Thisreport will discuss the pros and cons of: capacity utilisation, productionsmethods and managing change (stock control and quality). Theaim of this report is to explain and provide recommendations for methods, thatwould most benefit the company.
Thisreport includes a graph and a table from the previous year, which shows how thecompany is currently producing products. Therefore, enabling clarity toevaluate where improvements need to be made. Thisreport includes descriptions of the most beneficial methods for businesses, toclarify judgement, followed by comparisons to other useful methods.
Finally,the most efficient methods are recommended.2.Results/ findings 2.
1Sales/Production figures Stocks at start (thousands) Monthly sales (thousands) Production level (thousands) Stocks at end (thousands) Jan 40 55 90 75 Feb 75 60 65 80 Mar 80 95 90 75 Apr 75 140 90 25 May 25 110 90 5 Jun 5 80 90 15 Jul 15 70 90 35 Aug 35 65 90 60 Sep 60 75 60 45 Oct 45 80 75 40 Nov 40 60 60 40 Dec 40 45 45 40 2.2Identifying under-utilisation and where stocks are building upSeethe graph attached 3.Capacity utilisationCapacity utilisation is a measure ofthe degree to which an organisation is using its maximum possible capacity isusually shown as percentages.Atsupermarket checkouts, queues build creating the shop to have them be over 100%capacity utilisation, which can add stress and an unneeded extra workload forthe employee. It will create the employee to rush, giving a bad impression tothe customers.
Whereas at some supermarket checkouts, you can have employeessitting idly with no work to do. Creating them to be working under 100%capacity utilisation. Companies try to combat having a low capacity utilisation,for example B&Q operate a ‘over 60s’ discounts’ on Wednesdays, as it isclassed as a quieter period and to hopefully increase their capacity utilisation.Another example, cinemas offer discounts Mondays as they are their quietestperiod, which they’d hope to increase their capacity utilisation. It isn’t possible,or wanted, to keep all resources fully employed.
Majority of companies aim to functionat just under full capacity, such as 90%. It is important to run a business at around90%, as it is a measurement of efficiency and all organisation will want to beas efficient as possible. The more output a company makes, the averageproduction cost fall, therefore a higher utilisation makes the business morecompetitive.Thereis a capacity utilisation issue with MowRite, as they can’t always keep theirproduction level at 90,000 because they do not have the storage (80,000)/demandto hold the stock.
As the demand increased for MowRite they clearly couldn’tproduce enough stock to keep to their minimum (buffer) stock level at 40,000units. This is shown in the table from the stock at the end of the April-July,as the stock was below their 40,000 thresholds. Capacity utilisation is substantial,as it is used as a measure of productive efficiency, also the averageproduction costs tend to fall as the output rises, thus higher capacityutilisation can reduce the unit costs, making a company more competitive andmore efficient. Therefore, organisations usually aim to produce as close thefull capacity (100% utilisation) as possible. 4.Production methodsJobproduction is normally completed by a single worker or a group of workers, thejob can vary from complex and high technology to small scale and lowtechnology. An example of low technology jobs are hairdressing and tailoring,where the production is very simple, requiring low skill and easy obtainableequipment.
This method allows customers specific requirements to be included,normally as the job progresses. Whereas high technology jobs include a lot morecomplexity, which means there is a greater management challenge. The businessshould always keep a clear definition of objectives.Decision-makingprocess is essential, like how are decisions taking about the needs of eachprocess in the job, labour and other resources. Examples of high technology /complex jobs: film production; large construction projects. mAs a business grows and production volumesincrease, it is not unusual to see the production process organised so thatbatch production can be used. Using batch production obliges the work for anytask to be divided into sections or operations.
Each section is finishedthrough the whole batch before the next section can be performed. It ispossible to achieve specialisation of labour, by using batch method. Careful planningis needed to ensure that production equipment is not left idle, but the capitalexpenditure can also be kept lower. The main aims for batch production are toconcentrate skills (specialisation), plus to achieve high equipmentutilisation. The batch method is probably the most commonly used method of fororganising manufacture. An example for batch method is the production ofelectronic instruments. Batch production does have faults though, having tofinish an operation on all the products, before you can move onto the nextsection, means that there can be a high build-up of significant stock. There isa high chance of unpleasant work flow, especially if the batches are notoptimal in the process.
Flow methods are very analogous tobatch methods, apart from the issue of in batch production where the batch isresting awaiting to be used for the following stage. The objectives of flow productionare:• Improved work and material flow• Reduced need for labour skills• Added value / completed work fasterFlow methods are efficient as when workon a task at a specific stage is completed, it is required to be moved onto thenext stage in the process without waiting for the remaining batch of productsas you do in batch method.For flow production to work, thereneed to be a consistent demand for the product as if the demand is random, itcan lead to an excess amount of stock, therefore having to buy storage is anunwanted business expense. Flow is very uncompromising, it cannot deal verywell with differences to the product If the raw materials for the product isn’tdelivered on time, it may cause the whole production to an end, with a likelihoodof a serious cost consequence.MowRite uses flow production, as it makes sucha vast amount of lawn mowers. The use anyother production method wouldn’t make sensefor MowRite as it wouldn’t be able to keep up with the demand that MowRite has.Which would foresee a bad reputation.5.
Managing change – Stock control and qualityStock control usually takes place at leastonce a year, but varies with different company policies. Stock taking, is usedto check the amount and the value of the stock possessed. Also, it adds asecurity check, to check for a theft and to monitor if the business has theright amount of stock for production. This process can be done manually, butmost shops have computerised stock records. Having low stock levels can have many implications,running out of stock can be an issue, as there could be a sudden increase indemand and the business may not have the stock to accompany for the demand. Nothaving a lot of stock can implicate a organisations reputation, as consumers willfind start to find them unreliable, questioning the companies trustworthiness.
Whereasholding a high amount of stock can have its implications as well, storage tohold all the materials and adds a more likelihood chance of spoilage/waste ofthe products. Holding high levels of stock may make the good become obsolete,therefore the company have wasted money on products that won’t get used. Havingsuch a vast amount of products in storage makes all your money tied up in stock,which holds the company back to make any investments. There are many things to take into considerationthat will influence the decision for holding stock, such as:• Storage costs• Type of products, as you wouldn’t want tostore cold or perishable items in a warm enclosed area • Economies of scale• Level of demand • Suppliers reliability • Opportunity cost • Level of competition Thereare two types of stock rotation: FIFO (First in first out) and LIFO (Last infirst out). FIFO means that the stockthat has been delivered first are first to be sold, which is highly recommendedto perishable items and products that are likely to become out of date.
Forexample, such as meat, vegetables,dairy products and even prescription drugs. LIFO means that the latest stock isused rather than earlier stocks, these technique is used if stocks are bulkyand/or difficult to handle. It’s not suitable to use this for perishables as itwould cause a lot of stock to go off or/and out of date. A problem for this isthat old stock will be stored for extended periods of time, maybe even getforgotten about, therefore wasting money on stock not being used. Just in time was developed in the 1950s inJapan. A form of ‘pull’ system.
An organisation only produces, and thereforeorders, what is required at the required time. So, all stocks kept to a minimum,it requires efficient and effective scheduling, plus it is usually managed by acomputerised system, also ensures supplies are delivered only when required. Advantagesof just in time is that your cash is not tied up in stock, so you can spendyour money on other business expenses.
It reduces storage costs as you won’thave the stock to store, because you’ll order stock when you need it, and usingit straight away when It is delivered, also making it very unlikely for yourstock to become obsolete. Also, it reduces waste because you will order theamount of stock you need. Disadvantagesof using just in time is that it’s extremely dependant on having reliablesuppliers, because if you get an order due in for a certain date and yoursupplier is late with the delivery, then you will have to deliver you orderlate, which may dampen your reputation.
If there is a sudden change in yourdemand it will be difficult respond. One huge disadvantage of using just intime is that you lose the opportunity of getting bulk buying discounts.TheKanban system is used as part of the just-in-time process. It ensures onlymaterials/resources needed for a particular stage are authorised for movement.Therefore, avoiding a build-up of unnecessary stocks. A Japanese method meaning’signboards’ or ‘cards’. It is used to move materials through the differentstages of production.
The ‘kanban’ can be in various forms e.g. a physicalcard; a plastic marker.Someadvantages of using IT are, the range of new products, for example you can getanything from touchscreen computers to routine updates on your computersoftware. It can massively increase productivity, as any mistakes that are madeare easily corrected when on a computer, but if you have all paper work then itcan make your work look scruffy and once you’ve sent it off it can be a hassleto make any adjustments, whereas if it’s on a computer you can quickly go ontothe website and change what you’ve done. Also, using IT can create a lot morewaste as there would be no paper waste as every would be done electronically.It can massively improve communication as you can email and fax things withcomputers. Having your work on computer can make your working conditions a lotmore flexible, as you would only need a small laptop to complete your work andnot a bunch load of paperwork.
Somedisadvantages of using IT are, the stress it can be on employees if they arenot computer friendly, which could create a bit of a hostile environment. Itmay reduce jobs, as you wouldn’t need people for all the small jobs. If there areany issues with your IT equipment its reliant on specialists, which could costa lot and may even interrupt your normal routine as you wouldn’t have theequipment you are used to and need. The software on computers are updated veryregularly, which could put the person using the computer under pressure makingthem feel like they must do things which they don’t know enough about. Thecosts of IT equipment aren’t cheap by any means, for you would need an initialamount of money to invest in or have someone that’s happy to make theinvestment.
Lastly, employees may feel like the traditional crafts/skills arelost as it is all controlled by computers. Thebenefits of innovative technology cannot be denied, and businesses cannotignore the change, otherwise they will be slacking behind every other businessthat are embracing technology and making their company more streamlined. Introducingnew systems may be problematic but can be successful provided those applyingthem are enthusiastic and confident. Technology is only another ‘set of tools’relying on good understanding of customer and staff needs and wants; internalauditing and knowledge of the external environment. So good management of it isno different to good management generally.
Quality control involves testing ofunits and determining if they are within the specifications for the finalproduct. The purpose of the testing is to determine any needs for correctiveactions in the manufacturing process. Excellent quality control helps companiesmeet consumer demands for better products.Quality testinginvolves each step of the manufacturing process. Employees often begin with thetesting of raw materials, pull samples fromalong the manufacturing line and test the finished product.
Testing at thevarious stages of manufacturing helps identify where a production problem isoccurring and the remedial steps it requires to prevent it in the future. Aquality product or service is one which is fit for its intended purpose, and isproduced at an acceptable cost. An organisation will need to consider the costof failing to meet quality requirements. Quality management initiatives enablean organisation to focus on both customer and employee satisfaction.
However,this may be at a cost in financial terms and in meeting requirements ofshareholders. 6. Conclusion Fromthe table and graph provided, lawn mowers sell a considerable amount morebetween March and June. To counter the issues of not being able to keep thebuffer stock based on the operations managers suggestions. This report wouldadvise to make more lawn mowers a few months before and keep them in storageand it can then be more consistent with production, making it more consistent,which may make the employees more comfortable than having to rush at certaintimes throughout the year.
Flow production is the most suitable way ofproduction for MowRite as make a lot of lawn mowers and on such a consistentbasis, therefore keeping things the same is most beneficial.This report would advise FIFO to be adapted atMowRite, as it would reduce the waste made, making sure that all the stockbeing bought is being used and not going to waste, making the money go further.MowRite using just in time is very constructive, as stock ordering can bepredicted can tell how much stock you would need. This will release cash wouldbe able to invest in other ventures. So, making investments in other areas likemarketing or advertising could be easily made.