Production_Plan_for_Riordan_Manufacturing

Production Plan for Riordan Manufacturing Operations Management/OPS571 June 28, 2010 Robin Hundley-Solomon Production Plan for Riordan Manufacturing Learning Team A’s recommendation for a new process design and supply chain emphasizes strategic capacity planning, enabling Riordan Manufacturing to sustain systematic balance with increases in capacity, both internally and externally. For instance, Riordan Manufacturing can schedule overtime, lease equipment, and subcontract additional capacity during larger production periods. In addition, Riordan can strategically plan for capacity by using forecasting methods to predict demand. As a result, Riordan can determine equipment and labor needs in accordance with their accessibilities. Furthermore, Learning Team A recommends Riordan strive for the best operating level, which is the processes capacity level at which the average unit cost is minimized at that particular volume output level. Likewise, Riordan must focus on the capacity utilization rate, which shows how close the organization is to its best operating level. Ultimately, Riordan should aim to operate at a point of economies of scales. The organization and production volume will continue to grow, decreasing the average cost per unit of output. This phenomenon is clearly expressed in organization with high fixed costs, as no matter the level of output; the fixed costs remain the same, therefore, the greater the output, the smaller the fixed cost per unit (Chase, Jacobs, & Aquilano, 2006). As Riordan Manufacturing produces more units, the organization will gain more experience with the optimal production techniques, reducing the production cost in a predictable manner. This experience curve will provide Riordan with a competitive advantage. By constructing larger facilities and producing more units, Riordan Manufacturing will gain greater experience, which increases sales volume with a lower cost to price, providing another competitive advantage. Moreover, Learning Team A recommends focusing on particular tasks that contribute the most toward organizational objectives for greater manufacturing performance. Thus, Riordan Manufacturing must use production control methods for different items, providing the greatest operating level for each sector. Consequently, the organization will begin to form separate sub-organizations with a greater capacity focus. However, Riordan must maintain a balance among cost, quality, flexibility, reliability, investments, and new product introductions. Nonetheless, Riordan Manufacturing must create and maintain capacity flexibility, enabling the manufacturer quickly to increase or decrease production levels or shift production capacity swiftly from one product to another. This capability is the result of flexible workers, plants, and processes. Flexible workers require multiple skill sets and the ability to switch from one task to another, which is achieved through broader training in specialization and management support and coordination. Likewise, flexible plants require moveable equipment and easily accessible utilities with the ability to quickly adapt to change. Moreover, flexible processes focus on innovative manufacturing systems (Chase, et al. 2006). Learning Team A suggests Riordan Manufacturing uses coordinated activities to attain high-volume production levels, using minimal inventories of unneeded materials. This strategy is known as lean production or similarly, just-in-time production, in which nothing is produced until needed. Riordan can meet the customers’ demand to customize the design and look of consumer electric fans without wasting materials. In addition, Riordan should pace the workload according to customer demand, as seasonal variations control consumer needs for fans. Furthermore, the organization should maintain a continual workflow to eliminate downtime. This strategy is achieved through balancing workloads, standardizing procedures, and strategically placing associated process stations near one another, similar to an assembly line flow. Moreover, Riordan Manufacturing can post performance and productivity results, which illustrates objective evaluations among workers. This technique raises motivation, morale, and teamwork, ultimately increasing productivity and performance (Chase, et al. 2006). Learning Team A believes the supply chain process is critical to the success of the Riordan Manufacturing and how well the organization is linked to the processes. These processes include the entire flow of information, materials, and services from raw material suppliers all the way to the end consumer. During these transitions, Riordan must track inventory and measure efficiency through inventory turnover, which is the cost of goods divided by the average aggregated inventory value. Likewise, Riordan must consider the cost of goods sold, which is the yearly cost to produce these goods and provide them to their customers, but does not include selling and administrative costs. In addition, Riordan Manufacturing must coordinate efforts for this process to meet constant replenishment demands, which will require regular monitoring for additional opportunities. Thus, Riordan should integrate an agile supply chain system. The agile supply chain combines the strengths of responsive supply chains and hedging supply chains through responsiveness and flexibility to the customers’ needs while minimizing the risk of supply shortages or disruptions by pooling and sharing inventory and other capacity resources among different vendors (Chase, et al. 2006). Currently, Riordan uses a single supplier for the electric motors in their fans. Their vendor strives to maintain appropriate stock levels of the motors, but over the past year, on-time deliveries averaged 93% (University of Phoenix, 2004). By using more than one vendor, Riordan can eliminate its dependence on the single supplier and reduce its risk of shortages. Riordan uses both make-to-stock and make-to-order process with the fans. The make-to-stock results in unnecessary inventory and storage costs. Riordan can implement lean manufacturing to transition from a make-to-stock process to make-to-order process. Strategic Capacity Planning Riordan Manufacturing’s (RM) Chinese business partners for research and development is located in close proximity to the Qiantang River. RM made a decision to take the electric fan process design supply chain to China and handle the shipping needs through the Qiantang River which has an access to Hangzhou Bay. In an effort to make the new location profitable, RM needs a strategic capacity plan. An accurately developed strategic capacity plan will provide a solution for determining the overall capacity level of facilities, equipment, and labor force size that will serve and support the company’s long-range competitive strategy (University of Phoenix, 2004). Capacity The capacity level has a significant impact on the Hangzhou location. If capacity is insufficient, the company may lose customers through slow service or by allowing competitors to enter the market. If capacity is excessive, they may have to reduce prices to stimulate demand; underutilize its workforce; carry excess inventory; or seek additional, less profitable products to stay in business (University of Phoenix, 2004). In the Hangzhou operation, most of the raw materials and finished products are being shipped from Hangzhou Port to Shanghai Port, then to their final destinations. Therefore, the continuance of shipping between Hangzhou and Shanghai could be costly. Riordan Manufacturing Technology Technology and Systems There is an accelerated introduction of new technology and systems, which could be adopted to help organizations with their operational procedures and policies. “Technology has played the dominant role in the productivity growth of most nations” (Chase, et al. 2006. p. 774). RM’s human resources department has been operating with a 20th century system. The Human Resources Information Systems (HRIS) monitors pay rates, new hire information, and vacation time. These inventory management and control systems consist of hard-copy forms and computer programs inputs, which are submitted by the different departments via phone or fax. This system has been proven to be ineffective for the current generation of technology systems needed to conduct operations. Computerized RM would be better prepared to compete by introducing a new computerized system that would combine the needs of the human resources department into one interlinked system accessible in all locations, instead of the current central location in San Jose. This system would benefit the entire organization of human resources activities. The adapted system could be outsourced to an agency that specializes in human resource processes allowing RM to focus on production of goods. Recommendation The recommendation would be to introduce new technology to the organization and maintain a life cycle replacement system that would ensure the organization keeps up with the latest technology. References Chase, R.B., Jacobs, F.R., & Aquilano, N.J. (2006). Operations Management for Competitive Advantage (11th ed.). New York, NY: McGraw Hill/Irwin. University of Phoenix. (2004). Riordan Manufacturing Virtual Organization [Computer Software]. Retrieved from University of Phoenix, Simulation, OPS571 - Operations Management website.