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In 1967, Beothic Fish Processors Ltd. started its operations in Newfoundland and Labrador, Canada. The company is involved in pelagic fish processing. As the company expands, it has met a series of problems. One of the primary problems is material flow. It is not consistent since the capelin was utilized. Likewise, the processing still requires intensive manual labor despite efforts to automate. To further understand and eventually address these problems, a root cause analysis is needed. First, an organization achieves its corporate goal through its processes (Knowles, 2011). Each step must be systematic and focus on fulfilling the customers’ needs. A potential cause of Beothic’s problem is the use of a push-based strategy. As the name implies, the strategy is to ‘push’ the product toward the customer (Pyke & Cohen, 1990). The company applies an inconsistent push-based strategy rather than a pull-based lean manufacturing.
Likewise, the company’s general manager forecast is questionable. In this case, the general manager predicts a three-week short season for capelin production. The projection was made in hopes to avoid loss like last season. With the continuous demand for a smaller variety of products, the manufacturing system will benefit more if it utilizes a pull-based strategy. If the company used preventive strategies at the operational level and shifted its manufacturing approach, it could have done a better job of satisfying the customers’ needs and improving the supply chain. Because of the company’s current strategy, it still heavily depends on manual labor. Although humans are irreplaceable in any industry, automating is a good way to improve production and quality (King & Stapleton, 1993). Beothic’s arrangements prevent it from maximizing production opportunities. To shorten production time, the company must start integrating technology into its manufacturing processes. It will require additional training, but the company must adapt to the changing times and demands.
This case study shows the value of improving production processes, particularly quality. The production lines play a crucial role in satisfying customers and building a good brand image and customer loyalty.
References
Hamzah, A. A., & Shamsudin, M. F. (2020). Why customer satisfaction is important to
business? Journal of Undergraduate Social Science and Technology, 1(1).
King, W. & Stapleton, D. (1993). Improving production at bioethics fish processors, Ltd. Acadia
Institute for Case Studies. Acadia University.
Knowles, G. (2011). Six Sigma. Bookboon.com.
Pyke, D.F., & Cohen, M.A. (1990). Push and pull in manufacturing and distribution systems.
Journal of Operations Management, 9 (1): 23-24, DOI:10.1016/0272-6963(90)90144-3.
Part II- The Improvement Project Of Science Construction PLC
The case discusses the operation of Science Construction PLC and its financial struggles. The company is a Turkey-based company that offers design, project development, financing, and contracting services. The company has been successfully operating for over 25 years and is one of Turkey’s leading service providers. But by 2008, the company started manifesting financial instability following the country’s economic decline. It eventually filed for bankruptcy and needed to recognize its finances and comply with the Turkish Execution and Bankruptcy Code (Eren, 2013).
Problem Identification
The problem in the case is the 2008 financial crisis that struck Turkey. The economic crisis impacted not only domestic firms but also international businesses. Science Construction PLC suffered because of the economic crisis. The number of work requests decreased since budgets and local funding declined. Although the company managed to continue operating, profit drastically decreased, which means sustaining operations was almost impossible.
The economic crisis also caused network issues. The company could no longer get new contracts to address its financial needs. It struggled to keep its credit line afloat. Erer (2013) points out that although the whole economy struggled to keep cash flow steady, obtaining credit lines became more challenging; thus, adversely affecting companies’ financial stability. The company was forced to operate in unfamiliar territory. In almost three decades, the company managed to keep its status as one of the leading Turkish companies, but the economic crisis halted its success. The company had no choice but to operate with a limited budget and economic uncertainties.
Root Cause Analysis
There are obvious contributors to Science Construction PLC’s financial decline. The biggest contributor is the 2008 Turkey economic crisis. “The great recession had adverse effects on the Turkish economy beginning October 2008. Industrial activity fell by 40% and the open unemployment rate rose by 5 percentage points to 15.4% by the first quarter of 2009, and GDP contracted by 4.7 over 2009” (Ercan, Taymaz & Yelda, 2010, p. 9). The economic crisis made it nearly impossible for businesses to remain afloat because of difficulties in maintaining a steady cash flow. In the case of Science Construction PLC, one of the root problems of its financial decline is its struggle to collect its receivables from their clienteles (Erer, 2013). The metropolitan authorities served as one of the company’s major income sources because of the metropolitan’s size and demand. Before the crisis, the company experienced a continuous influx of job requests from the metropolitan authorities. Some of the job requests included projects for highway and road paving. Because of the projects’ sales, the company managed to secure big profits. But because of the reduced budget, the metropolitan authorities could no longer afford to contract Science Construction PLC.
The lack of projects from their once steady source of income created a huge financial dent in the company’s cash flow. The company had no choice but to sell some of its assets and offer discounts to clients just to secure job orders. Although discounts were a good way to entice clients, they reduced the company’s profit. In some instances, they could not cover the operational expenses of a project. The company tried its best to balance operating costs and discounts, but the skyrocketing expenses proved to be a recipe for disaster because offering discounts amidst the high cost of construction materials was not sustainable.
Prescribed Alternative
The company did try to make financial amends. But there are better alternatives to address the issue. A good alternative is to develop a better forecast model. Forecasting is crucial in any business because it helps business leaders make informed business decisions. Since Science Construction PLC is trying to operate during an economic crisis, a more effective forecasting model is needed for than ever. Financial forecasts are informed guesses. They are anchored on data and data analysis. By improving the system, the company will make wiser investments, which is essential since resources are scarce. Moreover, it will also aid in the risk-reduction efforts of the company. By improving forecasting, the company will better understand the risks involved in each option. The company must also make wiser decisions when they try to secure loans. They must consider the interest rates. If it falls into a ‘debt trap,’ it will become more challenging for the company to bounce back.
Third, the company should also lessen or eliminate unnecessary spending. Again, since the company is operating on scarce resources, better allocation of resources is key to survival. They must review what areas are generating additional expenses and how they can cut it down.
Recommendation
For the company to survive the financial crisis, it should take the following steps to avoid further financial meltdown and bankruptcy. First, it must reduce credit lines. They should focus on maintaining their current credit line and avoid acquiring new ones. Second, they should improve communication with stakeholders to generate more capital and or resources. Third, they must make an effort to reduce operating costs and work within the budget.
Overall, the Science Construction PLC case study shows the complex nature of operating a business. External factors such as economic crises can adversely influence any business’ financial stability. It shows how a contingency plan is necessary so businesses can continue to thrive despite global crises.
References
Androwis, N., Sweis, R. J., Tarhini, A., Moarefi, A., & Amiri, M. H. (2018). Total quality management practices and organizational performance in the construction chemicals companies in Jordan. Benchmarking: An International Journal.
Babalola, O., Ibem, E. O., & Ezema, I. C. (2019). Implementation of lean practices in the construction industry: A systematic review. Building and Environment, 148, 34-43. https://doi.org/10.1016/j.buildenv.2018.10.051.
Ercan, H. Taymaz, E., & Yeldan, E. (2010). Crisis and Turkey: Impact analysis of crisis response measures. International Labor Organization.
Erer, M. (2013). The improvement project of Science Construction PLC. Journal of Business Case Studies, 9(1), 227-234.
Introduction to business. (2012). Lardbucket.org. Knowles, G. (2011). Quality management. Bookboon.com.
