Name

MT435 Operations Management

Unit Three

Kaplan University

Date

Introduction

Operations and production as defined by Siegel & Shim (1999) is the process involved in the creation of goods and services. Operation management involves decision making about the production process to ensure that the goods or services produced are in accordance with the specified standards, at a minimum cost and under the given period of time. Input of labor, materials and resources are necessary to obtain goods and services of high value. The initial step involved in operation management as discussed by Siegel & Shim (1999) is the formulation of a business plan that incorporates both short-term and long-term strategies based on the demand for the good or service.

Question One

Based on the information presented in the scenario discuss Albatross Anchor’s competitiveness in relations to (please address all items in the below list and provide support for your conclusions).

Cost.

Cost is a significant determinant in most markets. Most people will purchase a commodity or service if it is cheaper in price compared to others. For a company to effectively compete in such an industry, then they have to produce their products at a minimum cost so as to realize a profit.

Speed of manufacturing process from order to finished product.

The speed of conversion of raw materials to a finished product affects the speed of delivery of the product to the customer. The speed of delivery in-turn influences the buying decision by the customer. Most companies use speed of delivery as a strategy to increase its customer base which has an effect of changing the premium price of the product.

(c) Flexibility in filling order(s)

Flexibility is termed as the company’s ability to offer a broad array of products or services to its clients. As explored by Siegel & Shim (1999), it can also be a measure of how a company can convert its processes from production of one product to another. Product variation is seen as a mode of speed delivery by the customer.

(d) Technology

The employment of technology in the process of production increases the speed of which the products are manufactured therefore increasing the speed of delivery. The products are also of high quality and this provides a basis for competition.

(e) Capacity and facilities

The capacity and the facilities available for production effects the quantity of units produced. This also gives room for flexibility where the company can change the production of products. When dealing with fast-moving goods, it is essential for a company to have a large capacity and facilities for production so as to meet customer demands.

(f) Service to customers

Services to customers that include those during purchase and after purchase should be emphasized to gain a large customer base. Customer service is very important especially during purchase where the company can take the opportunity to talk more about the product to the customer explaining the benefits that can be derived from using the product as opposed to others. After-sale services that include transportation of the products for the customer are strategies that have been use by most producers for them to gain a competitive edge.

Question Two

There are many ways that mushroom/bell anchors may be manufactured. Albatross Anchor is considering two new manufacturing processes (Process A and Process B) to reduce costs. From the available information below determine which process has the lowest breakeven point (this validates the process is more cost effective) and report your analysis and supporting conclusion.

For each process the following fixed costs and variable costs have been identified:

Anchor and Process Process A Process B

Size and weight of anchor 30 lbs 30 lbs

Sale price of anchor $ 35.00 $ 35.00

Fixed cost $ 500,000.00 $750,000.00

Variable cost per anchor $ 25.00 $ 23.00

Based on the above information identify:

(Please enter the answers for the following two questions into the below chart.)

(a) The total fixed costs per anchor for Process A and Process B

(b) The total number of anchors to attain breakeven point for Process A and for Process B

Anchor and Process Process A Process B

(a) Fixed costs per anchor $500,025.00 $750,023.00

(b) The total number of anchors to attain

break –even point for Process A and Process B 50,020 62,501

Identify as a result of your review, which Process (A or B) that you would recommend for adoption. Why? Please make sure to explain your answer with clear detail and substantiation.

Process A is more bound to produce better results as compared to Process B. this is determined by the break-even points of the two processes. The break-even point for process B is higher meaning that the company would have to sell more than 62,501 anchors in order to make a profit as compared to process A where the company would be required to sell at least 50,020 to make a profit. Process A in my view is more achievable especially when trying to launch a new product due to the unpredictable nature of the market.

Question Three

Based on the limited information in the case study along with the answers to the questions above; identify at least two direct and specific long-term and two direct and specific short term operational changes that Albatross Anchor must make to gain a clear and sustainable competitive advantage. Please make sure to explain your answers with clear detail and substantiation.

Long term operations

Product design- The limiting characteristics of a production system are realized during the product design stage. The major obstacle in the design is to come up with one that will employ the use of minimum costs during the production. In the long run, the production design will have long term implications on the process of production and the profits realized (Siegel & Shim, 1999).

System location- The location of the production plant is vital for its growth and for low production costs. The source of raw materials, transport and communication, availability of power, labor and other factors of production should be available at the location of the production plant. The location should also consider the potential customers therefore it would be advantageous to have the production plant close to the targeted customers for ease in accessibility. It is for this reasons that the choice of the systems location is vital for the success of the company.

Short term operations

Quality control- The quality is very significant because it captures the interest of customers and at the same time boosting their confidence. The products should be certified by a certified body or even be ISO certified to enhance and maintain customer confidence thereby giving the company a competitive advantage.

Inventory and production control- keeping of proper records so as to know the number of units produced and those sold is important for the assessment of the success of the production system. It is for this reason that the company should have efficient measures for inventory and production control.

Conclusion

In the production, several things have to be considered. The choice of the system site, the production design, availability of raw materials, labor and other factors are essential to ensure that production is done at a minimum cost. Strategies that are both long-term and short-term are employed to give the company a competitive advantage over others producing similar products or services. For efficient production and flexibility, the capacity and facilities available should be well considered to make sure that the consumers’ demands are met. Use of technology in production is vital for efficiency and for speed in manufacturing.

References

Siegel, J. & Shim, J. (1999). Operations Management. New York: Barron’s Educational Series, Inc. Print.