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operation management

2020-02-04 来源: 51Due教员组 类别: Paper范文

Executive Summary

According to Alex Hill and Terry Hill operation management is crucial for a company, because it understands the company's input and output. It is concerned with the full capitalization of the product, the resources of the enterprise, and the conversion of these resources into consumer goods and services. Operation management provides a thorough understanding of how the company carries out the company in its production process to meet the customer's expectations and requirements. From the case study of Treva Bikes, this paper discusses such aspects as material plan requirements (MRP), challenges faced by the company, push pull concept and so on, and provides suggestions to improve its business. .

 

Introduction

Treva Bike is a leading bicycle manufacturer in Europe. It has more than 200 different sales locations in the UK. With its excellent design and advanced distribution system, it sells more than 100000 bicycles every year. 92% of the main competitors are from the United States, Asia and Europe. The company is famous for its new design and good sales system. Bicycles are sold by main retailers, independent bike dealers, and other outlets. There are over 200 different locations in the UK to distribute company's products. The current factory production capacity allows about 2500 ordinary, 2000 or 1800 mountain bikes to be produced within a week.The latest annual report of Trevor's bike shows a 25% gross margin, but only 2% of the net profit. In addition, the annual profit of Trevor bicycles has fallen, and the stock has risen 2.4 times. In order to solve this problem, Duncan, the director of manufacturing, proposed the problem of the establishment and pull system of the plant three assembly line to improve the bicycle running of Treva. The pull system is to reduce the level of inventory by linking the use of suppliers and materials to the Kanban system. At the end of the report, it will work with Treva Bike on the overall business plan and assessment problems and challenges, and put forward some suggestions to solve risks and problems in the future.

 

An Overview of Treva Bike's 0perations. 

According to Alex Hill and Terry Hill, management and services include operation strategy, planning and control, design and improvement.

Resource planning determines the resources needed to predict the total demand for all services or products within a future period of time, usually for two to five years.

The demand forecast in some classifications is used for rough review of the necessary resources for staff skills and process types. According to the type of business involved, it lasts six months to two years.

Detailed plans to determine the capacity (staff skills and processes) and materials to meet the service or product schedule, together with any contingency plans

Day-to-day (often hourly) control systems to manage the detailed capacity plans and material requirements to meet the scheduled delivery of services and products to customers.

 

The management strategy of Treva Bike is to shorten the cycle, improve the quality of customer service, and ultimately reduce inventory and cost and technology. The company is famous for its new design and good sales system. Bicycles are sold by major retailers, independent bicycle dealers, and other sales channels. There are more than 200 different locations in the UK to distribute the company's products. There are three main types of Companies: ordinary, urban and mountainous. Regular models account for the largest proportion of the annual sales of 100 thousand bicycles. Treva's bicycle is made up of 25-35 different parts, and the cost of a complete 60% bike is outsourced.

The MRP system is controlled by the Treva Bike plan and the production requirements. A weekly plan is set up for a term of eight weeks. The main plan is 4 weeks, and the new order will be arranged in fifth weeks. The factory adopts the mass production plan. The current factory production capacity allows about 2500 ordinary, 2000 or 1800 mountain bikes to be produced within a week.

The company's suppliers have established a good relationship with the company. The company ensures that the supplier provides the raw material for the assembly of the goods a week before the assembly. Each part of the supplier is recorded in the inventory to ensure that there is no excess supply. The company ensures that the supplier has a healthy relationship with the 60% material required for the assembly process from the supplier.

Planning and Control System

MRP

MRP refers to the company provide specific services and products according to one or more volume requirements in the future, then invest quantitative material and time to meet their demand. (Hill and Hill, 2012)

Treva Bike is currently using the material requirements planning (MRP) plan and control system products. The main production plan (MPS) is prepared eight weeks a week. The master plan then freezes for four weeks for time to make the required parts and to receive the parts from the supplier. The new order is only placed in the general plan in 5 weeks or later.

The volume of the conventional model is calculated. The unit is 2400 units, which is about one week's production. The other two models, cities and mountains, are 1150 and 960 units in mass production. In the calculation of large hours, it is assumed that the charge is 25% per year.

The volume of the conventional model is calculated. The unit is 2400 units, which is about one week's production. The other two models, cities and mountains, are 1150 and 960 units in mass production. In the calculation of large hours, it is assumed that the charge is 25% per year.

Factors needed to be considered in calculating batch size, in general, are as follows  installation time, installation cost, manufacturing cost, mass productionproduct, processing and raw material inventory costwarehouse handling, ordering, transportation cost

MPS

Master Production Schedule (MPS)

According to Alex Hill and Terry Hill, this plan is essential as it allows the company to maximize production, identify challenges and bottlenecks and to anticipate completed goods. The master production schedule as seen in Table 3 and it allows the Treva Bikes to maximize its resources that include time and finances when a demand for a specific product will be encountered.

 

 

Operation Management Challenges

The main challenges of Treva Bike include the competitor from Asia, high stock, bad customer service, high cost and falling profit.

Although Treva Bike has always been the leader of the market, the vast majority of bicycles sold in the UK, that is, 92%, are imported. The imported bicycles are from the United States, Europe and Asia. Recently, the major Asian companies seem to be selling low priced bicycles, emphasizing the quality and reliability of the design.

Treva Bike's competitive companies use a lot of technology to shorten the cycle, improve the quality, and ultimately reduce inventory and cost. And Treva Bike has not taken measures on high stock, bad customer service and high cost. In addition, the quality of the supplier of Treva Bike is not high.

Treva bike shows that gross profit is 25% of sales, the latest financial statements, and net profit, after tax, sales in this fiscal year are a disappointing 2%. Profits have been falling over the past three years. The financial statements also show that the stock is growing at a rate of 2.4 times a year. Duncan referred to reduce production costs and change inventory by using three assembly line and a new pulling system in order to solve Treva Bike's current issues.

 

Order Winners

According to Alex Hill and Terry Hill, order winners are to win an order is a criterion that distinguishes a company's product or service from the other. The standard of the order winner is to compare with the competitor, make the company different, and allow the supplier to hold them to win the order. The higher the supplier scores, the higher the factors, the more opportunities to win the order.

According to Vastag, G. and Ram Narasimhan, appropriate order winners are as follows: price, short lead times, on-time delivery, and time to market, flexibility, service levels and enhanced customer propositions.

Price

Treva's bike started its business in 1954 of the conventional model of the introduction, and it still made it. Although these years, both from the material and style have regular updates, the basic design is the same. The retail price of the ordinary model is 49. In 1975, the company launched a city model with a special design, which is lighter than the conventional model. The retail price of the city model is 99 pounds. 1994, the company has launched a mountain climbing model. This model is heavy; mountain bikes are used to deal with unpaved environments in such a log discovery barrier, vertical cliffs, and small boulders. This mountain bike sells for 149 pounds and has been widely sold in the UK.

Short lead times

It takes about four weeks to reorder from the factory, and it takes a week to transport. Some stocks are safe stocks. Similarly, the four weeks' work is to provide high machine utilization and promote scheduling. The company also has a 10 week (Procurement) part to facilitate scheduling and suppliers to prevent production lines from stopping. The inventory of finished products, processing and raw materials is 750000 pounds, 300000 pounds and 350000 pounds, respectively.

On-time delivery

The inventory of finished products is distributed in three warehouses all over the country. The average supply of 75 days is storage and store storage, tube cutting burr and formation, final product storage, frame part storage, frame welded pipe, cleaning of the frame of the general assembly frame.

Time to market

Treva Bike has been the market leader in the past 40 years. At present, it has 4.6% of the British market, and the other companies have a total of about 3% in the UK. The massive majority of bicycles sold in UK, that is, 92%, are imported. These imported bicycles are from the United States, Asia and Europe. Recently, the major Asian companies seem to be selling low priced bicycles, emphasizing the quality and reliability of the design.

Service levels

Treva Bike is a manufacturing and selling bicycle company in the European market. The company is famous for its new design and good sales system. Bicycles are sold by main retailers, independent bike dealers, and other outlets. There are 200 different locations in the UK to distribute the company products.

Enhanced customer propositions

Duncan considered the current problems facing the company and the actions to be taken to maintain the company's market share and accelerate business growth. He wanted to know how to reduce production costs and inventory by shifting from traditional systems to lean plan control.

 

Advantages and Disadvantages of Pull system

The advantages of pull system are as follows. The operating system is relatively simple, the use of computer is very low, in some departments, and computer control is more stringent than the computer. And the purpose is to make all the materials used actively throughout the process. In this way, the material is always the operating system of the production factor, thus avoiding the cost without corresponding benefit, so the stock is kept at a minimum.

However, the drawback of JIT system is that it has the risk of stock-outs, which is very dependent on the consistency of the supply chain. If faced with the risk of out of stock, companies need to take appropriate alternatives to obtain the similar product. Second, there is a lack of control over the time frame, as customers are easy to lose due to the inability to provide each order on timeliness. Third, the JIT system requires companies master more about the inventory plans. (Shah, 2018)

 

New Product Introduction Option

As far as I am concerned, the new bicycle can be produced in small volume. If the new bicycle has a small production and a positive reaction to the market, it can achieve a profit of 150000 pounds; the unfavorable market will produce a loss of 50000 pounds. It is not difficult for Treva Bike to produce in small volume; it can make full use of current production line, that is to say, no much more operation cost. Meanwhile, it does not affect the main business. If loss occurs, only 50000 pounds, as can be afforded by Treva Bike.

However, production of a large number of bicycles will earn 300000 in a favorable market. The adverse market will lead to a loss of 250000. If the bicycle production in big volume, Treva Bike has to set up another production line, find more competitive supplier, and hire more workers, as needs very good cash flow, but the Treva Bike is in not good financial situation. Furthermore, if the loss happens, it reaches high to 250000 pounds, which may destroy Treva Bike normal operation.

Furthermorewe can also choose a progressive market strategy. First we choose a experimentation area as a sample to put into trial production. If the market reaction is positive, we should increase the number of production and develop multiple styles. If the market reaction is dull, we can consider the appropriate change of money and then carry on the marketing planning activities. The market will close the project without the color of the market. When designing a new product, the design department should try to consider some accessories business and consider that the accessories of standard parts can be used. When ordering inventory, the demand of new market will be taken into account.

 

Problem Solution

Duncan is thinking about the application of pull system of planning and control, in thinking about lean manufacturing.  This proposal is proper for the company as it has various advantages. 

The advantage of this method is to ensure the effective utilization of resources and avoid the waste of resources. Pull the system to focus on the priority of a specific task or product to ensure the maximum use of resources and avoid waste. Managers gain control of resources and propose solutions to mitigate and manage risks because they occur. In addition, the waste of resources, cost savings, these funds can be redirected to other projects (Heizer, 2016). Another advantage is that it ensures that employees do not feel overloaded and overworked. As the system focuses on prioritization, it stipulates that employees are focused on producing and manufacturing a product to ensure high quality of the product. It allows employees to concentrate on the appropriate products and tasks at the appropriate time. The communication has been improved in the pull system. The manager provides a platform for the employees' views and opinions on all aspects of the company. In addition, the system encourages team cooperation and comes from effective and appropriate communication settings.

Non-equity cooperation can also solve the problem of Treva Bike. Treva Bike can cooperate with suppliers and R&D department outsourced. The advantage of non-equity cooperation lies in R&D cooperation and improvement of product innovation to meet the needs of consumers and the market, and ultimately increase market share. Second, it provides the opportunity for Treva Bike to cross business collaboration with other vendors and to integrate vertically. (Kwicinski, 2018)

According to Alex Hill and Terry Hill, card which indicates standard quantity of production, which originated at Toyota to stop overproduction and link the flow between departments, was inspired by replenishment systems in U.S. supermarkets, maintain discipline of pull production and Authorizes production and movement of goods.

 

Conclusion

The paper introduces Treva Bike's operations overview, then describes the planning and control system including Material Requirement Planning and Master Production Schedule. Then introduces main challenges of Treva Bike: the competitor from Asia, high stock, bad customer service, high cost and falling profit. The paper introduces the key elements of order winners: price, short lead times, on-time delivery, and time to market, flexibility, service levels and enhanced customer propositions. Then compares the advantages and disadvantages of pull system; as for new product introduction option, the paper contends the new bicycle can be produced in small volume. To solve Treva Bike’s problem, the application of pull system of planning and control and non-equity cooperation should be adopted.

Treva Bike should implement lean inventory systems and pull systems to ensure maximizing their resource creation in high demand goods. The company should ensure that its operation is effective so that the introduction of new products will not be challenged, but it is recognized by business and consumers. By advocating a better operating system, Treva's bicycles are expected to increase their profit margins and increase their consumer groups.

 

Reference List

Hill, Terry.(2000). Manufacturing Strategy: Text and Cases. 3rd ed. Boston: Irwin McGraw-Hill.

Kwicinski, J. (2018). Alliances: Getting Non-Equity Collaboration Right. [online] Waterstreetpartners.net. Available at: http://www.waterstreetpartners.net/blog/alliances-getting-non-equity-collaboration-right [Accessed 8 Jan. 2018].

Vastag, G., and Ram Narasimhan. (1998)"An Investigation of Causal Relationships Among Manufacturing Strategic Intent, Practices and Performance." In Performance Measurement. eds. A.D. Neely and D.B. Waggoner. Cambridge, UK: Centre for Business Performance: 679–86.

Shah, S. (2018). Just in Time (JIT) Advantages and Disadvantages | Babington Group. [online] Babington Group. Available at: https://babington.co.uk/blog/accounting/just-in-time-advantages-and-disadvantages/ [Accessed 9 Jan. 2018].

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