Production and Operations Management - Viverra Motors - Case Study Example

Heading: Production and Operations Management Your name: Course name: Professors’ name: Date Executive summary Viverra Motors a business firm that is about 15 years old with a procurement of a Mitsubishi dealership. The company has just engaged in an acquisition of a new dealership, which handles a line of vehicles including Hyundais, Cherys, and Volkswagens. The business has a total of four dealerships, which separately buy their parts and materials form distinct suppliers. As a result, the business has various policies and procedures that concern its buying activities and inventory management. Clearly, there are various drawbacks that the firm has regarding its management of inventory system. Besides, the company’s concepts of supply chain and inventory are important in its space and investment reduction. This report, therefore, this report is designed to tackle these issues and offer the company suggestions, which will help in the restructuring the firm’s inventory and purchasing practices; hence, enhancement of its performance. List of tables and figures Appendix A Introduction Viverra Motors is a firm that has recently acquired a new auto supermarket to handle in three vehicles lines; Hyundais, Cherys, and Volkswagens. Currently, the company owns four dealerships that buy various parts and materials for both sale of, and servicing customers’ vehicles. This report, therefore, seeks to explore the distinction between the company’s procedures and policies of purchasing and inventory management due to buying of various products from distinct suppliers. Secondly, the report illuminates some of the drawbacks of the firm’s inventory and purchasing activities, and as their impacts of the new possession on them. Additionally, the paper reports on the consequences of supply chains in the process of minimizing its space and investment necessities. The report also offers certain suggestions for the company’s improvement of its inventory and purchasing activities. Assumptions The report is prepared with assumptions that Viverra Motors will: Face certain distinctions in the purchase and inventory management resulting from different vendors Have limitations in its purchase and inventory management practices Require more inventory space and investment Utilize concepts of inventory and supply chain in minimizing its space and investment requirements Difference between purchasing and inventory policies and procedures due to dealerships purchasing of different service parts and materials from various suppliers It will be hard for the company to operate due to the fact that its four dealerships purchase their service parts and materials from diverse suppliers. This is because of the rising number of service parts and materials to be addressed. For example, some of the firm’s parts and services will be utilized in servicing their clients’ cars, whereas others will be sold over the counter. It is imperative for the firm’s purchase sections to consider the fact that efficient purchasing activities are dependent on the costs in order to assist one price-minimum notion, hassle-free, and offer of appropriate service parts and materials at the appropriate time so as to facilitate dependable and speedy after-sales services. In case of the fact that Viverra Motors receipt of its products from various dealerships, there is a possibility of a need for sufficient space used in proper storage of its service materials and parts. It is crucial for every dealership to ascertain that there is availability of adequate space for the storage o its service materials and parts essential in handling clients’ vehicles, and those that are set to be sold (Jespersen 2008, pp. 9-13). This is highly significant in that it will minimize losses that may result from poor handling, breakages, and theft at the firm’s dealerships. In addition, the different purchasing activities in the new dealerships by Viverra Motors will cause a change regarding the modification of inventory levels budget. In addition, it is indispensable for every purchasing an inventory sections in the firm to physically count its stock every year in order to make sure that the correct asset value is featured in the company’s balance sheet report. The cost of service materials and parts must also be demonstrated on the report’s expense and revenue sections. This stock-taking ought to be done in three months just before the completion of the financial year. Moreover, every department’s manager ought to plan the actual stock, establish procedures of cut-off, and observe the physical inventory process (Saxena 2009, pp. 275-280). Moreover, the purchase and inventory departments in the firm’s dealerships should appropriately address purchases in order to maintain efficient performance of the company. This implies that any form of buying activity that the dealerships plan to undertake should be correct in order to avoid unnecessary losses in the company. For instance, it is crucial that all departments in Viverra Motors Company ascertain that appropriate purchasing practices are carried out so as to facilitate proper recording to every purchase made. In terms of the deleted and recently bought company tools and equipments, the company to ensure the availability of the original source documents in its records. What are some of the main weaknesses of the present purchasing and inventory management practices at Viverra Motors? How can the new acquisition affect these weaknesses? The need for expansion at Viverra Motors Company was motivated by its rapid growth rate and need for acquisition. Fast growth rate of the company is caused by the timely availability of highly-skilled personnel; a wide range of tools and technologies necessary for identification and repairs, as well as the availability of adequate service materials and parts. However, these acquisitions have imposed a lot of pressure on the Viverra Motors’ procedures and policies of inventory and purchasing practices. This is because of the need for modification so as to facilitate effective coping with the alterations. Notably, the company has inadequate space set for receiving, storing, managing and handling its inventory. Therefore, the necessity of adequate space at Viverra Motors is stimulated by the acquisition of the dealership that addressed the varied car lines at the same place. Besides, the firm has a limitation with its buying and inventory management activities involving insufficient funds used in supporting its investment on service materials and parts. This means that Viverra Motors has insufficient money resources that are indispensable in the effective inventory investment. The money limitation is caused by the earlier diminishing of the company investment dollars. Notably, the firm lacks suitable budget that tackles its entire duties and conditions. Thus, it is cumbersome for the company to give correct time in order to facilitate fast and reliable after-sales services. Another limitation depicted about the company’s buying and inventory management activities involves receiving excessive service materials and parts for its small space. This means that the company receives more supplies than it can accommodate. As a result, the company experiences a problem regarding the ineffective management of its supplies. Effective companies ought to attain adequate inventories to operate the business in order to avoid challenges like theft poor management, wastage, and insufficient space. While some of these inventories will be essential in handling clients’ needs, some of them will be sold. The recent rise in the company’s suppliers is motivated by its acquisitions since each of the dealership buys its parts and materials for diverse suppliers. The increased company supplies are also caused by its failure to advance suitable systems to modify its procedures and procedures concerning its buying and inventory management (Jespersen 2008, pp. 9-13). The limitations in the firm’s inventory and purchasing activities can be affected by the latest acquisition the auto supermarket in various ways. First, the new dealership will affect the company’s condition, since it will cause a great challenge concerning insufficient space for receiving, managing, handling and storing various car lines, and materials and parts for servicing clients’ vehicles. This is because the newly acquired auto supermarket will need the company to buy various service materials and parts, which are necessary in the support servicing of customers’ vehicles. Besides, space and money issues are also triggered by the firm’s dealership in diverse car models. How can supply-chain and inventory management concepts help Llew Gwych reduce investment and space requirements whilst maintaining adequate service levels? First, ideas of supply-chain management have diverse influence on the company’s performance. Researches indicate that supply chain concepts account for approximately 70% of the total business’s running cost. The same studies also show that the concepts consists if half its total assets and almost 80% of the firms acknowledge that the concepts facilitate reduction of costs, enhancement of efficiencies; and improvement of client services and revenues, and promoting their competitiveness. Inventory is extensive in supply chain and comprises of anything starting from raw materials and on-going process, and then to the complete levels of products, which manufacturers, retailers and distributers hold in the chain of supply (Muller 2011, pp. 1-9). The benefits of retaining a large amount of inventory allow the company, and the supply chain as a whole to react to changes as per the clients’ demands. Nevertheless, storage and creation of inventory is quite expensive, and to acquire high efficiency degrees, it is imperative to maintain inventory costs at low levels (Bamford 2010, pp. 1-20). In order to cope with the changes and boost the company’s performance, it is essential that Viverra Motors considers key decisions concerning its holding and creation of its inventory. One of the decisions entails to ensure that the company’s supplies are safe. This entails maintaining safety of company inventory that is held as a hindrance to insecurity in the company. Cycling of inventory is possible if forecasting of demand is achieved with total accuracy (Toomey 2000, pp. 2-45). Nonetheless, since every forecast contains some degree of insecurity, the company will lessen the improbability by retaining extra supplies. The significance of this surplus inventory lies on the fact that demand may increase more than anticipated (Axsäter 2006, pp. 7-14). The second decision involves inventory cycle that indicates the amount of stock needed in order to satisfy the demand for products in the period between product purchasing. It is necessary for the company to engage in the buying and large quantities of inventory in order to attain the advantages caused by economies of scale. Insurance, storage and handling of company stocks contributes to the company’s expenditure. The third decision entails the firm consideration of possessing seasonal stock that is kept in anticipation of predictable hike in demand, which normally happens at a given time of the year (Hugos 2011, pp. 12-16). For instance, in this case, there is a prediction that anti-freeze’s demand will go up in winter, and thus, companies manufacturing it will have a standardized manufacturing rate all through the year. This implies that it is critical to create stock at the time when demand level is low so that the business can handle the high demand season, a period that may supersede its standard manufacturing rate. Besides, the formation of seasonal stock in firms is also important in facilitating spending on flexible production facilities that can fast alter their rates of manufacturing different products in order to cater for increased demand. In this case, the trade-off lies in the middle of inventory carrying costs and elastic manufacturing capabilities’ costs (Shah 2009, pp. 85-100). In order to ensure the reduction of investment and space wants in the company, as well as maintenance of adequate service degrees, Viverra Motors should utilize combined supply chains that are based on integrated replacement, forecasting and preparation. Integrated supply chains are based on win-win associations, notice stakeholders’ requirements, use pull strategy, and eliminate waste via mitigation of bullwhip impact. It is also based on developing value for consumers; divides clients and suppliers; and possession of a network that have common experiences and learning (Shah 2009, pp. 85-100). Some of the advantages accruing from supply-chain are many including reduced inventory, high information flow, increased responsiveness, and effective use of resources. What is more, it is advisable that the company gets involved in the combined supply chains, as they benefit the firm by focusing on its potentialities, demand-triggered plans; and minimized product expense. This strategy will also enable the company to engage in the minimization of its process costs. Value will also be created if the company adopts the combined supply chain because of large sales volume and broad market share (Arlbjørn 2010, pp. 170-180). Recommendations to Llew Gwych for restructuring of the company’s purchasing and inventory practices In order to boost correct demand scheduling and aligning stock demand with its business marketing, Viverra Motors ought to report its demand via sources. This can also be enhanced through auditing so as to capture information process, and ensure efficient capturing and requesting of information for consumers. The second recommendation is that the firm must ensure that they are convenient in its inventory and purchasing concerns. Thirdly, it is vital for the company to be up-to-date in terms of its purchase order information. Additionally, the company should rely on appropriate purchase order information. It is also paramount for the company to address its inventory issues in time so as to enable effective decision making for its future market. Still, controlling of buyer purchase stock is of utmost importance for Viverra Motors so that it matches its product projections. It should also budget for its entire demand efficiently (Bamford 2010, pp. 1-20). Audit reports to flag overlooked information is necessary in the company so as to allow for timely corrections; hence, avoiding purchase decision interruptions. Additionally the firm should undertake budgeting for inventory by month to create a constant reminder to regulate buyers to plan purchasing orders when there is a need; hence, preventing unessential safety stock. Lastly, the Viverra Company should arrange stock hot lists that contain appropriate projections, especially for the supplies that have little or excessive inventory. It should also include vendor lead times, so as to inform the buyers about needed size (Kempf, Keskinocak, & Uzsoy 2011, pp. 1-15). Conclusion Viverra Motors Company’s inventory and purchasing management activities will greatly differ, for it has a recent acquisition of an auto supermarket, and that its dealerships buy different service parts and materials from various vendors. This calls for modification of its recording, receiving, management, handling and storing of its stock. Besides, there is an urgent need for sufficient space and monetary resources in order to achieve success. The firm has limitations regarding short inventory budget little space, and insufficient finances. Therefore, it is imperative that the company adjusts its budget, space and finances in order to succeed. Monthly budgeting, regular purchase data updates, organized stock hot lists, and audit reports are highly significant. References Arlbjørn, JS 2010, Supply chain management: sources for competitive advantages, Academica, Århus. Pp. 170-175. Axsäter, S 2006, Inventory Control, Springer, Berlin. pp, 7-12, Bamford, D 2010, Essential guide to operations management concepts and case notes, John Wiley & Sons, Hoboken, NJ. Pp. 1-20. Hugos, M 2011, Essentials of Supply Chain Management, Wiley, New York. Pp. 12-16. Jespersen, BD 2008, Supply chain management: processes, partnerships, performance, Supply Chain Management Institute, Sarasota, Fla. Pp. 9-13. Kempf, K, Keskinocak, P & Uzsoy, R 2011, Planning Production and Inventories in the Extended Enterprise: a State-of-the-Art Handbook, Volume 2, Springer, Berlin. Pp. 1-15. Muller, M 2011, Essentials of Inventory Management, AMACOM, New York. Pp.1-9 Roy, R 2005, A modern approach to operations management, New Age International, New Delhi, PA. Pp. 100-115 Saxena, R 2009, Inventory management: controlling in a fluctuating demand environment, New Global India Publications. Pp. 275-280 Shah, J 2009, Supply Chain Management, Prentice Hall, Englewood Cliffs. Pp. 85-100. Toomey, J 2000, Inventory Management, Kluwer Academic Publishers, Boston. Pp. 1-45 Appendix Supply chain management Read More