Production planning and quality management is one of the key indicators of any company’s productivity. This is especially the case for multinational companies that conduct business in diverse and highly competitive business environment. In such a scenario, an optimized production process is one of the key factors that give the company competitive advantage and profitability. Some of the key factors of production include quality, productivity, efficiency, cost of production labour characteristics and cycle time to mention but a few. In this case analysis the chip manufacturer can only optimize its production process and eliminate the inefficiencies by focussing on the three major factors of production i.e. quality, cost of production and labour characteristics.
Quality
In any business environment, the quality of a company’s merchandise directly determines how marketable they are. This is especially the case for a manufacturing firm that’s undergoing expansion into new markets such our specialty memory chip company in the case study. The quality of the manufacturer’s products is a subject of two key factors; the production process and the demand in the market. The challenge has never been production of quality merchandise. In fact the challenge is maintaining the high standards set by the manufacturer. Given the manufacturer is in the technological industry, the production planning and quality management department needs to heavily invest in research and development (R&D).
Timeliness
Timeliness affects the price products fetch when they do hit the market. For instance the decision by the specialty memory chip manufacturer to expand its production plants to Japan and Singapore is a timely one. This is because currently the fastest growing economies are in East Asia and Singapore specifically is ranked as the easiest company to do business with. The time a product takes before it hits the market is depended on the duration it takes to manufacture the product, the lead time and the time the product takes in the supplies chain.
Cost
The production cost in totality determines a company’s production planning process. For instance the location of the manufacturer’s production should be done on the basis operating cost. This is also an important factor to consider before the company expands. The production cost at the end of the day affect all the other factors the production process. Production costs are of two types; labour and material costs. These production costs determine the cost of the final product, the materials used in the manufacturing process and finally the quality. It is standard practise for a manufacturing company to move its production plant to a location where the productions costs are low.
Flexibility
The specialty memory chip manufacturing company has a unique competitive advantage. This is because most of its products i.e. personal computers, cellular telephone manufacturers, electronics distributors, and government organizations use the same type of technology and materials to produce. This implies this production process cost is flexible. Flexibility in the manufacturing industry is mainly as a result of the flexibility of the workforce.
Productivity
The fundamental building bloc of a production plan is to increase the productivity. This should be achieved at minimized costs and maximized yields. Therefore, this implies that the productivity of a manufacturer is the ultimate result of all factors in the process. The whole essence of having a production plan and managing it is to increase productivity. Productivity can also be driven external factors in the market. For instance principle of demand and supply dictate that any economically viable enterprise pays close attention to market forces
Efficiency
The efficiency of a manufacturer is dependent on both external and internal factors. As mentioned earlier market factor affect the productivity. For instance in the case study, increased demand of the manufacturer’s product has for the company to review its production plan to increase efficiency. Just like productivity, efficiency is the ultimate end-result of the production process in entirety. The efficiency of the production process also goes further to indicate the wastages in available resources in the manufacturing. This basically implies that efficiency in a manufacturing company results to significant reduction in production costs.
Cycle Time
Cycle time is a product of how efficient the production plan and process is. The more efficient the production process is, the shorter the time cycle of production. The time cycle on the other hand affects the productivity and the quality of the final product. This implies that it is absolutely for a manufacturer to have a shorter cycle time that more produce a lot of substandard products. Therefore as repeated in the paper over and over, no aspect of the production should compromise on the quality of the final product.
Labour Characteristics
The whole production process and implementation process is dependent on the human resource the manufacturer has. This begins right from the conceptualization stage of the production to the actual production. The success of the production process and plan is dependent on the characteristics of the workforce. For instance, the skill set of the workforce determines the quality of the product, the production cost, the flexibility and adaptability of the workforce, the efficiency of the production of the plan among other aspects of production. This therefore implies that strategies must be formulated to attract, recruit and retain a highly qualified and motivated workforce.
Proposed Production Plan
For the manufacturing firm to stay profitable in the light of these new challenges and opportunities, the chip manufacturer should adapt the Just-In-Time (JIT) quality management model. This is because the aforementioned factors of production can only be optimized through a JIT based approach. As the model suggests, the key production factor is quality as stipulated in the rank above. However for this model to be successful, a few customized must be changed here and there to optimize the production process. First and foremost, the company should stick its short term contracts both for its suppliers and customers. The contract duration in its Western business segments should stick one month because the culture of doing business is on a short-term basis. However, the Eastern segments should be allowed longer contracts of up to 1year to accommodate the long-term oriented business culture in the region.
Secondly, R&D department of the chip manufacturer should mull over possible strategies to cut the depreciation cost by half from the current $1.2million per day to $600,000. The current depreciation cost asserts the fact that the production process is very wasteful. One of the strategies that can be implied includes innovating manufacturing materials that last longer though at a cheaper cost. This multi-pronged approach deals with many of the production challenges the firm is bound to experience including quality, costs, and efficiency among others. This strategy also effectively tackles the rapid obsolescence rates. In addition to this, the efficiency of the production process can be further by recruiting and a highly motivated techno-savvy workforce. Given that the company has segments both in the East and the West, this can be easily achieved easily given the firm can tap into the labour resources of both worlds. However, we recommend that all the production plants should be moved to Japan and Singapore because of cheap labour force and the ease with which production materials are available. This production plan will ensure that the company easily meets and even surpasses expected pre-order target of 10million products.
Fourth, the company should keep its sales segment in all the major cities of the world and maintain the same pricing despite the fact that the production costs have significantly reduced. This increases the efficiency of the production given that the external factors are held constant and the production process has been optimized. Finally, the manufacturer should diversify its product portfolio. This is based on the simple logic that the extremely qualified personnel should earn their pay by being innovative and flexible coming up with closely related product lines. In addition, new markets imply new market demand which should be met. The product range should be easily double from 24 to 48 if this production plan is implemented fully.
Conclusion
Quality, costs of production and labour characteristics are the most significant factors of production that the chip manufacturer should focus on. If these key factors are effectively dealt with, then all the other production challenges that the company is currently experienced can be easily dealt with. The challenges that shall be dealt with by focusing on three aforementioned factors of production range from depreciation costs to product line diversification related challenges. In addition, the only production model that is ideal to meet all these goals simultaneously is the JIT quality management model. Finally, the success of this model is largely dependent on the chip manufacturer customizing the production plan to reflect all the business environments it operates. This can be complemented by using all opportunities presented by having business segments both in the East and West.
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