Production and Supply Management

Production and Supply Management
Any process of production ought to produce goods and services that can
meet customer demands within the required timeline. This leads to
customer satisfaction as customers can be able to plan their activities
based on the projected time. Thus, delivery of goods and services within
a stipulated timeline increases customer loyalty. This calls for
efficiency in production as well as an efficient supply chain that can
meet demands with little pressure on production. Thus, the production
company ought to have a well organized production management system and
a responsive supply chain.
Chapter 12 Case Study: The Realco Breadmaster
Inventory acts a suitable way of ensuring customer satisfaction at all
times despite unforeseen hitches. However, inventory and production
ought to reflect efficiency as high inventory numbers result in
increased costs. Based on this fact, the production levels of Realco
Breadmaster ought to be adjusted to reflect the demand and supply
trends. The following chart reflects what the new production schedule
ought to look like. The current production system does not reflect an
organized plan. This ought to be correct to reflect a proper
relationship between demand and supply, informed by a master schedule
plan.
Week Promised Shipments Weekly Production New Production
1 23, 500 40, 000 33,000
2 23, 000 40, 000 30, 000
3 21, 500 40, 000 28, 500
4 15, 050 40, 000 22, 050
5 13, 600 40, 000 20, 600
6 11, 500 40, 000 18, 500
7 5, 400 40, 000 12, 400
8 1, 800 40, 000 8, 800
The new production numbers reflect a resonating between the demand and
the actual production. The final numbers indicate the actual number of
units produced with an additional number of 7, 000 held in inventory.
According to the marketing manager, the numbers in inventory are boosted
by the actual production. However, the production numbers coupled with
the numbers in inventory indicate very high production despite reducing
demand. Therefore, the new numbers are the actual demand plus 7, 000
units as held in inventory. This means that in case of increased demand,
the company has a cushion of 7, 000 units to cover the difference.
Considering that the time promised is one week higher than the actual
production time, there is sufficient time to increase the numbers in
case the difference cannot be covered by the 7, 000 units inventory.
Realco has not overpromised as the company has the ability to produce
twenty thousand more units in two weeks than the actual demand based on
statistical evidence. Thus, the company can meet higher demand at any
time without letting down its customers. The company, however, ought to
update their production number to reflect actual demand and supply
numbers. This will reduce production cost while still meeting customer
demands within the stipulated time frame. This will reflect a well
organized production system that is informed by market forces and
trends, as opposed to the current system that is not informed by any
study (Brand, 2006). Effective production ought to always reflect market
trends this reduces the production costs for the management while also
ensuring that customer demands are not neglected.
Jack’s promising time is three weeks while the actual production is
two weeks. However, based on the current production levels versus the
actual demand, the time ought to be reduced to two weeks. Even with the
new production numbers, the time can still be reduced to two weeks. The
advantage of the current trend is that the company has the advantage of
meeting unforeseen increased demand without any pressure on production.
Additionally, the company is always assured of meeting demands
comfortably (Herrmann, 2006). The disadvantage is that the company
incurs higher production costs than necessary because the difference
between production, demand, and inventory is too high. This includes
storage costs.
Master production schedule can increase efficiency as it has the
ability to determine production based on demand and anticipated
differences in demand. The master production scheduling plan studies the
essential aspects of the production line such as human resource,
capacity to produce, and inventory and uses the outcome to determine the
most suitable production schedule. This facilitates an informed process
that increases efficiency and affects profitability. The organization
might need to reduce human capital as the new numbers will drastically
reduce the production and thus, some workers may become redundant
(Sharma, 2010). Realco may also need to change the supply chain and
deliver goods in less than three weeks if possible. Additionally, the
organization may also need to change its business plan to reflect the
new production schedule.
Customer loyalty and good business relations are based on reliability
and efficiency. Thus, taking customer orders and failing to deliver
would reduce customer’s trust in the business. This means that
customers will avoid doing business with the company due to lack of
trust on the ability to deliver. The implication for the master
scheduling plan ought to make provisions for higher production than
actual demand so as to meet sudden increase in demand (Blanchard, 2010).
It will also mean that the company must always adjust its production so
as to meet customer demands within the stipulated timeline. Thus, the
master scheduling plan will require that the inventory plan remains the
same so as to meet any unforeseen challenges in the new production
schedules.
If Realco reduces the average production levels to 20, 000, the average
inventory levels will be lesser than required. This may result in a
strain on production in case of higher demand than the average. This is
because the production level may be less than the demand especially in
the first two weeks. The master schedule plan may, however, choose to
retain the promissory time for delivery at three weeks. This will give
production enough time to meet higher demand without having to rely
heavily on inventory. This is because inventory ought to only be used in
emergency situations and not in situations that can be rectified through
simple adjustments in production.
Production must always ensure that the difference between actual demand
and inventory can handle any emergency demands. This enables the company
to retain credibility as it can always meet customer demands with little
strain on production. However, the master schedule plan must always
ensure that the production is slightly higher than demand at any time.
The idea is to minimize chances of failing to meet customer demands and
using inventory unnecessarily. The purpose of inventory is to cover
emergency and not production’s shortfall (Berry, Vollmann & Whyback,
1979).
Chapter 13 Case Study: Supply-Chain Challenges in Post-Earthquake Japan
The Japanese supply chain was single sourced initially. This means that
the company held little reserves in inventory as it had a highly
efficient supply chain. The advantage is that the company could
consolidate its supply chain for maximum efficiency. Moreover, the
company reduced costs as it did not require having large plants in all
its branches. Thus, the cost of production was also low due to low
overheads (Taylor & Brunt, 2001). A single supply chain also facilitates
a standardized system of production and thus, the quality of production.
The single supply chain also facilitates good management practices as
one source does not rely on another or cover for its shortfalls as this
may lead to a collapse of the system. Thus, it also increases
accountability (Taylor & Brunt, 2001).
A single supply chain also facilitates the invention of a highly
synchronized information sharing system. This is because the supply
chain must have an efficient communication system to ensure that the
system remains stable. Innovation also improves because the source is
centralized and any changes do not require wide consultations that delay
the process. This means that the company can improve its products on a
regular basis with little changes in the supply chain (Myerson, 2012). A
single supply chain also reduces risks considerably, which improves
productivity. Finally, a single supply chain ensures that the supplier
is responsive to the company’s needs because this increases loyalty.
However, the single supply chain has a number for disadvantages. To
begin with, the single supply chain can severely cripple operations in
case of a disruption like it happened during the crisis. This is because
such chains have a small margin of error and when a disruption occurs,
the supply chain has no mechanisms of absorbing the change (Sharma,
2010). This leads to losses and reduced production, which can take a
long time to recover. The disruption in supply management can also
expose a company to unfair competition because the competitors exploit
the weakness.
A single supply chain also has the disadvantage of establishing a
monopolistic system of operation. This can lead to unfair competition as
the supplier controls that operations in the supply chain and thus, can
create an artificial economy, which manipulates operations. The decision
making is also centralized and this means that there is no room for new
ideas, which makes the supply chain slow to adapt to change. This can
create challenges when there is dire need for change. A monopolistic
system also means that there is minimal sharing of ideas leading to a
rigid system of operations. A single supply chain is also prone to
political interference especially where the chain cuts across different
countries (Burt et al., 2010). This is especially in such cases where
the two countries may have political and economic rivalry.
The lean management system does not make room for a change in the demand
and supply. This is because there are low inventory levels in the supply
chain. The lean management system has a philosophy of supplying exactly
what is needed. This means that in case the demand rises suddenly, the
manufacturing companies face severe shortages. This is because the
philosophy holds that the supplier focuses on quality and neglects
quantity (Myerson, 2012). However, the supply chain can experience
problems, which make the efficiency fail.
Toyota and other manufacturers can devise a foolproof system by
utilizing the recycling system as a way of ensuring that in case of a
disaster, the supply of parts is not interrupted. Recycling can be a
good way of mitigating against shortfalls in the supply chain as the
company continues to utilize its own parts before hitches in the supply
chain are corrected. Despite standardization of the car parts, it may
take a while to source parts from other companies, thus, recycling
ensures that the manufacturing process in not stopped du to delays
(Iyer, Seshadri & Vasher, 2009).
The car manufacturers can also decentralize their manufacturing plants.
For example, having two, similar- capacity plants in two completely
separate locations ensures that the capacity remains at par even if one
fails. This may result in increased costs and a bloat of the market.
However, one plant can have lower productions at normal production
levels, which are activated in case one plant fails. This keeps costs
low and ensures that production is easily restored in case of a disaster
(Iyer, Seshadri & Vasher, 2009). The transition from one plant to
another can be synchronized in such a way that manufacturing would
require less than two weeks to be restored to normal levels.
The manufacturers can also hold high inventory levels in their own
plants such that if a disaster strikes, the inventory would be used to
cover supply chain shortages. Currently, the manufacturers do not have
in house inventories because their supply chains are very efficient.
This, however, leaves no room for sever disruptions in the supply chain
as witnessed during the tsunami. In house inventories can reduce the
need for alternative supply chains in case of disruptions and still
mitigate against any disasters in the supply chain. This will mean a
larger margin of error that the current one, but which, nevertheless
cushions against calamities.
Toyota was hard hit than the other manufacturers because the bulk of the
manufacturing process is done in Japan. This means that despite having
plants in other countries, it could not deliver efficiently. This can be
improved by decentralizing its production (Iyer, Seshadri & Vaser,
2009). Building totally independent and operational plants may lead to
increased costs. This can be reduced by allowing other plants in other
countries to have at least a fifty percent capacity to build the cars in
their own countries. This means that in case of a disaster, there is a
fifty percent chance of retaining production levels at near capacity.
Toyota needs to institute changes in the supply chain, which may affect
how the system operates. The relationship with suppliers may change due
to the need for changes in the system. The management of relationships
with its suppliers will have to have the suppliers increase their
inventory. Toyota may also need to increase the numbers of its suppliers
and thus, strain the existing relationship with the current suppliers.
Toyota may also need to manage the supply chain more closely than
before, which can lead to strained relationships with suppliers (Iyer,
Seshadri & Vaser, 2009). The close management is necessitated by the
need to make the system more efficient than currently.
In conclusion, the production system ought to be backed up by an
efficient supply chain. The production management system requires
provision of inventory to mitigate against any unforeseen circumstances.
An efficient management system requires a well- informed master
production scheduling plan. This plan evaluates the manufacturing system
and comes up with the most suitable production system that can meet the
demands in any circumstances. Despite an efficient lean supply chain,
there is the need for inventory because alterations in the supply chain
can result in losses. Additionally, it is advisable to have several
supply chains so as to ensure that in case of a disruption, the
production and supply do not get severly affected.
References
Berry, W. L., Vollmann, T. E., & Whybark, D. C. (1979). Master
production scheduling: Principles and practice. Washington, D.C. (Suite
504, Watergate Bldg., 2600 Virginia Ave., N.W., Washington 20037:
American Production and Inventory Control Society.
Blanchard, D. (2010). Supply chain management best practices. Hoboken,
N.J: John Wiley & Sons.
Brand, D. (2006). Inventory. Toronto: McClelland & Stewart.
Burt, D. N., Petcavage, S. D., Pinkerton, R. L., & Burt, D. N. (2010).
Supply management. Boston: McGraw-Hill Irwin.
Herrmann, J. W. (2006). Handbook of production scheduling. New York:
Springer.
Iyer, A. V., Seshadri, S., & Vasher, R. (2009). Toyota supply chain
management: A strategic approach to the principles of Toyota`s renowned
system. New York: McGraw-Hill.
Myerson, P. (2012). Lean supply chain and logistics management. New
York: McGraw-Hill.
Sharma, V. L. (2010). Production management. Jaipur, India: ABD
Publishers.
Taylor, D. H., & Brunt, D. (2001). Manufacturing operations and supply
chain management: The lean approach. Australia: Thomson Learning.
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