A) Master Production Schedule for the Bread Maker
Planning the production process is a major step in achieving a firm’s goals and objectives. It is, therefore, very crucial to ensure that the scheduling is done. A master production schedule becomes important since it shows how many items should be produced according to the customer orders and demand forecasts. The task aims at addressing the matter with regards to Realco by establishing through the Master Production Schedule if they are overpromising their customers or not.
Master production schedule
|Inventory on hand at the start
|Projected on hand inventory
Available to promise (week 1) = Inventory (week 0) + Production in week 1 – Customer Orders (week 1) – Customer Orders (week 2)
From the above schedule it is clear that Realco has overpromised their customers in week 2. It should have a formal master production schedule to help in making informed decision. Consequently, there is a need to upgrade their forecasts, since they are low and their production capacity needs to meet more than 20,000 bread makers in a week. Similarly, from the projected on hand inventory the company is under promising to its customers because the ending inventories for most weeks are higher than the customer orders. They also have available- to-promise numbers increasing as the customer orders decrease. It means that there are many uncommitted inventories over the weeks (Sheldon, 2005).
B) Advantages and Disadvantages of Jacks Approach
Jack’s approach is based on their past experiences with the customers. They just inform their customers when it is most appropriate for the company. They do not have a formal approach to assessing whether they can meet a customer’s order. Such approach has the advantage of being simple, since it does not require any calculations. It is also cost-effective, since it does not have implementation charges or need for a specialized and trained personnel to operate. It is also flexible in terms of adjusting to the changes in the production process unlike if they were using a master production schedule. However, such approach has several drawbacks. They include interfering with the stability of the production process. It is caused by the fact that the company is not referring to what is scheduled to be produced at a given time. For instance, if a bread maker is not supplied when it is supposed, it is likely that the schedule will change. It leads to planning in areas where past failures are taken into account. It addition, there is a lack of proper demand prediction, since there are times when demand is high and low. Such approach denies Realco the opportunity to increase the demand indicators. It calls for implementation of a Master Production Schedule which will make the company efficient and effective by providing a basis to meet delivery promises to customers, attaining objectives regarding production and sales and proper utilization of production materials. Additionally, the schedule helps in predicting the seasons when demand is at peak or otherwise so that to have a steady production process. Large quantities can be produced into take advantage of minimal times the process is set up (Mukhopadhyay, 2007).
MPS also helps minimize chances of the employees panicking when they are faced with large orders. It assists in setting priorities correctly, whereby future requirements of the customers are put into consideration. By using a fixed schedule of the customers’ needs it is easy for Realco to plan and avoid failing to deliver the goods to customers. The organization will also need to engage its employees in how the production planning is implemented. The marketing manager and the inventory manager should work together with other employees to ensure that the production schedule is developed. Additional resources, such as trained personnel to handle scheduling.
C) Refusing an Order vs. Accepting and Failing to Deliver
It has often been said that the customer is always right, though it is not always true. It is important to put the needs of a customer at the forefront. However, in some cases it is likely to put a company in jeopardy. A company may find itself in a situation where a customer places an order but there are not enough supplies to meet it. Should a company accept the order and risk failing to honor the promise or should the order be declined? Refusing the order may imply to the customer that the company has poor requisition methods or poor management and may risk losing the customer, lack referrals or repeat orders. However, it will save a company from a damaged reputation if it accepts the order and fails to complete it. In addition, a customer is less likely to become disappointed when he has been given a clear explanation that his order will not be accepted due to the said reason. It also provides the levels of confidence and trust between a company and a customer. It is also important for a firm to be genuine without isolating its needs, as well as those of its customers. Negative impacts that are likely to result from this step, such as declining word of mouth sales or reduced repeat orders, can be countered by assuring the customer that the problem is only temporary and will be solved within the shortest time possible (Murthy, 2005).
On the other hand, accepting an order and failing to deliver it is likely to cause more harm than good to the company’s reputation and future growth. Companies often find themselves in such situation due to being overcommitted to meeting customer needs without carefully considering how viable it is to deliver goods and services in time. Such companies do not establish the workload they have or availability of resources required. Inability to decline orders in an attempt to please the customer or fear of losing a good business causes a company to lose credibility and questionable integrity and value systems. The customers are also likely to spread the bad news of how a company disappointed them; it will affect a company immensely. Instead of promising what cannot be delivered, a company should take responsibility and rectify whatever its problem is. Consequently, by making mistakes every company should undertake necessary measures to mitigate the damage, stating how the problem will be rectified. In conclusion, it is reasonable to decline customers’ orders and explain to them why it will not be possible to accept them in order not to disappoint clients by failing to deliver after a period of time. Failing to deliver an order that a company has accepted may lead to legal charges being filed against a firm (Murthy, 2005).
D) The Impact on Average Inventory Levels and Production If Realco Produces 20,000 Bread Makers
If Realco has to produce 20,000 bread makers every week it will mean that production and forecasted demand will be the same. The impact is that inventory at the end will always be 7,000 units. It is caused by the fact that the number of bread makers forecasted is the same number that is scheduled to be produced. Therefore, the inventory level that was left at the beginning will remain stable till either forecasts are adjusted or production is altered.
Chapter 13 Case Study: Supply-Chain Challenges in Post-Earthquake Japan
E) Advantages of a Lean Supply Chain
Before the earthquake most Japanese auto industry companies used lean supply chain. Lean manufacturing aims at improving business and the production process. Its major objective is to eliminate wastes which are non-value adding. It has various benefits, such as removing wastes that include time wasted by people in moving during the production process, resources being wasted in holding unnecessary levels of inventory and work in progress which does not gain any added value. Human effort wastage is eliminated by ensuring that people are not overworked by performing tasks which are not needed immediately. Lean supply chain also causes an increase in revenues and profits. It results from the reduced costs on unnecessary processes. It enables a company to save and realize high profits. It also allows a company to make appropriate pricing decisions where the price is not too high for the customer or too low for the company to make reasonable profits (Mukhopadhyay, 2007).
It also helps a company provide its customers with satisfactory services. Such supply chain permits a company to offer quality products when customers need them. Satisfied customers are a key factor to growth through repeat purchases and referrals from word of mouth selling. Efficiency in production process makes the output reliable. It is also less likely that the machines will break down due to being overworked. There is enough time to ensure that they are serviced regularly. Since inventory levels are kept low, less space is required. It saves a company on holding costs, rental charges and property maintenance among others. It also provides employees satisfaction by incorporating their ideas on what should be done. They are better placed to identify where inefficiencies and wastages are occurring. The fact that they also use the strategy indicates that they are satisfied, especially when their ideas are adopted or given a consideration (Mukhopadhyay, 2007).
F) Disadvantages of a Lean Supply Chain
Such systems advocate for minimizing supplies as much as possible. It means that they depend on suppliers who provide the materials in time when an order is placed without fail. However, in real life it is not perfectly possible due to such challenges as delays in shipments or transporting or employees going on strikes, and suppliers may also need to be notified in advance as they don’t want to work without proper plans. Such challenges will negatively affect the steady flow production process. The cost of implementing a lean supply system is normally high, since it necessitates the need to train employees which may be time-consuming and hiring managers who have experience in such process will inflate a company’s payroll. Additionally, the cost of machinery that increases efficiency and installation costs may increase gearing levels, especially when a company is borrowing funds. Such technology has also been overused and new challenges and inefficiencies around it have emerged. They range from time taken in tracing productivity and wastages which could have been otherwise used in production process. It also overemphasizes on waste elimination and overlooks other major concerns. It looks at ways of increasing productivity by reducing wastes and overlooks the welfare of employees and social responsibility (Panneerselvam, 2012).
G) Evaluation of Toyota’s Plan for a “Foolproof” Supply Chain
After the earthquake, Toyota developed a strategy of reducing future losses resulting from national disasters, such as tsunamis and earthquakes. They decided to make parts of Japanese auto industries standard in order to produce similar components. However, it was not logical because it would mean that the automobiles being manufactured would be the same. It would go against the principle of continuous improvement, since automobiles would all be the same. The other plan was to find more suppliers, increasing the levels of inventory held to accommodate enough resources for some months. It was done in an attempt to avoid occurrence of events where supplies are needed but they are not available. It was aimed at establishing a separate supplier for each region so that if Japan faces similar disaster, the problem will not affect the whole world. It, however, is not consistent with lean production philosophy whose aim is to eliminate wastes completely, which includes holding inventories that are not needed. Lean production only permits movement and production of parts if it is required. It ensures that components are not utilized in product that is not demanded and hence, no time is used in making a product that is unsalable. Such plan is also not foolproof, since the supplier may be selective on whom to sell or on what company offers the highest price (Panneerselvam, 2012).
H) Consistency of Toyota’s Plan with Lean Production Philosophy
Due earthquake tragedy experienced in Japan, Toyota Company decided to come up with measures of minimizing losses experienced when natural disasters like Tsunamis and Earthquakes occur. The company thought of standardizing the auto mobile industries in such a way that all the automobiles in all industries will be similar and thus it would be easy for companies to get supplies from other regions when one of the regions is faced with disasters. This did not seem to be a wise solution since it went against the policy of continuous improvement. Another option was to ask the suppliers to increase their stock to cater for future months. This was to avoid situations where supplies were needed but they were not available in the supplier’s stores. Each region was to have a supplier such that if such a disaster occurred the whole world will not be affected. This suggestion however went against the lean production policy which aims at eliminating wastes completely by not holding stock which were not needed at that time. Lean production policy agrees with the movement and production of parts when only needed. This ensures that there is no wastage since the products produced are utilized at that time. The plan however seem not to be effective since the supplier could choose whom to sell to. The supplier could choose the company offering the highest price in the market (Panneerselvam, 2012).
I) Recommendation and Plan on the Best Supply Chain Strategy for Toyota.
Toyota needs to combine technology and new strategies of operating to assist in its lean global supply operations and prevent losses from future disruption. Having a working lean philosophy is not enough for successful operation because by streamlining its suppliers to one sort of product the company suffers a big loss. There is also the need to anticipate such catastrophes ahead of time and be ready to embrace the unexpected situations so that to prosper. Their suppliers should implement disaster plans so that to look for alternative places of production. In such case if their main plant is affected they will continue producing in another location.
Similarly they should also have a primary and a secondary supplier so that the company will have a fallback position in case of disaster. There is also a great need to assess the areas where the suppliers of the company are located. Besides, one more question should be answered: Are they located in high risk zones or not? It will assist in seeking other suppliers who are outside the prone areas or communicating with the suppliers in catastrophe areas on possibilities of relocating to safer areas. It should also engage insurance companies to provide policies to protect businesses from interruption due to failure by suppliers to deliver goods in accordance with the previous agreements (Wisner,Tan & Leong, 2009).
J) Impact of Toyota’s Plan on Relationship Management in Its Supply Chain
To succeed in business it is necessary to understand how well relationships are managed along the supply chain. Toyota believes in a philosophy of offering customer value while stabilizing the supply chain. It seeks to maintain stability through minimizing the number of variations in its product range while offering a significant level of product value to customers to cater for the lack of varieties to choose from. Value creation begins from supplies whereby potential problems are pointed out and steps to solve it are undertaken. If Toyota wants to implement its plan of increasing the number of its suppliers, there is a high chance that it will be difficult to meet and discuss on one of the basis, especially if the suppliers are to be located in regions outside Japan. It is carried out to ensure that defect rates on parts that are delivered are minimized. It also focuses on ensuring that the suppliers do not incur so many expenses in maintaining the parts. Since Toyota’s suppliers are very important, they are selected carefully so that to play their role in the long term. They are nurtured to establish partnerships that will last long. Bringing in new suppliers will mean that the corporation will have to start again from meeting with them, nurturing them, visiting their places of operation and observing what should be improved.
In the plan, Toyota decided to have auto parts standardized to the extent that the firms in the industry will not have problems accessing them during the manufacturing process. They also seek for companies that will utilize technology and cut costs and produce goods that will increase customer satisfaction. They were able to find a potential supplier who provided improved designs. Their criteria of selecting suppliers give them a competitive edge, since it is strict and based on merit. Sharing knowledge openly with the suppliers helps create good relationships in the chain. For instance, it manages and maintains relationships with the suppliers and supports them while ensuring that they perform according to the expected standards. Suppliers are also cushioned against risks whereby the corporation absorbs some of them. If the plan is adopted, Toyota should consider approaching insurance companies who will provide insurance policies for such risks while the supplier will be required to meet the basic costs (Wisner, Tan & Leong, 2009).
Measuring results continuously and focusing on improvement will help in identifying a problem at an early stage. It will assist in providing sustainable solutions. Quality improvements, waste reduction and reduced defects will enhance the relationships among the suppliers, manufacturer, as well as the buyers. When the manufacturer identifies a reduction in profits, it sends out experts who seek to understand why from the suppliers. After identified the problems they offer opinion and what should be improved. Such steps help in restoring positive results. Introducing other suppliers will mean that the manufacturer will extend its relationships for both short-term and long-term objectives. It will help in reducing quality problems that were seen earlier, since the single supplier offered parts to serve global markets (Wisner,Tan & Leong, 2009).
The supply chain that a firm adopts has the power to make the company succeed or fail. There is also a need to keep reviewing the strategies to incorporate technological advancements. Supply chain managers should take advantage of strengths and efficiencies alongside the production process so that to create supply system which is highly competitive and customer-driven and responds to the changes in supply and demand. There is also a need to schedule production to avoid inefficiencies when orders are accepted but there are no materials to meet the delivery. Strong supply chain relationships assist in realizing reduced inventory levels, storage costs, increased revenues and increased customer satisfaction. Industries should work towards acheiving such benefits.
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