Operation Management Principles in Turbo Exhausts - Case Study Example

Operation Management Principles Insert Name Institution Introduction The production line of Turbo Exhausts operates in distinct processes whose throughput are undermined due to typical logistical challenges. In fact, there are various aspects of the production line which dictate the process in an overwhelming way due operational circumstances. Having had a tremendous interest and success in the manufacture and design of custom automotive extractors and exhausts, the production of Turbo Exhausts heavily relies on the demand of the products by the motor racing industry consumers. However, this is not the only factor in the production process. Having secured a laudable reputation in the design and manufacture of custom automotive extractors as well as exhaust systems, Turbo Exhaust has attracted a considerable market of private motorists who are consumers of these products in a painstaking manner. Precisely, the production process of Turbo Exhaust was chiefly influenced by consumer demand especially, custom V8 exhaust systems for Holdens. Nonetheless, the emerging demand for custom extractors and exhaust system for private street cars inclined the production process of Turbo Exhausts to address this market. Thus, the production process reserved some labour and work hours to process a diverse range of products for street cars and other eminent car models in Australia (Aquailano, Chase & Jacobs, 2008). Technical Analysis Practically, Turbo Exhaust has advanced from a rigid producer of custom-made systems for specific engine solutions to an all round supplier of custom-made exhaust systems and extractors as well as off the shelf solutions. Given the remarkable prospect in expansion Turbo Exhausts sought to open a new investment into the production of a limited number of systems in order to stock its supply for the growing demand. In fact, the diversification created a constraint such that an additional system to the two initial ones, that is Holden and Ford had to be allocated processing time in the production work schedule. This system production of off-the- shelf solutions was a minor undertaking that had mere anticipation of a booming demand hence it had no specification, but rather a standard performance level that targeted high performance engines although quite inferior to the custom-design extractors (Aquailano, Chase & Jacobs, 2008). Technically, the focus of Turbo Exhausts production shifted from a streamlined product that is, custom-made solutions to a broad production line of both custom made products and off-the –shelf products as well. Since the off-the-shelf products mostly attracted customers who were exceedingly price conscious, such buyers regarded the brand which Turbo Exhausts supplied to them. Nonetheless, the brand could not grow and make tremendous penetration into the market without a fair value for money to the buyers. Consequently, the management, Geoff and Joe realized that the brand demanded a lot of logistical attention to attain a similar engineering quality to match the rest of the products that Turbo Exhausts produced. To this effect, the company resulted into standardizing the off-the-shelf products whereas seek a fair profit margin as well. In greater detail, the production was subjected to a division of processing percentages such that the production of custom-made exhaust systems still dominated the production at 60% whereas the processing of the off-the-shelf products was allocated a mere 40% production volume (Aquailano, Chase & Jacobs, 2008). It is noteworthy to consider that fact that Turbo Exhaust runs it operations in a single manufacturing plant in Black town. Thus, all production process are scheduled and carried out with reference to the number of finished products in stock as well as the inventory number of ordered products. In fact, the demand of the various products, the extractor and exhaust systems, both custom made and off-the-shelf drive the firm’s production line and volume. The firm has a tremendous all purpose engineering equipment that is of a great standard and suitable for the production of custom systems. The production process entails a variety of technical steps. In actual fact, the first step involves the organization of tube cutters in a given area of the engineering plant; secondly the tube benders are laid in a distinct location in the firm. Thirdly, the factory prepares a separate section for welding purposes. In addition, the firm has several dyno-equipped service bays that serve the sole purpose of tuning and perfectly fitting custom systems. In fact, the firm’s staff are a commendable group of highly skilled tradespersons who carry out production of quality designs and fine tuned products to a prestigious standard. Nonetheless, the constraint of throughput in Turbo Exhaust dominates and the custom systems are ever competing with the off-the-shelf systems for processing time since there is only once production line that utilizes the same equipment by all tradespersons in the firm (Aquailano, Chase & Jacobs, 2008). Problem identification and specification Furthermore, the firm, Turbo Exhausts is under immense pressure to produce a higher volume of its products. This is a pressing reality that was exacerbated a few months earlier when the firm partnered with The Performance Shop, a national car parts dealers specializing in the distribution of high performance automotive parts, which are mainly supplied to the public in general as well as motor racing hobbyists. The Performance Shop sought a supply of limited variety of high quality exhaust systems for Ford and SVO racing vehicle brands. The entry of Turbo exhausts into this agreement exacerbated the production process constraints. In actual fact, the agreement demanded an initial fixed stocking of the high quality products for The Performance Shop’s supply chain and a consequent, regular replacement of its stock dependent on the estimate demand for the products as well as the sales line effect on current stock. In essence, The Performance Shop approximation of a consistent but low demand was an inaccurate anticipation hence the processing of the initial stock and the replenishment stock was allocate inadequate scheduling time. Turbo production process had anticipated overtime scheduling as well as production during the weekend would meet the supply for the new arrangement. In additional, The Performance Shop’s independent forecast had proposed that a regular day to day requirements for the stock replacement would be effortlessly met by normal production supplement by overtime scheduling (Jarvenpaa, 2007). Thus, the production process was carried out on these factors, the stocking of the supply chain for the trio, that is, custom systems, off-the-shelf systems and the Ford as well as VSO exhaust systems. The replacement of each stock in reference to sales and customer’s order inventory extensively control the production process in Turbo Exhausts. However, the expansion and growth of the firm, Turbo Exhaust has steadily accrued sales exerting more pressure on the stocks systems. Thus, the firm’s finances and accounting audits indicate glaring discrepancies and profit projections have not been achieved so far. This is mainly due to strained production line that relies on the same equipment for all productions. For instance, the costs accounted for the production of the off-the-shelf and The Performance Shop are exceedingly high. This is attributed to the extra rental, warehouse space acquired by the firm to accommodate the inventory volume. Additionally, the firm, Turbo Exhausts has had accrued lead times from increased demand in both custom and The Performance Shop systems leading to further delays in promised delivery time. The production processes has also suffered formidable stock-outs especially with the off-the-shelf products which are mainly sold on a retail basis (Jarvenpaa, 2007). The production process is pathetically struggling with inadequate capacity to increase production room, which its current layout cannot handle simply because there is no space left for possible expansion in the plant. The firm, Turbo Exhaust has experienced a deadlock wherein the demand has overwhelmed it production capacity hence the inventory clearance takes longer hence compromise of cash flow in the entire production process (Jarvenpaa, 2007). The contract to supply high quality systems to The Performance Shop by Turbo Exhausts brought an extensive effect in the production process as whole. In fact, the effective was severely systematic. In operation management principles the effect can be better understood from the standpoint of the Theory of Constraints. The contract introduced a week link in the production process. Subsequently the production system affected the throughput negatively. In reference to the Theory of Constraints (TOC) the negative impact of the contract herein the throughput was undermined demands an unconventional solution to undo it. In fact, the constraint was never addressed the management should have considered a less costly solution or rather investment to minimize or absolutely do away with lead times in inventory. Alternatively, the effect of the new contract could have been averted by the management by simply adopting a an extra support process such as outsourcing a some its is minor production process that are less complicated and demand less technical engineering know how (Joan & Van, 2005). However, these reiteration actions against the effect of the contract with The Performance Shop were never implemented hence the production process suffered extensive strain resulting in crowded processing capacity that sacrificed efficient productivity of the firm as whole. In fact, the off-the-shelf products were sacrificed whereas the custom systems experienced accrued lead times. This derailed production caused a build up of inventory hence complete payments for the products were held up and possible clearance took longer at a limited capacity. The chief problem was the ever increasing demand in all products which the firm’s production capacity that is, the tradespersons, the equipment fell short of accomplishing. The lack of a synchronized flow became a major concern since the build up of inventory meant process of products for the ever accruing demand was hindered. Therefore, the firm’s production was regretably under capacity (Moore & Scheinkopf, 1998). Day-to-day operational issues. Under the current operational conditions at Turbo Exhausts it is quite agreeable that immediate decisions ought to be implement to realize a healthy production process. In this approach, the constraint must be eliminated in the most affordable way, but in the right approach to create an optimum change to enhance production. The core change that necessitates capital investment is acquisition of second inventory warehouse as well as additional engineering equipment to increase the production capacity. In some instances, outsourcing some process which do not require detailed engineering prowess could be implemented whereas additional production process must get additional staff to offset the low processing capacity. For instance, the stock watch in line with sales as well as delivery operations could be easily outsourced at a friendly cost with greater efficiency (Les, 1993). Apart from the aforementioned decisions, it is paramount to implement a Materials Requirement Planning strategy for Turbo exhausts. This implies the firm must have a primary schedule of the whole process detailing the number of ordered products and what its cost is and keep this data to forecast the production process. In fact, Material Requirements Planning (MRP) will undo the build up in inventory, a scenario at Turbo Exhausts that has derailed production. In additional, the current operation conditions at Turbo Exhausts necessitates an immediate decision for the firm to embark on Lean Manufacturing. This is an economical theory which uploads the principles of operation management by eliminating waste. In a different wording, this is referred to as waste removal. The concept involves various steps. First, Turbo Exhausts ought to identify the specific value to understand the exact customer need. Thus, the production process with be inclined to a specific line such that specific products at given prices will be produced without compromising the customer’s specific needs. Consequently, any products that do not meet customer need will be done away with hence effective utilization of resources and customer satisfaction. For instance, the firm will focus on what is in demand and produce high quality products with foregoing any product for supposed profits perceived from off-the-shelf retail products. Secondly, lean manufacturing will guide Turbo Exhausts in the most effective structuring of the production process which will feature non-essential process hence their elimination. Consequently, the production process will be more effective and cost conscious to realize painstaking profits and timely delivery. Overall, the decision to adopt this concept will impact the firm in whole and make it possible to realize smooth flow of production activities. In fundamental nature, the elimination of non-essential products as well as non-essential process will free some production capacity which will be transferred to optimized production of the prioritized products in the firm (Slotegraaf & Atuahene-Gima, 2011). The actualization of lean manufacturing will limit production to demand hence only specific products are made. Subsequently, the firm will run on a customer pull. This implies a production process solely reliant on customer demand hence a schedule of work based on customer orders. Therefore, the production process amount to products only when they are required by the customer. Nonetheless, further action is necessary to keep a consistent improvement of the production process. This is achieved through implementation of the above step in lean manufacturing over and over again (Cristina & Amy, et al.). Broader organizational issues caused by operational problems The effect of the decision by Turbo Exhaust to embark on the production of off-the-shelf products was undeniably immense and impacted the whole process in the firm’s production line. In fact, it had a broad operational impact on the firm. The production plant had initially been set for the sole production of custom exhaust systems hence the capacity to produce additional off-the-shelf systems had not be considered there before. Thus, the introduction of processing the –off-the-shelf systems brought about a constraint in the production capacity. This, undermined the efficiency of the process. It also lead to a sacrifice in the of processing time meant for custom systems production. Consequently, the form embarked on acquisition of extra inventory space, warehouse. The financial arrangement was drastically affected such that some capital was transferred from the production of custom systems to the production of off-the-shelf products which had a lower profit margin and customer response. Additionally, the build up in inventory due to limited production capacity was evident and result in accrued lead times (Moore & Scheinkopf, 1998). In conclusion, the overall running of Turbo Exhausts is in good shape, but its growth and expansion has lead to severe logistical challenges. Nonetheless, given the vast flexibility in principles of management operations; the situation can be addressed and fully settled. In reality, it is a step in the development and expansion of a manufacturing company. The implementation of the proposed steps are no doubt satisfactory in solving the production crisis currently affecting the firm. Reference List R. Les G, 1993.The Principles of Operations Management Routledge Series in the Principles of Management. New York: Routledge. Aquailano, N.J., Chase, R.B & Jacobs, F.R. 2008. Operations and Supply Management. New York: Mc Graw-Hill/Irwin. Moore, R. & Scheinkopf, L. 1998. Theory of Constraints and Lean Manufacturing: Friends or Foes? Chesapeake Consulting. Inc. n.d Operations Management Principles. Docstoc availablew at http://www.docstoc.com/docs/10038857/Operations-Management- Principles. Joan, E. & Van, A. Management Research as a Design Science: Articulating the Research Products of Mode 2 Knowledge Production in Management. British Journal of Management Volume 16, Issue 1, pages 19–36, March 2005 Jarvenpaa, M. (2007, May). Making business partners: A case study on how management accounting culture was changed. European Accounting Review, 16(1), 99-142. Slotegraaf, R. J., & Atuahene-Gima, K. (2011, January). Product development team stability and new product advantage: The role of decision-making processes. Journal Of Marketing, 75(1), 96-108. doi:10.1509/jmkg.75.1.96 Cristina M. G, Ph.D. & Amy, E. Hurley-Hanson, Ph.D. Frederick Winslow Taylor: Reflections on the Relevance ofThe Principles of Scientific Management 100 Years Later. Journal of Business and Management.available at http://www.chapman.edu/asbe/_files/journals- and-essays/jbm-editions/jmb-vol-17-01.pdf. Read More