5116 GA2 2E Submission PDF

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5116 GA2 2E Submission...

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GROUP ASSIGNMENT: PART 2

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Group Assignment: Part 2

Algarra, R. Y., Awadallah, T., Mclaughlin, M., Oyakhilome, D. University of the People BUS 5116 Group 2E: Operations Management Dr. Robert Shepherd April 28, 2021

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Group Assignment: Part 2 In part 2 of this group assignment, we will analyze and discuss other functions within operations management. These are planning and control, inventory management, capacity management, and capital and technology investment. The most effective approaches and strategies will be chosen for our chosen product, Industrial Organics. Planning and Control In manufacturing facilities that deal with chemicals, such as chemical detergents, the most important aspects are the health and safety of the staff, the workers, equipment, and facilities of the factory. Also, the environmental impact of the manufacturing process must be taken into consideration, while dealing with wastewater and chemicals coming out from the manufacturing processes. All these concerns and points must be included while considering the planning and control activities of the production process for chemical cleaners and detergents. In production planning for chemical detergents, several aspects need to be considered, such as facility location and layout, materials planning and inventory control, and scheduling tools. 

Facility location and layout: Facility location is the most strategic and critical. Once a new manufacturing facility is built, a substantial investment of time, resources, and capital is made, and can’t be changed for a long time (Lumen Learning, 2018). Some of the key factors that influence facility location are the following: o Proximity to customers, suppliers, and skilled labor o Environmental regulations

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o Financial incentives offered by state and local development authorities o Quality-of-life considerations o Potential for future expansion As discussed in the first part of this group project, the process or facility layout will follow the Flow-line scheme, where the machines and equipment are arranged in a line or sequence, as this is the most common and most efficient layout for the detergents industry. 

Materials planning and inventory control: Current advancements and technologies made this step easy and computerized, where many companies and industries are using computerized systems to control the flow of resources and inventory. Such systems are called Material Requirement Planning (MRP), or Enterprise Resource Planning (ERP). Those systems usually use a master schedule to ensure that the materials, labor, and equipment needed for production are at the right places in the right amounts at the right times. The schedule is based on forecasts of demand for the company’s products. Orders are placed so items will be on hand when they are needed for production while maintaining the lowest possible amount of materials and products to remain in the house.

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Scheduling tools: Most industries are using the most common scheduling tools, which are the Gantt charts, PERT, and the Critical Path Method (CPM). The objective of using such tools is to increase operational efficiency in managing multiple processes while ensuring that every job and task is completed within the expected time frame and budget limits.

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Inventory Management What elections in terms of inventory management (centralization level, classification, models, and implementation) do you consider most appropriate for the product or service? For our industrial-grade organic cleaner, we will first need to define how many types of products we should carry. During the initial launch of the product, it might be better to have one classified product to save on expenses. After receiving feedback from our customers and retailers, we will have a better understanding if there is an option to add some different types of products to better meet our customer needs and/or meet other needs. We can also consider if we will operate of a resource to order, made to order, or made to stock approach (James, 2011). With that said, it would be more suitable in the beginning for us to focus on resources to order or made to order so we have only the supply we need for our inventory. Then as we grow our inventory can grow with the process. Spending too much on inventory can prevent the business from meeting its monthly expenses and drive us into a bad financial situation. So, in the beginning, we should prioritize, track, audit, and analyze. We could also practice a general rule such as the 80/20 rule in which 80% of your profits come from 20% of your stock (Caramela, 2020). As we move through the sales cycle, we can then track sales, coordinate our inventory ordering strategy, and possibly move to a made-to-stock approach. Therefore, from the inventory side of our organic cleaner, we also need to decide what inventory will be and what management system we can use to track and analyze our product goals. Carmella (2020) states, before you can tackle effective inventory management, you'll need to understand exactly what inventory comprises. These are some of the different types of inventory to consider:

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Raw materials or materials you use to manufacture your products;

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Unfinished products are work in progress that is not ready to be sold;

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Finished products, which are typically stored in a warehouse until sold or shipped;

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In-transit goods, which are no longer in the warehouse and are being transported to their final destination;

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Cycle inventory, or products that are shipped to a business from a supplier or manufacturer, then immediately sold to customers;

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Anticipation inventory, or excess products in anticipation of a surge in sales;

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Decoupling inventory, which are parts, supplies, or products set aside in anticipation of a slowdown or halt in production;

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MRO goods, which stands for "maintenance, repair and operating supplies" and supports the production process;

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Buffer inventory or "safety stock," serves as a cushion in case of an unexpected issue or need for more inventory. It also helps to sort your inventory so you know which items fall into the same category,

and then you can manage accordingly. For example, you'll handle your finished products differently from your raw materials (Caramela, 2020). All of these types of inventory can play a factor during the production and storing of your product. The issue becomes, the more money we have tied up in inventory, the less we might have to be able to cover the essential daily expenses such as rent and payroll (Gartenstein, 2019).

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A larger inventory of certain inventory might allow us to be able to get better prices on inventory by buying in volume. However, our products may be more efficient when we produce more inventory and achieve economies of scale. Cash-flow shortfalls can easily wipe out these advantages (Gartenstein, 2019). In the end, we have a lot of things to consider before we move our product into go live. There are also a lot of variables that could play a factor at the beginning which could force the organization to pivot. We can only make confident decisions once we have all our data and metrics from our sales to further determine what direction will be the best to go.

Capacity Management Capacity Management is the planning of production volume based on the demands of the company and the market (James, 2011). There are several steps involved in the development of Capacity Management: 1) Company’s Future Plans or Objectives (Business Concepts Team, 2020) – there is a huge opportunity for growth and an increase in revenue in the market for plant-based cleaners and disinfectants based on studies (IBISWorld, 2020). a. Industrial Organics aims to grow its market share by increasing production and distribution. b. Industrial Organics aims to increase its market segment by tapping new industrial and household clients both domestically and globally.

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c. Industrial Organics aims to expand its reach by distributing to retail channels for household consumers. 2) Research Market Opportunities and Customer Demands (Business Concepts Team, 2020; James, 2011) – the company will need to do research and conduct surveys that can address the following questions: a. Which regions have the highest number of industrial demands for disinfectants? i. What is their average consumption? ii. Which disinfecting product/s do they require? In what quantities and sizes? b. Which retailer has the highest number of branches and distribution network? i. What are their average sales for disinfectants? ii. Which types of disinfectant are sold primarily? In what quantities and sizes? iii. What are the price points? c. What online channels can be tapped for distribution? i. What are the average sales for disinfectants in these online channels? ii. Which types of disinfectant are sold primarily online? In what quantities and sizes? iii. What are the price points?

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The answers to these questions will give the company an idea of the market and segment demand for disinfectants, their types, and sizes, as well as competition. However, it is also important to note trends and seasons (James, 2011). Although at the moment there is a general trend of increasing demand until 2027 (IBISWorld, 2020), the company should update the research regularly to avoid over-stocking or producing more than needed (James, 2011). It is also important to analyze the seasonal availability of raw materials and have alternative sources in case of shortage from regular producers. 3) Analyze Existing Capacity (Business Concepts Team, 2020; James, 2011) - Capacity is reliant on many variable factors and each must be addressed: a. Storage Space – how many products can it accommodate? b. Employee Skills – are staff working at their maximum ability? c. Equipment Numbers – does the company have enough equipment or is it capable of meeting the demands? d. Transportation and Delivery – does the company have enough transportation available? Does the company have courier services it can hire in case of not having enough transport? What does this mean cost-wise? e. Location and Time – is the company near its clients and how much time will it take to deliver the products? Under this variable, it is also important to note production schedules. A Job Schedule is for particular projects or requirements, and a Production

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Schedule is a combination of several requirements that makes up a production management plan (Business Concepts Team, 2020). (James, 2011). Capacity must also be scheduled and measured properly because a sudden decrease in demand means over-production, products will occupy storage space, and will also mean a waste of manpower and equipment resources (James, 2011). Thus, the following capacity must also be considered: a. Potential Capacity – this is the available capacity of the company at the moment and is used for long-term planning; b. Immediate Capacity – this is the capacity at its maximum availability that can be used for short-term or daily production and deliveries; c. Effective Capacity – this is the actual total usable capacity; (Business Concepts Team, 2020).

4) Compare Capacity with Demand – there are three methods or strategies for measuring capacity and demand, they are: a. Level Capacity – setting a fixed production rate based on an average of demand and effective capacity; thus, any variation in demand such as a sudden increase can be covered by inventory; b. Chase Demand – is based on the demands at any given time, where production output can either increase or decrease; however, this is expensive to maintain when it comes to equipment time and manpower hours;

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c. Demand Management – this will rely on marketing efforts where the company will try to affect the demand of the product to meet its capacity; (James, 2011). 5) Study Alternatives and Implement Capacity Planning (Business Concepts Team, 2020; James, 2011) – there are several approaches to capacity management: a. Cumulative Representations – this indicates a cumulative or running total of inventory that should be able to meet demands and avoid out-of-stock; b. Queueing Theory and Simulation – is implemented when time is a variable of delivery and there is a delay in meeting demands with existing capacity; while a simulation is a more accurate estimation depending on the type of product; c. Psychology of Queuing – this is a theory that informing customers of waiting time for the service or product delivery creates the impression that the service or product is valuable or in demand; (James, 2011). 6) Regular Monitoring, Review, and Adjustments of Capacity (Business Concepts Team, 2020) – market demand can be dynamic and will fluctuate from time-to-time, thus it is important to constantly monitor, review and adjust as required the Capacity Management Plan. Based on the above types of strategies and approaches, the most effective for the company at present is Level Capacity and Chase Demand combined with Cumulative

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Representation. By creating a level capacity, the company knows how much it can supply at any point and will only require an increase in production, should there be an immediate demand that is more than the available capacity. The Cumulative Representation will allow for a buffer for those unscheduled product requirements.

Capital and Technology Investments Capital which is known to be the funds a company requires to pay its day-to-day operations and finance its expansion growth in all facets (Hargrave, 2021), is an important growth tool for Industrial Organics to increase production of our industrial-grade cleaners during the present pandemic as the company’s objective is to boost production by tripling its plant based organic cleaning products (cleaners, detergents and disinfectants) with the current advantage of the consistent increase in product demand which is now projected to remain in the rise for the foreseeable future as the company is moving towards investing its capital in the right technology for more efficient production infrastructure. The future capital investments are targeted towards increasing production, expansion of current assets, development of new product line, leading edge technology to boost efficiency and other effective innovations. With the current growth rate experienced, it is important for Industrial Organics to invest in technology in the production infrastructure for our various products as this opens up other future opportunities on being adequately equipped for accelerated production, reduced cost/waste, increased efficiency, and places the company in a good competitive advantage.

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According to bdc (n.d.), technology can promote and increase the productivity rate of a business as investing in new technology inevitably cuts cost and improves profitability but the right technology and processes have to be put in place to make this happen. Certain steps have been put in place to ensure the right technology investments in production infrastructure for business growth and development, which as per bdc (n.d.) are; 

The business needs examination and functional requirements analysis are to be met to ensure that the tech caters for both the present/future needs while ensuring each critical need are properly documented.

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Research the technology and shortlist the right vendor

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Ensure the technology is user friendly and proper training in usage and maintenance is conducted with employees at intervals

Technology investment happens to be a key area the future capital will be channeled to as we are certain to gain profitability in the advantages it brings to the business with the tools to promote development, ease of accomplishing task, use and exchange information. (DIGITALEDENZINDIA, 2019).

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References

Bdc. (n.d.). Invest in Technology. https://www.bdc.ca/en/articles-tools/technology/investtechnology

Bdc. (n.d.). 8 steps for a successful technology investment. https://www.bdc.ca/en/articlestools/technology/invest-technology/technology-investments-10-steps-success

Business Concepts Team. (2020, December 29). Capacity Management. MBA SkoolStudy.Learn.Share. https://www.mbaskool.com/business-concepts/operations-logisticssupply-chain-terms/6883-capacity-management.html

Caramela, S. (2020, April 15). 10 Essential Tips for Effective Inventory Management. Business News Daily. https://www.businessnewsdaily.com/10613-effective-inventorymanagement.html

DIGITALEDENZINDIA. (2019, October 18). Why Technology Is Important In Our Daily Life? Technology. https://digitaledenz.com/why-technology-is-important-in-our-daily-life/

Gartenstein, D. (2019, January 28). The Disadvantages of Holding Too Much Inventory on Hand. Small Business - Chron.Com. https://smallbusiness.chron.com/disadvantages-holdingmuch-inventory-hand-22710.html

Hargrave, M. (2021, March 9). Capital. Investopedia. https://www.investopedia.com/terms/c/capital.asp

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IBISWorld. (2020, March 19). IBISWorld - Industry Market Research, Reports, and Statistics. https://www.ibisworld.com/united-states/market-research-reports/disinfectantmanufacturing-industry/

James, T. (2011). Operations Strategy (1st ed., Vol. 1) [E-book]. Ted James and bookboon.com. https://my.uopeople.edu/pluginfile.php/771261/mod_page/content/27/BUS5116Textbook OperationsStrategy.pdf

Lumen Learning. (2018, November). Production Planning | Introduction to Business. https://courses.lumenlearning.com/wmopen-introductiontobusiness/chapter/productionplanning/...