OPS 571 Week 4 T A....Production Plan for Riordan Manufacturing
OPS 571 Week 4 T A....Production Plan for Riordan Manufacturing
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1 Running head: PRODUCTION PLAN FOR RIORDAN MANUFACTURING Production Plan for Riordan Manufacturing PRODUCTION PLAN FOR RIORDAN MANUFACTURING 2 Production Plan for Riordan Manufacturing “Riordan Manufacturing, Inc. is an industry leader in the field of plastic injection molding” (University of Phoenix, 2009). Riordan is considered innovative and is recognized to have stateofthe art design capabilities. Riordan operates globally and has locations worldwide including facilities in California, Georgia, Michigan, and China. Many of these facilities have revenues over $1 billion dollars. The company produces plastic bottles, fans, heart valves, medical stents, and other custom plastic parts. In particular, Riordan produces custom plastic parts in Pontiac, Michigan and plastic fan parts in Hangzhou, China (University of Phoenix, 2009). Riordan needs to employ effective strategic capacity planning, the concepts and methods of lean production, and improve their supply chain in order to add value to the company and enable them to sustain a competitive advantage over time. The company has a reputation of paying attention to detail, extreme precision, and enthusiastic quality control. These are key values the company wants to ensure remain throughout the implementation of any changes that are made. Approaches in Developing an Effective Supply Chain Strategy Developing an effective supply chain strategy is a significant aspect of any business and should be incorporated into a total systems approach (Chase, Jacobs, & Aquilano, 2006). Companies that can effectively manage inventories, both raw materials and final products, will gain a competitive advantage and reduce inventory liabilities and risks. Managers should carefully consider and determine how inventories should be managed. In order to do this it “takes a clear understanding of the products strategic positioning, stage of product lifecycle, demand PRODUCTION PLAN FOR RIORDAN MANUFACTURING 3 variations and supply disruptions risks” (Inventory, 2009, p. 1). There are several approaches to supply chain strategy. Outsourcing is one of the major ways companies are managing their supply chain. Outsourcing allows a company to move the responsibility and decision making to an outside company. Companies can outsource all or some components of the supply chain. A company might decide to outsource returns and or warranty claims. Outsourcing inventory can also help a company reduce and eliminate the need for maintaining its own distribution centers (Polakoff, 2009). Other approaches include global product sourcing and mass customization. Participating in a global economy allows companies to utilize global product sourcing. Global product sourcing allows companies to strategically plan and coordinate the procurement of supplies and parts from other countries at a lower cost. Another approach being used by companies is mass customization and process postponement. This approach allows companies to mass produce a product and customize it very late in the process. Companies must develop strategies that “turn a resilient supply chain into a competitive advantage” (Industrial Week, p. 60, 2009). Strategic Capacity Planning Resources and Consolidation Riordan currently has three facilities which have issues with supply. The Albany facility has problems with shipments to Northern areas of the United States and uses a release system for ordering. The Pontiac facility has a low storage area for raw materials in order to be able to make the custom parts that are made to order. The Hangzhou facility creates the custom parts for what is manufactured and is based on a forecasted estimate of customer orders and does not seem to have any issues with shipping internationally. Since the China facility and Michigan facility both make custom parts, even though the PRODUCTION PLAN FOR RIORDAN MANUFACTURING 4 parts are utilized in different products, it would be beneficial for these two facilities to be combined into one facility. These two facilities could utilize the equipment in one facility to create all the custom parts for what is manufactured. The China location seems to have a handle on their supplies and is capable of getting better shipping rates than the United States going to International customers. An integrated ordering system would benefit the company in order to be able to receive and fill all orders for the facility. This would allow customer orders to be received faster and possibly allow for a better calculation of a weekly or even daily cost of goods for each facility. This in turn could possibly reduce the storage space problem at one if not two of the locations. It could also allow for a more efficient calculation of customer needs, allowing for a better control on special or larger orders from customers. It would be advisable to have the Michigan and China plants merge their facilities. China’s easy access to raw materials and lower shipping cost could benefit Riordan in the long run lowering their cost of goods. The Overall Objectives of Strategic Capacity Planning The objective of strategic capacity planning is defined as providing an approach for determining the overall capacity level of capitalintensive resources (Chase, et al., 2006). Capacity plays an important role in a company’s competitive strategy. All resources, including facilities, equipment, and labor force, affect strategic capacity planning. Having so many variables, strategic capacity planning is very malleable in fitting a companies’ specific need. A poorly fit strategic capacity plan could lead to all sorts of problems for a company. For instance, if a company was housed in a large industrial warehouse with lots of space and produced a generic, but time sensitive product (such as oilfield specific fasteners) then that company could PRODUCTION PLAN FOR RIORDAN MANUFACTURING 5 maximize profits and customer service by purchasing raw materials in bulk and producing a large inventory of product which would then be available to a customer on a moment’s notice. This particular plan would not be effective if there was a lack of space, or if production could be scheduled far in advance. Overall, strategic capacity planning is used in the supply chain to meet the demand of new opportunities at a minimal cost (Chauhan, Nagi, & Proth, 2004). In strategic capacity planning, it is beneficial to understand the longterm capacity needs to ensure that the company remains competitive within the industry. Decisions on the capacity needs of the company, if not carefully made, can help the competition and the business will lose customers (Chase, et al., 2006). If Riordan Manufacturing has to increase the size of their business, they may also have to change their product prices or services. This is where knowing the break even analysis can ensure the organization implements the optimal decision. Lean Production – Minimal Inventories and JIT Processing According to Chase, Jacobs, and Aquilano, (2006), lean production is an integrated set of activities designed to achieve highlevel production using minimal inventories of raw materials, workinprocess, and finished goods. Parts arrive at the next workstation “just in time” and are completed and move through the process quickly. Lean is based on the logic that nothing will be produced until needed. Production need is created by actual demand for the product. When an item is sold, in theory, the market pulls a replacement from the last position in the system, in this case final assembly. To enable this pull process to work smoothly, lean production demands high levels of quality at each stage of the process, strong vendor relations, and a fairly predictable demand for the end product. Waste as defined by Toyota’s president, Fujio Cho, “is anything other than the minimum PRODUCTION PLAN FOR RIORDAN MANUFACTURING 6 amount of equipment, materials, parts, and workers (working time) which are absolutely essential to production” (Chase, et al., 2006, p. 472). Widely known types of waste to be eliminated from the value stream includes: over production, waiting time, transportation, inventory, processing, notion, and waste from defective products. Being lean leaves no room for surplus, if it’s not being used now then it’s not needed now; that’s wasting. The seven elements that address waste elimination are: 1. Focus Factory Networks: Plants designed for one purpose can be constructed and operated more economically. 2. Group Technology: A technology where similar groups are grouped into families, and the processes required to make the parts are arranged in a specialized work cell. 3. Quality at the Source: Do the job right the first time. Workers should be held accountable and responsible. 4. JIT Production: Produce only what is needed when needed and no more. Doing otherwise would be wasting effort and material. 5. Uniform Plant Loading: Make changes through the line and supply chain. The only way to eliminate problems is by making small adjustments by setting a firm monthly production plan where the output rate is frozen and stability is maintained. 6. Kaban Production Control System: This system uses a signaling device, such as signs or instruction cards to regulate JIT flows. In a paperless control system, containers can be used instead of cards. 7. Minimize Setup Times: Because small lot sizes are the norm, machines must be quickly set PRODUCTION PLAN FOR RIORDAN MANUFACTURING 7 up to produce the mixed models on the line. To achieve this setup time reduction, setups are divided into external and internal activities. Internal setups must be done while a machine is stopped. External setups can be done while the machine is running. Lean requires that the plant be design to ensure balanced workflow with a minimum of workinprocess inventory. Each work station is part of the production line, whether or not a physical line actually exists. Additionally, the system designer must visualize how all aspects of the internal and external logistics system tie to the layout. Lean production can be accomplished by designing flow process, establishing total quality control, stabilize schedule, implement the Kaban pull system, work with vendors, reduce inventory further, and improve product design. Preventive maintenance is emphasized to ensure that flows are not interrupted by downtime or malfunctioning equipment. This involves periodic inspection and repair design to keep machine reliable. Operators perform much of the maintenance because they are familiar with their machines and because their machines are easier to repair, as lean operations favor several simple machines rather than large complex ones. Under the Kaban approach, setup cost is treated as a variable and the optimal order quantity is reduced. Improvement of Inventory Process and Forecasting To predict demand, forecasting is an important part of organizational planning. Managers need forecasts that will allow them to predict future events effectively and in a timely manner. Riordan relies on its own data about past sales trend, promotion plans, and other factors to calculate a demand forecast. The markets for plastic bottles, fans, and custom plastic parts are affected by changing economic conditions. As a result, the impact of the economy on Riordan Manufacturing’s major customers and markets must be analyzed in order to determine how the PRODUCTION PLAN FOR RIORDAN MANUFACTURING 8 future direction of the economy will affect Riordan Manufacturing system (University of Phoenix, 2004). Today, major technological changes usually involve the introduction of new equipment, tools, or work methods, automation or computerization. Competitive factors or innovations within an industry often require managers to make changes in work practices to be more productive. Successful value chain management is not possible without a significant investment in information technology. Value chain management radically changes organization processes; that is, the ways that organizational work is done (Coulter & Robbins, 2002, p. 344). In order to ensure consistency of operations and quality control at all Riordan plants, a common set of procedures have been developed for the management of receiving raw materials, tracking products during manufacturing, and accounting for the finished good inventories. In order to deliver better value to the customer and improve inventory process, Riordan, will be consolidating the disparate databases, paper files and microfiche into a CRM system. In the past, most sales were recorded using paper and pencil and then someone else would enter the information into the system (University of Phoenix, 2009). In order to improve the inventory process and streamline the flow of inventory through the system, Riordan will implement the improved inventory management system. Having the Receiving Supervisor and the Manufacturing Staff enter the information directly into the system avoids duplication of effort between the Receiving Supervisor and the Inventory Clerk, and the Manufacturing Staff and the Inventory Clerk and enables access to up to the minute real time inventory information. PRODUCTION PLAN FOR RIORDAN MANUFACTURING 9 In conclusion, in order to ensure a longterm competitive advantage, Riordan Manufacturing should improve their supply chain design by consolidating their Michigan and China plants in order to take advantage of China’s easy access to raw materials and lower shipping costs which will add longterm value to Riordan by lowering their cost of goods. In addition, Riordan should implement a more effective forecasting system, and apply the concepts of lean production by eliminating waste and streamlining their inventory process to save time, remove duplication of effort, and enable real time access to inventory information. PRODUCTION PLAN FOR RIORDAN MANUFACTURING 10 References Chase, R., Jacobs, F., & Aquilano, N. (2006). Operations management for competitive advantage (11th ed.). New York: McGraw Hill/Irwin. Chauhan, S., Nagi, R., & Proth, J. (2004). Strategic capacity planning in supply chain design for a new market opportunity. International Journal of Production Research, 42(11), p. 2197 – 2206. Retrieved from EBSCOHost on August, 6, 2009. Coulter, M. & Robbins, S. (2002). Management: managing change and innovation. Saddle River, NJ, Prentice Hall, 13, p. 344. How to optimize your supply chain to improve cash Flow. (2009, June). Industry Week/IW, Retrieved August 5, 2009, from Academic Search Complete database. Inventory Rationalization and Right Sizing Strategies. (2009, July). Industry Week/IW, Retrieved August 5, 2009, from Academic Search Complete database. Polakoff, S. (2009, June). Supply Chain Strategies for a Down Economy. Journal of Commerce (15307557), 10(22), 4242. Retrieved August 5, 2009, from Business Source Complete database. University of Phoenix (2009). Riordan Manufacturing Virtual Organization. Retrieved on August 5, 2009, from https://ecampus.phoenix.edu/secure/aapd/cist/vop/business/riordan/internet/indexport.htm
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