Team_D_-_Riordan

Assignment 4: Production Plan for Riordan Manufacturing Learning Team D: University of Phoenix Team D..This assignment is best prepared if the team follows the outline of the components of a supply chain which the class has reached a consensus on the five pieces of Plan, Procure, Produce, Deliver, and Make sure the customer is satisfied. While the team has spent a great deal of effort on discussing the academic concepts behind the issues in the simulation it appears that the team did not understand that that only focus of this assignment is the fan manufacturing facility in China, and might not have found the summary provided for you at the end of this submission or did not appreciate the importance of all the operating issues and challenges discussed in the case. The assignment clearly states: In this team paper you are to identify the challenges, problems, inefficiencies, and down right bad practices, that are occurring anywhere in the Roirdan China operation, and its interfaces with the home office.  In Wk 6 your individual assignment is to develop process improvement plans for the Roirdan China operation.  The issues that you discover and discuss in this paper will from the foundation for your week 6 individual papers. Please see the several comments below that identify undocumented, and erroneous statements in this submission. The team has identified some but not all of the other day-to-day operating challenges in the simulation. An excellent summary of the existing situation at the China operation is provided in the case and is copied at the end of this submission. There are clear-cut problems with the method of forecasting sales and handling custom orders; there are issues with poor supplier performance; with methods of distribution, plant location; with the recoding and distribution of supply chain and financial information; and a potential logistics driven plant relocation. It is not until these problems and challenges have been identified can they be associated with potential capacity, and manufacturing improvement suggestions. As I am sure you recognize this initial analysis only sets the base line for the your Week 6 individual assignment which requires an analysis and recommendation for resolution of the external and internal issues involved, and unless the problems and challenges are identified here, your later recommendations will not have solid foundations. An item of importance is the so-called MRP requirement in your Week 6 assignments. In this Week 4 start up assignment you have dealt with some of the M[Materials] and the R [Requirements] but the P [Planning] needs extreme focus on your part as does the possible selection and implementation of technology as it can be brought to bear on the challenges. As you will note in the text and our discussion MRP is a planning system, not an execution system. Execution, such as inventory management and factory scheduling, procurement, and information processing are the responsibilities of the Ops/Supply Chain Managers, and the focus of your Wk 6 assignment will be how to use this planning information to execute production processes. Points available 150 - Points Earned 115 Production Plan for Riordan Manufacturing The Riordan Company is a fortune 1000 organization founded by Dr. Riordan, a chemistry professor who patented several techniques in processing plastics. The company produces products such as beverage containers, medical parts and fans. The company has several locations throughout the United States and one International plant in Hangzhou, China. Riordan identified several challenges, inefficiencies and bad practices throughout the supply chain and company processes including inventory demands, recording of financial and accounting data, and quality control. Finance and Accounting One of the major problems at Riordan Manufacturing is their process of consolidating necessary financial and accounting data. Riordan’s three operating entities that are located in Georgia, Michigan, and San Jose California are all running on different financial and accounting manufacturing process applications. San Jose uses a Windows-based ERP program; Michigan uses a vendor developed software application. The vendor that developed Michgan’s software is now out of business. Georgia also uses a vendor developed software; however, a different vendor developed the software. The San Jose office, which is the corporate head quarters, processes the consolidated financial and accounting data. The process of submitting data to corporate for consolidation is very disorganized which has caused a challenge for the company. The data files are submitted to corporate in different ways including electronically by data files and hard copy files that must be converted to digital files and requires a significant amount of time for consolidation. Data files are also being submitted that must be converted to match the system at San Jose. Due to the different programs and ways of submitting data there is a lengthy process to consolidate and process financial and accounting data. This situation in unacceptable to the company as is creating problems related to customer and vendor satisfaction. The data conversion issue could potentially impact the company negatively if the company does not comply with governmental reporting requirements. The financial reports being completed 15-20 days after month end could cause the government violation. Inventory A second major problem identified at Riordan has been the company’s inventory supply and demand. Riordan Manufacturing has outsourced and partnered with the Chinese in hopes to minimize their costs and increase profits. Riordan provides operations capital, injection molding machinery and expertise; whereas the Chinese supply the labor, interface with local vendors, government and regulatory agencies. In producing the electric fan, finding the balance for the right amount of fans needed to meet demand will be a major challenge for the organization. The purpose of inventory analysis in manufacturing and stock-keeping services is to specify 1) when items should be ordered and 2) how large the order should be (Chase, Jacobs & Aquilano, 2006). Managing inventory is a huge challenge as it can increase costs dramatically if forecasting is incorrect, and will require all levels of management, researchers, and assemblers to track inventory to maintain the right level that specifically meets demand. Electric fans primary customers are homeowners. [That may be true but the simulation provides no information about Roirdan’s fan customers. They could be other manufacturers who use the fans in their products.] The number of homes being built and purchased will impact the demand for electric fans. Customers typically buy or build homes when the interest rates are low. The constant fluctuations in interest rates does have an impact on the decisions of customers building or buying new homes, thus, the changing interest rates of the economy could impact the demand for electric fans. Based on this theory, Riordan will have a difficult time being able to store the right amount of inventory in efforts to minimize the financial impact the overage/shortage in inventory is having on the company. Quality Control The final concern identified is the quality of the production of the plastic medical products in the Pontiac Michigan location. Several employees addressed the concern for product quality through memos to various management team members stating that training and quality control was reduced due to cost cutting in the company. The memorandums documented in detail that stents and other plastic products were making it through the quality control line with defects and then sent to packaging and shipped. [The assignment is quite specific in saying that your ONLY area of interest in fan manufacturing in China, and while this may be important to Roirdan, it has no bearing on this assignment.] After the memos were sent, the company was contacted by media and subpoenaed regarding a wrongful death suit in an Ohio hospital. The subpoena requested that the Riordan Company provide production of documents regarding quality control for a production run of stents. In one of the response memo’s a management team member stated that the company is within the minimal FDA standards; however, two of the employees that reported the issues are no longer working for the company and the third has been relocated to the China facility. The challenges that Riordan will have to overcome are: working to clear and re-establish the company’s image, redesign and implement a process for quality control and introduce and create a more ethical company culture. Supply Chain Riordan Manufacturing has proposed relocating their operations from Hangzhou to Shanghai, due to their increased operation costs. The company believes that the relocation of the China operations to the city of Shanghai will result in significant savings. The relocation would allow future growth in an urban setting that would help with marketing the company more effectively. The major inefficiency was identified with shipping and was discussed in the memo. The plastic fans are currently being trucked to the port and loaded into shipping containers.  The containers are then loaded into barges that finally get to the Shanghai port.  Finally, the containers are offloaded and trucked to another area where they will depart to their final destination.  The suggestion is to transport the fans by truck to the port of Shanghai and then loaded onto their ship where they will reach their final destination. By eliminating the extra shipping it would create efficiency within the supply chain and will allow the operations in the city of Shanghai, alleviating the bottleneck of local shipping companies charging to move goods to the port of Shanghai. [This is good but there are also supply chain challenges with the motor supplier, inventory data recording and others.] Riordan can accomplish their goals of being a solution provider for customers, maintaining an inventive and team-oriented working environment, and maintaining and achieving reasonable profitability to ensure that the financial and human capital is available for sustained growth. This is accomplished by following Kaizen philosophy of continuous improvements, identifying the company challenges by identifying bottlenecks, implementing a lean manufacturing strategy, and improved operations through Change Management. The data provided signifies good economic conditions for Riordan and opportunities to bargain low interest rates into new opportunities to explore new markets and increase productivity. Riordan can achieve business growth by aligning the company’s mission, strategy, planning and goals. [Identifying those bottlenecks is the objective of this assignment. It is not sufficient to say that bottlenecks should be found but this assignment asks you to find them.] References Chase, R. B, Jacobs, R. F, & Aquilano, N. J., (2006) Operations Management for Competitive Advantage: Process Analysis. McGraw Hill-Companies Riordan Manufacturing’s China plant operates as a decentralized unit of Riordan Manufacturing. It prepares its own forecast of electric fan sales throughout the world, which includes the United States. It schedules production of these fans to meet the forecasted sales. The electric motors used in the fans are completely assembled units. They are purchased by buyers in the China Plant’s purchasing department from a local Chinese company. While this company attempts to maintain adequate quantities of electric motors in stock to meet all its order requirements, its on-time deliveries over the past year have averaged only 93%. The buyers also purchase the Plant’s requirements for plastic polymers locally. The polymers, after being received, are melted at precisely controlled temperatures and injected into individual molds to create individual plastic parts required by the fans. This is accomplished by means of injection molding machines located in the production area. These capital expensive machines control the molding processes to the specifications of the plastic parts being produced, such as the fan blades and fan housings. The plastic fan blades, plastic fan housings, electric motors and other miscellaneous parts are then assembled to create finished models of electric fans. The assembled fans are individually packaged together with instructions on how to use the product and stored in a finished goods stockroom awaiting sale. This part of the plant’s business is a make-to-stock operation in which the future demand for fans is forecasted based on taking the average of sales for the last three years and extrapolating it into the next year. The assumption in using this forecasting method is that history will repeat itself within manageable limits. Orders for electric fans can be picked up at the China plant by the customers themselves or else they can be shipped to the customers anywhere in China. The China Plant uses a Chinese shipping company that offers services comparable to FedEx, but is less expensive. Orders are also shipped internationally by either FedEx or a Chinese shipping company that competes with FedEx. Two shipping companies are used by the China Plant for international shipments to assure that timely delivery services will always be available. The services both shippers offer are very similar and their shipping charges are competitive. The China plant also designs and develops customized electric fan products for customers world-wide under individual customer contracts. After the design and development of a new electric fan is completed for a particular customer, a small production lot of the fans is usually scheduled, but under a separate contract. A separate contract from the development contract is used since the final cost of the fan can only be determined after its development is completed. This final cost is used in estimating the cost of the production quantity. A small production quantity is produced to statistically validate both the design of the fan and the production process used to build and assemble the fan, if the fans design represents a significant departure from the way typical fans had been designed and assembled. This initial production can be described as a production pilot run. Estimates of follow-on orders for these new custom fans are not forecasted but are based on the customers indicating what their estimated yearly requirements will be. Since the fans are being produced to a particular customer’s unique requirements, they are not available for sale to other customers; consequently no additional forecasts are required. The customer’s indication of what its yearly requirements will be helps the China Plant to estimate what their yearly resources requirements will be in terms of production capacity, material requirements, and labor to satisfy the customers requirements. Customers normally negotiate their yearly requirements for fans in order to obtain the lowest price. They then provide periodic release orders for smaller quantities against the yearly total throughout the year. Periodic orders for quantities of fans against the contract’s yearly total however are received from customers randomly throughout the year. This makes it difficult for the China Plant to estimate exact material requirements in the very short term since the orders are received randomly and are for varying quantities. To assure that it will be able to meet any delivery schedule its customer’s request, the China plant maintains a safety stock of polymer material even though the material is obtained locally and does not present an availability or a delivery problem, at least for the foreseeable future. It does not stock electric motors other than a small quantity of the more popular types for warranty repairs, but depends on the electric motor supplier to maintain motors in their stockroom. The China Plant, following good supply chain management practices, periodically provides the electric motor company with a list of the motors it forecasts it will need throughout the year to help the company plan which motors and how many it should carry in its stock. Logistics requirements for the China plant to ship products internationally are similar to the requirements for shipping items from the United States to China. A logistics scenario for a shipment of items from the Riordan R & D facility, for example, to the China Plant would be as follows: 1. Riordan’s R & D Department contacts FedEx, the shipping company they plan to use, on a shipment going to the China Plant. 2. FedEx picks up the shipment at the R & D facility. 3. The R & D Facility provides FedEx with information on the items being shipped including export license if required, item descriptions, item model or part numbers, quantities, total cargo weight, Product Duty Classification Codes, and destination name and address. The United States Bureau of Export Administration (BXA) under the U. S. Commerce Department oversees export control and licensing in the United States. It is mandatory that companies follow their requirements when shipping items internationally. Originals of all documentation are maintained by Riordan’s R & D’s shipping department. Copies of all the shipping documents are also faxed to the China Plant. a. To determine the Product Duty Classification Code, the R & D Facility compares the technical description of the items being shipped against a set of technical descriptions known as both Schedule B and as the Harmonized Tariff Schedule (HTS) codes. The HTS is maintained by the U.S. Government. Coding items with duty classifications can be tricky business, but it is essential to international supply chains to make sure that only the correct amount of duty is imposed. b. The code for a fractional horsepower AC motor for example is 8501.20.2000. The code for polycarbonate plastic material is 3920.61.0000. The first six digits in each code is the code classification. The last four digits is a country specific code. 4. FedEx delivers the cargo and documentation to a customs broker at a United States sea port and then faxes the details of the shipment, including shipment arrival time in China, to FedEx in China so they will be prepared to receive the cargo upon arrival. 5. The Broker takes possession of the cargo and the documentation from FedEx and presents the documentation to U.S. Customs for clearance. Dock fees or any other fees such as channel dredging fees, if imposed, are identified and paid by the broker. The broker collects for all such payments from the R & D Facility when his responsibilities have been fulfilled and he submits his bill. 6. The Broker also arranges transportation with a ship company and has the cargo moved to the dock area along side the ship. Note that this same procedure would be used to ship by air. The shipping documentation travels with the cargo although copies are usually faxed to the customs office at the destination port ahead of time by the broker to help expedite receipt and clearance of the cargo when it arrives. Shipping charges by the ship company are billed directly to the R & D Facility. 7. The ship reaches its destination. 8. Chinese Customs examines, or re-examines the paperwork if previous copies were received, accepts it if there are no problems and releases the cargo, which has been or is in the process of being unloaded, to a designated local Broker. This Broker might be a member of the same Broker Company hired originally in the United States or it might be a different company. The stateside broker determines which one to use. The Broker accepts the paperwork and cargo and submits everything to the local FedEx carrier after making copies of all the documents for its files. If any additional fees such as dock fees are imposed, the Broker pays these and submits a complete bill for his services, including any fees he pays, to the China Plant. 9. Fed Ex accepts the cargo and paperwork from the Broker, signs off on receiving the cargo, and delivers the cargo to the China Plant. FedEx makes copies of all documentation for its records. 10. Upon receiving the delivery, the China Plant verifies the contents of the shipment while checking for damage, then accepts the shipment and provides FedEx with a signed receipt.