Introduction
Managing the inventories in the modern manufacturing operations is a tough process. Many manufacturing plants, both big and small, are facing problems in managing their inventory properly. Hence, companies are exploring new systems and software that can help in managing the inventory properly. One of the most popular software that is used to efficiently manage inventory is the Material Requirement Planning or MRP. MRP helps the companies in taking informed decisions regarding the efficient management of the company’s inventory (Vonderebse & White, 2013).
Other than helping companies in efficiently managing their operations, they also help them in improving the quality of the products. One of the main benefits of the software is the reduction of human error and increasing the production gains and profit margins of the organization. However, some employees resent this latest technology as it could lead to loss of jobs for the employees. The current system focuses on how the MRP system could be used at Space Age Furniture Company for improving the efficiency of its production operations.
Problem at Hand
The company by the name Space Age Furniture is facing issues related to the manufacturing a part that is used in the manufacturing of two different types of stand. While one of the stands is used for placing Microwave Ovens, the other is used for holding portable televisions. The main problem that is being faced by the company is the lack of the availability of skilled manpower to make the component.
The only machinist who is available with the organization is overburdened and was complaining that he could not work overtime regularly for completing the job. The present case study explores the ways in which the company could improve the efficiency of the task by focusing on new techniques like MRP.
Thesis Statement
The kind of production process that is selected by a company has a deep impact on the product that is produced by the company and their ultimate quality. An production planning is required for any company to ensure a smooth flow of the production process. The current study will deal with the production process as followed by a company called Space Age Furniture. The current paper also looks into the issues related to dealing with inventories in an organization and contrasts it with the costs incurred over a long period of time.
The paper also looks into the solutions that are available for an operations manager for solving the issues that may arise in the company in the long-term. Finally, the paper also looks into the approaches that a company could employ to improve the image of the company and attract more number of customers to the company.
Materials Requirement Planning for Space Age Furniture
Materials Requirement Planning (MRP) is a key tool used by manufacturers for planning the production, scheduling the production process, and controlling the inventory that is used for managing the manufacturing process of an organization. Most companies now use MRP systems that work basing on software. However, MRP could also be done efficiently done b hand.
Below is the MRP for Space Age Furniture Company:
Ways to Handle Lumpy Demand for Part 3079
As it is visible from the above table, the lot size of 1,000 for manufacturing both Gemini and Saturn has resulted in a lumpy demand for part 3079. The problems are further highlighted further due to the problems that are being faced by the company in the production of the said part due to the non-availability of the machinist.
Having lot sizes of 1,000 can result in surplus spare parts and make production process cumbersome. The best way to handle the problem of lumpy demand for part 3079 is to reduce the subassembly size to 500. In this way the company can better utilize the machinist. The subassembly size could be kept at 500 till more machinists could be acquired by the company.
New MRP to Improve the Base MRP
Below is the new MRP with a lot size of 500 that can improve the base MRP given above:
Tradeoff between Overtime Costs and Inventory Costs
All the manufacturing companies need to pay overtime charges for its employees in case the required production cannot be achieved within the initial allotted period. Overtime costs incurred by companies are sometimes inevitable for companies when they need to meet any temporary and seasonable demand for the organization. Overtime costs involve the costs over and above the regular wages that are paid to the employees. In the case of Space Age Furniture, the overtime costs incurred by the companies constitute 50 percent more than the regular costs incurred by the company. Overtime costs when incurred in the long-term can turn out to be very expensive to the organization and lead to an extra burden on the company. Another disadvantage of overtime costs is the extra workload on the employees who are frequently asked to work for extra time in the organization. As the extra workload puts a lot of mental strain on the workers, it will ultimately result in the fall of employee productivity.
Inventory costs on the other hand involve costs incurred by the companies for maintaining the excess inventory. Inventory costs might be incurred by the company for maintaining both the finished goods and the spare parts that are needed for manufacturing the finished goods. Many companies that have unpredictable demand or seasonal demand for their products need to maintain adequate inventory of its products so that they do not face any inventory shortages. Maintaining too much inventory can put a burden on the organization in the form of extra costs incurred and the infrastructure facilities that are needed for maintaining the inventory stocks properly. Additional storage costs increase the overall expenses of the organization and block the working capital (Potamianos, 2006).
While deciding upon the tradeoff between overtime costs and inventory costs, a company needs to take its production process into consideration (Vieira, 2006). In the case of Space Age Furniture, the company incurs a cost of US$ 0.75 per unit per week for holding the inventory. On the other hand it needs to pay 50 percent overtime to the machinist for making the part 3079. The mechanist is also not willing to work overtime and take the additional burden. Hence, it should decide whether to carry some inventory of the part or pay the additional amount to the mechanist.
Types of Production Processing
Companies that are involved in manufacturing of goods can follow a number of production processes. Some of the most commonly used production processes are job shop, batch, repetitive, and continuous production processes.
Job Shop
Job shop is used in case where the number of varieties that need to be made by the organization are higher but the volume required for each of the product is minimal. They are very small manufacturing systems and handle the task of job production. A good example of a job shop is a machine shop where parts are made for the local farm machinery, industrial machinery, and even some special parts that are used in the manufacture of aircraft.
The opposite system to job shop is continuous production used in industries like textile. Continuous production is discussed in detail below.
Advantages of Job Shop:
- Provides required flexibility in product engineering.
- Easy to add the required machines in the future.
- Advantage of high elasticity in production volume.
- Long durability and low obsolescence of the machinery used in the production process.
- Can easily handle the problems related to the failure of machines.
Disadvantages of Job Shop:
- Capacity utilization is low leading to wastage of resources.
- Scheduling of tasks is very hard due to the problem of a high variability in product and production flow that is highly twisted.
Batch Production
On the other hand, batch production is used for manufacturing complex products which involve assembling of a number of small components. In the case of batch production the total production process is divided among a number of workstations with each of the workstation handling a small part of the total production process. In the case of batch production, one part of the production needs to be completed before another part is initiated (Hill, 2003).
Since the production of microwave tables and television tables for Space Age Furniture need a complex assembling of a number of parts where each of the part is taken care by a different machinist, batch production is the most appropriate production process that can meet the requirements of the organization.
Continuous Production
Continuous production process is useful for products which are manufactured in large number. In continuous production all the parts are made continuously and assembled separately. Continuous production minimizes the inventory carrying costs and is suitable for companies that follow continuous production process should have a lot of expertise in manufacturing to handle the task effectively.
Repetitive Manufacturing
In the case of repetitive manufacturing, the same production philosophy of continuous production is applied. But the quantity of work in progress at any given point of time is limited and items that are being manufactured move very quickly on the factory floor (Crawler, 2009).
Ways to Keep Track of Job Status and Location during Production
Being able to continuously track the status of a job and the location of a particular good or component in the production process is very crucial in the production process of an organization. If the organization cannot track the job status properly, it can lead to improper handling of the production process and possible delays in the delivery of goods. Space Age Furniture can keep a track the job status and location during the production by keeping a system in place where the supervisors will keep a track of the job status and location during the production process.
A number of software programs that are being released by companies like Cisco and Microsoft also facilitate the easy monitoring of the job status and location during the production process. Space Age Furniture could contemplate on using any of the latest software programs for efficiently managing the job status and location during the production process.
Recommended Changes
Space Age Furniture faces the primary challenge of meeting the demand for the crucial part that is required to manufacture two important products. The machinist that is needed to manufacture was also not able to take the additional work burden. The costs incurred by the company for paying the overtime charges of the machinist are prohibitively higher at 50 percent higher than the regular expenses. Past experience of the company also proved that finding other machinists who could work on the spare part in the market was difficult. In such a scenario, it would be good for the company to start keeping a good amount of inventory of the spare part 3079.
It would be better for the company to maintain some higher inventory for the product and bear the extra inventory maintenance costs rather than paying the overtime charges for the machinist. This will not only help the organization in reducing its costs but also face any unforeseen consequences. As a single machinist is currently working on the part, non-availability of the machinist due to reasons like sickness or other reasons could bring the whole production to a grinding halt. In such cases, the firm faces the risk of losing customers and reputation in the market. In view of all these issues, the company should initiate steps for building proper infrastructure for maintaining a good inventory of the product.
Apart from maintaining appropriate inventory, the company should also look at recruiting more number of machinists who can work on the spare part 3079. Recruiting and training number of machinists to make the required part would make it possible to meet the future challenges of dealing with scarcity of the spare part in question.
Finally, as suggested above, it is recommended to reduce the planned size of subassemblies from 1000 to 500 as it would help in better managing the skills of the machinist for part 3079 and reduce the problem of lump demand for it.
References
Crawler, S. (2009). Research and Management Insights. Production and Operations Management, 23 (12), 8-11.
Hill, J. (2003). Revising the master production schedule in sequence dependent process, International Journal of Production Research, 41 (9), 2021-2035.
Potamanos, J.A. (2006). An interactive dynamic inventory-production control system. Journal of the Operational Research Society, 96 (3), 1017-1028.
Vieira, G.E. (2006). A new and practical heuristic for master production scheduling creation. International Journal of Production Research, 44 (18/19), 3607-3625.
Vonderembse, M., & White, G. (2013). Operations management. San Diego, CA: Bridgepoint Education, Inc.
