Introduction
Company overview
Trans- European is a manufacturing company in England that manufactures plastic household items. The company produces more than 500 products that are sold to retailers and wholesalers all over Europe. The company can deliver products within a period of 24hrs after receiving the order invoice. However, the trend has been lagging and thus disrupting the timely delivery of products to the customers. Francis Lamouche contracted a consultation firm to evaluate the setbacks and recommend possible undertakings. The consultants evaluate both the delivery system of the products and the operations management system.
Ability to deliver products reliably to its distributors
The planning control office has been experiencing a challenge in ensuring that the distributors receive timely consignments and ensure that the customers are able to receive the ordered quantities at the right time. The major areas of considerations that influence the delivery of product are the lead time, Re-order points and economic order quantity (Heizer & Render, 2001). Effective management of the above factors ensures that ordering costs and holding costs. The rapid increasing demand for products prompted the company to endorse split batches production process to mitigate the shortage problem in the supply of products to the customers. The company’s range of products includes seasonal and non-seasonal products and thus it’s imperative to evaluate a production procedure that prioritizes the demand schedule time of the products. From the consultant’s statistics, the company has 24machines that operate on a standard time of 105 hours per week. Therefore, the total machine-time available is the multiplication of 24 machines by 105 hours that equate to 2520 hours in a week. Additionally, the production unit has over 500 plastic products that consume an average of 3hours to establish and is estimated to run for an average 20 hours at an approximate cost of 500 Euros. As a result, the number of plastic units was about 110 per week, that is, 2520machine- hours divided by 23hours. One batch of products could only be made after four and a half weeks (4.5). This is because some production batches consumes more time in the machines. The above evaluation indicates that the company is unable to produce all the products in a single week as projected and anticipated by the customers. Consequently, the distributors were unable to provide the products to the consumers as per the market demand.
Recommendations
The operation's managers should concentrate on projecting the stock rather than planning on the statistics of the current level of stock. This will make sure that there is coherence between the re-order time and quantity and the lead time. First, the inventory management should downwardly adjust the preprocessed lead time of 2 weeks to about one week. Preprocessed time is the time consumed before the raw materials are accounted and ordered and the time the inventory is taken into the production process. The action reduces on the ordering cost of raw materials. Moreover, reduction in preprocessing lead time increases the processing time and thus allows for a slack time in the production process (Kim, 2005). The management could concentrate more on the rate of demand of the product. For instance, about 20% of the products are seasonal and therefore it would be appropriate to organize the re-order point and quantities in a given period. The management should prioritize those products whose demand is constant throughout the year. Raw materials of producing Garden Range and Storage Bins whose demands are seasonal could be re-ordered about two weeks to the season so that it can coincide with the peak season.
The approach will reduce the cost of holding the raw materials, as well as the storage costs of finished goods. As a result, the amount of products produced in one week (4.5) will increase and feature most of the non-seasonal products such as Broom head and bag clips. Additionally, the processing lead time will decrease because only the seasonal products will be processed first. Due to the small capacity of warehouse, the strategy would ensure that the holding cost of products is reduced since the seasonal products will directly replenish the market demand of the products and enhance reliability of the company with its distributors.
Planning and operation system
The management should adopt a make to stock system that utilizes a two stage- batch production system. Trans-European Company has been hindered by the small space of the warehouse that has been due to production of non-seasonal products such as storage bins. The two stage inventory system allows for the disruption of the production process either in the beginning all in the middle of the production process. For instance, seasonal products could be allocated fewer machines than seasonal products to create a lag time between the distribution of seasonal products and the non-seasonal finished products. The management could utilize the processing lead time by prioritizing seasonal products to ensure that the post-processing products lead time is affordable to maximize on timely delivery of finished products to the distributors and the customers.
The operations managers should consider adopting an online management system where they can order raw materials through the internet in a timely manner. The action will reduce the preprocessing lead time and cost (Muller, 2003). The management should conduct a feasibility study of the current market demands in order to save on holding cost for low-demanded products. The 15 hours overtime should be in tandem with the international labor relations laws. One of the strategic approaches that the company could adopt in order to counter the rapidly changing international economy is to adopt biodegradable plastic products in order to sustain the current market share and lure potential customers in the European market and the rest of the world.
References
Heizer, J. H., & Render, B. (2001). Operations management. Upper Saddle River, N.J: Prentice Hall.
Kim, B. (2005). Supply chain management. Singapore: John Wiley & Sons (Asia.
Muller, M. (2003). Essentials of inventory management. New York: AMACOM.
