Strategic Operations Issues Essay

Using your ain administration or a local administration that you know good. place a strategic operations issue or job that needs to be addressed. Describe the administration briefly and briefly explain the specific operational issue. job or procedure that needs to be addressed and supply clear inside informations of its maps within the administration ; analyse the job utilizing a construct covered in the topic ; see the public presentation aims of operations direction ; alterations to public presentation aims or results ; betterments ; theory and recommendations for bettering the system or operation.

Executive sum-up
Manufacturing works operation issues of XYZ Plastics Pty Ltd This paper surveies the operations issues of XYZ Plastics Pty Ltd’s fabrication works. In the last three months. the works experienced a diminution in % OEE ( % Overall Equipment Effectiveness ) from 90 per cent to 81 per cent. the natural stuffs stock list increased 10 per cent from 900 dozenss to 990 dozenss and increased the outsource warehouse cost from $ 100 000 per month to $ 150 000 per month. The overtime cost was besides increased by 50 per cent from $ 20 000 per month to $ 30 000 per month.

The analysis of the fabrication procedure and workflow revealed that the root causes were: a ) Inadequate communicating linkage between the Planner and Maintenance supervisor which resulted in deficiency of critical spare parts to service major equipment dislocation. B ) The batch size of white merchandise was excessively little which contributed to rush loss and quality loss degree Celsius ) The Planner’s order measure of natural stuffs was excessively large and caused mean stock list to increase and take stock overflow to outsource warehouse. vitamin D ) The dual handling of natural stuffs by the warehouse staff which contributed to the wastage of overtime resources. The survey recommended the company:

a ) Use a Kanban system to signal “pull” to the Planner to order trim parts for care section. B ) To put up an operating policy to restrict the minimal production batch size to ?24 dozenss for white merchandise. degree Celsius ) To keep a subject of utilizing the Economic Order Quality ( EOQ ) for replenishment order of the natural stuffs and reorder harmonizing to the stock list profile based on safety stock. bringing clip and ingestion rate. vitamin D ) To supply preparation to the operating staff sing the Wastes of Lean Manufacturing as a manner to advance the learning civilization.

Table of Contentss

Table of Figures

1 Introduction
XYZ Plastics Pty Ltd industries and sells black and white plastic stuffs for plaything casting application. Its fabrication procedure involves crunching the polythene plastics into a liquefied signifier and blending with black pigment or white pigment. It produces a black merchandise and a white merchandise. The merchandises are sold in 25 kilogram bags. The works operates 24 hours by seven yearss a hebdomad but merely four hebdomads in a month. It produces a merchandise mix of 96 per cent black and four per cent white.

The General Manager reviewed the monthly operations study late and found that in the last three months. the operations public presentation was on a downward tendency: a ) Its Overall Equipment Effectiveness ( OEE ) dropped down from 90 per cent to 81 per cent. Pophaley ( 2010 ) states that there would hold been issues associated with the Availability rate. Performance rate or Quality rate.

B ) Raw material mean stock list was increased by 10 per cent and the outsourced warehouse costs increased by 15 per cent. degree Celsius ) There was 50 per cent more overtime paid to fulltime workers.

The gross revenues volume remained unchanged at around 672 000 kilograms per month in the last three months. This was dismaying because it suggested that the profile and productiveness would hold dropped. The General Manager called a meeting with its operations squad to reexamine the public presentation informations and operations issues. They traced the job back to the fabrication procedures and work flow to find the root causes and take disciplinary actions.

Discussion and analysis

The fabrication procedure involves lading the fictile pellets and pigments into the hopper. the bomber and sociable converts the mechanical energy into heat so thaws and blend the natural stuffs. The assorted liquefied paste is extruded out through a pressure dice with 400 holes to organize spaghetti like strips. The strips are cooled by H2O and cut into pellets by the rotary cutter. the slurry is so spun in a H2O centrifuge to take the H2O and dry the fictile pellets ( see Figure 1 below ) . The merchandises are so packed into 25 kilogram bags and stacked onto a palette as a 1000 kilogram batch.

Figure – Manufacturing procedure conventional diagram

2. 1 OEE public presentation tendency analysis
The operations squad reviewed the % OEE tendency of the last three months and looked at the day of the month of three constituents that made up the % OEE. viz. Availability rate. Performance rate and Quality rate mentioned by ( Pophaley 2010 ) . They found that all three constituents were on the diminishing tendency which contributed to the % OEE lessening from 90 per cent to 81 per cent. The operations squad found that the Availability rate dropped from 95 per cent to 93 per cent which indicated that there was addition of equipment dislocations. They looked at the care log book and found that there was an addition of pressing die cleansing frequence. During the pressure dice cleansing. the procedure is shut down and the care staffs needs to pass 16 hours to bore holes to clean the soil out. This care occupation is normally outsourced and they have a trim pressure dice but this was non returned to the works on clip from the cleansing services provider because there was a miscommunication between the Planner and the Maintenance Supervisor. The work flow is described in ( Figure 2 below ) .

Figure – Process function of work flow

The care supervisor left an email message to the Planner. to order the dice cleansing service which the Planner overlooked. There was a hold in directing the trim pressure dice out to the provider for cleansing. If they had the trim pressure dice ready. they would hold saved the downtime of 16 hours for cleaning the dice. It appears that a Kanban pull system would hold provided better systematic demand information as stated by ( Claudio & A ; Krishnamurthy 2009 ) for parts refilling. The operations squad found that the public presentation rate dropped from 97 per cent to 92 per cent of their upper limit capable production rate of 1030 kg per hr. based on the current deteriorated production rate of 947. 6 kg per hr ( 0. 92 ? 1030 ) the works will be behind the monthly production mark.

The operations squad reviewed the production log book and found that the production velocity loss was due to increased production tallies of white merchandises. For every white production tally. the operating staffs needs to clean the whole production line exhaustively because the black pellets in the old tally will pollute the white merchandises. The cleaning procedure required two hours per tally. The works besides needs to pass two hours to alter the rotary cutter every bit good. The works usually runs one white merchandise per month ( 26 880 kilogram ) but in recent months the gross revenues squad requested four smaller white merchandise tallies per month ( 6720 kilogram ? 4 ) . The principle was there were four smaller clients willing to pay higher monetary value for the white merchandises but they required bringing at short notice without supplying prognosis to the Planner.

The smaller tally size of white merchandise contributes negatively to the per cent public presentation rate. the cleaning clip of two hours per tally and cutter altering clip of two hours per tally contributes a sum of four hours of velocity loss per tally which could hold been utilized to do more merchandises.

The Planner and gross revenues squad did non pass on with each other on this alteration and measure the economic system of graduated table for the production tally. The operations team re-assessed the alteration with the capacity size determination procedure. as ( Rabta & A ; Reiner 2012 ) suggested that optimum values of production batch size will cut down cost and lead clip. The operations squad took considerations on algorithms of the excess cost required for the cleansing. altering cutter and velocity loss for different batch sizes. and generated a graph ( see Figure 3 below ) to help the determination on the size of the production tally.

Figure – Capacity size determination graph

The Figure 3 graph showed that the smaller tally ( 6720 kilogram per tally ) costs more to do per ton and even selling at increased monetary value. it was doing a profile border of merely $ 100 per ton. In comparing. the larger tally size ( 26 880 kilograms per tally ) costs less to do but even selling at normal monetary value. it was still doing $ 400 per ton. The graph showed that the most economical tally of the white merchandise is ?24 dozenss. The operations squad besides found that the quality rate dropped from 98 per cent to 95 per cent. They checked the quality records and determined that this was due to the rework stuffs generated from the increased white tallies. The fabrication squad used natural stuffs to purge clean the procedure system to avoid taint. The purged stuffs were used subsequently on the black runs as rework. The clip they spent on the rework could hold been utilized to do good merchandise.

The above analysis determined the root causes which caused the % OEE bead from 90 per cent to 81 per cent and it is illustrated below:
% OEE = Availability rate % ? Performance rate % ? Quality rate % Historical % OEE = 95 % ? 97 % ? 98 % = 90 %
Current % OEE = 93 % ? 92 % ? 95 % = 81 % .

2. 2 Natural stuffs stock list analysis
The operations squad reviewed the stock list public presentation on the monthly operations study ; it showed that the natural stuff mean stock list volume increased by 10 per cent from 900 dozenss to 990 dozenss in the last three months. Due to the addition in mean stock list. the works ran out of storage infinite and therefore it required the stock list to be stored at an outsourced warehouse location. The works storage infinite was plenty to hive away 1000 dozenss of natural stuffs but from clip to clip the infinite is filled and overflows the stock list to the outsource warehouse particularly in the last three months. As a consequence. it increased the storage costs by 15 per cent from $ 100 000 to $ 115 000 per month including logistics and labor costs for the stuff handling.

The operations squad interviewed the Planner sing the order quality and order frequence. The probe revealed that the Planner was non telling based on stock list direction rules. The telling procedure takes about one hebdomad. from puting the order to having the goods. The works usually keeps a safety stock of 672 dozenss of natural stuffs ( approximately plenty for one month ingestion ) . This was based on their experience that the natural stuffs comes from other province and cargo holds could be up to four hebdomads ; this safety stock is to keep the service degrees of the company. The natural stuff comes in normal order measure of 2. 5 hebdomads ingestion. about 420 dozenss ( 672 ? 2. 5/4 = 420 dozenss ) .

The Planner starts to put order when the stock list gets near to 672 dozenss ( the safety stock grade ) . When there is a provider publicity. the Planner would order a bigger measure than 420 dozenss. thought that would salvage the company money. There were a figure of provider publicities in the last three months and the Planner placed a bigger order measure of 470 dozenss for each publicity which resulted in an addition in mean inventory degree from 900 dozenss to 990 dozenss. The operations squad constructed a graph to find if the Planner was doing the right order measure determination. They used the entire stock list cost based on two stock list cost constituents mentioned by ( Schreibfeder 2009 ) . viz. keeping cost and stuffs order cost.

Figure – Economic order quality ( EOQ )

The EOQ graph in Figure 4 indicated that the order measure of 470 dozenss which the Planner placed on the supplier’s publicity was non economical. Rather than salvaging the company money. the entire cost was higher than that of the EOQ of 336 dozenss. Even the normal order measure of 420 dozenss was non every bit economical as the EOQ of 336 dozenss. The stock list profile with the new EOQ of 336 dozenss is shown in ( Figure 5 below ) . It was constructed harmonizing to the method shown by ( Silver & A ; Zufferey 2011 ) with the probabilistic refilling lead clip and incline ( ingestion rate ) . If The EOQ of 336 dozenss was adopted and orders were placed when the stock list touches 840 dozenss. it would hold kept an mean stock list of 840 dozenss and upper limit of about 1000 dozenss on site. The stock list profile showed that mean stock list ( 840 dozenss ) would be lower than the current mean stock list ( 990 dozenss ) and most significantly it would extinguish the demand for outsource warehouse.

Figure – Raw stuff stock list profile

2. 3 Labour cost analysis

The operations squad reviewed the net income and loss statement and found out that there were 50 per cent more overtime paid to fulltime workers. It increased from $ 20 000 to $ 30 000 per month in the last three months. The sum of overtime was chiefly paid to the warehouse staff. The operations squad interviewed the warehouse supervisor and found that when the natural stuffs warehouse is full. they would travel the stuffs to the finished goods warehouse for impermanent storage. and switch it back when there are more infinites. One unit of ammunition trip to transport one ton of stuffs on a fork lift would necessitate two proceedingss. These are considered dual handling of stuffs as stated by ( Liker & A ; Franz 2011 ) . This is one of the Wastes in Lean fabrication viz. ( transit ) that should be avoided ( Slack. Brandon-Jones. Johnston. R & A ; Betts. A 2012 ) .

Decision

The bead in Availability rate was due to the longer breakdown clip required to clean the pressure dice as there was no trim pressing dice available. It appears that both the Planner and Maintenance supervisor required an improved communicating system for the spare parts telling. The capacity size determination graph in Figure 3 showed that the most economical tally of the white merchandises is & gt ; 24 dozenss. Any smaller tally size would ensue in velocity loss and lend negatively to the public presentation rate. The quality records showed that the bead in quality rate was due to the rework stuffs generated from the increased white tallies per month. These root causes need to be addressed in order to better the % OEE from the current degree of 81 per cent back to 90 per cent.

The EOQ graph in Figure 4 indicated that the order measure of 470 dozenss which the Planner placed on the supplier’s publicity was non economical ; even the normal order measure of 420 dozenss was non economical. The associated sum costs were both higher than that of the EOQ of 336 dozenss ; it increased the mean natural stuffs inventory degree on site and causes stock list flood to the outsource warehouse. There were dual handling of stuffs by the warehouse staff and this is a “transportation waste” which needs to be avoided harmonizing to the thin fabrication principals described by ( Liker & A ; Franz 2011 ) .

4 Recommendations
The care supervisor should utilize a Kanban system to signal a “pull” to the Planner to order outsource services to clean the pressure dice. Kanban is a ocular signal system advocated by the Nipponese maker Toyota and mentioned by ( Liker & A ; Franz 2011 ) . The Maintenance supervisor can utilize a ruddy box to signal that the pressure dice is ready to be picked up and direct exterior for cleansing. When the cleaned pressure dice returns. it can be placed in a green box bespeaking it is ready to be used. similar to the double card system described by ( Chen & A ; Subramaniamac 2012 ) .

The works needs to put up an operating policy which states that the minimal size is to be & gt ; 24 dozenss for white merchandise.

The Planner needs to keep a subject of utilizing the EOQ of 336 dozenss for replenishment order of the natural stuffs and puting the buying order when the natural stuffs stock list touches 840 dozenss ( a re-order point about one hebdomad before it reaches the safety stock of 672 dozenss ) . The stock list profile should be reviewed every three months to update the ingestion rate to find the new re-order point.

The works needs to supply preparation to runing staff sing the Wastes of Manufacturing particularly the warehouse staff as a manner to advance the learning civilization as advocated in Toyota and stated by ( Liker & A ; Franz 2011 ) . The operations public presentation such as OEE should be shared with all staff and novice counter steps to hapless public presentations. This will link the staff to the uninterrupted betterment rhythm to accomplish operational excellence.