can also be controlled byobtaining an optimal quantity.

WhoProduction team, plant manager, supplier.

WhatManufacturer should analyze in detail on capacityrequirement before presenting to the supplier.

WhenBased on EOQ, reorder point can be estimated andproper levels of supply can be acquired.

HowBased on Capacity requirements, optimal order quantityhas to be determined after consultation with production andsales department.

R d d l ti


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Implementation and

Justification (Contd..)

Solution and implementation based on problems and

causes identified

Determination of optimal size will lead to the purchase of

only the required quantities of supplies rather than bulk

purchase which increases holding cost. As the lot size is

reduced, holding costs will gradually get reduced.

Obtaining the capacity requirement would be easier for the

purchasing department to make the order more clear and

specific which increases the strength of the supplier

relationship. Supplier, inventory and production will all be

inline to make the process more efficient.

R d d l ti


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Implementation and


Recommended plan along with the contingency plans

As known fact, it is always quite difficult to immediately

change the process and work style of employees and

management. During the transition period to the upgraded

process, recruitment of inventory control analyst would be

helpful to supervise the overall process and suggest

effective and easy ways to implement. The analyst shouldbe APICS, CPIM certified.

R d d l ti


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Recommended olution,Implementation and


The choice of recommended plan of action based on models

and theories To manage inventory, production has to be smooth and

determined precisely. Raw materials for production should beidentified through capacity requirement. Based on capacityplanning made for production and demand from sales person,optimal lot sizes should be determined and this requirementshould be given to the purchasing department.

The present production process is not systematic. To maintainan effective system, proper production planning has to be doneand to make this work capacity requirement has to be madebased on lot sizes. In this way, the suggested solution would beefficient.


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External Sourcing

External sources and materials

www.Apics.org

http://www.austin-hardwoods.com/#overview

http://www.yelp.ca/biz/austin-hardwoods-and-hardware-

santa-ana

www.brazosfp.com


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case study final presentation

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