You have almost completed your Tertiary studies majoring in Operations and Production Management. Whilst studying you took a part time job at Dough a new commercial bakery established in 2010 next to the motorway in Papakura.
Dough produces good quality sliced bread. The business owners realized that if they compromised the production capacity they could use some of the machinery currently used in the “Chorleywood bread process” to quickly produce traditional supermarket sliced bread, to produce better quality bread. You have been asked by the Dough management team to investigate a number of operational problems they face, and they have agreed that you can undertake his as part of the Cooperative Education Project course.
In January 2013 Dough employed a new Sales Director, Amanda. She persuaded the business owners to change the direction of the business to sell good quality sliced bread directly to dairies and other stores competing with supermarkets such as petrol stations. Dough has borrowed to invest in the trucks and new delivery staff to distribute this bread to the retail outlets. More and more customers are placing orders with Dough resulting in a 40% growth in sales volume over the 12 months to the end of February 2014.
You have been asked by the Dough management team to investigate a number of recently occurring operational problems. They have agreed that you can undertake this as part of the Cooperative Education Project course.
Your initial investigations have discovered that the main problems currently faced by Dough are
1. An increasing number of customer complaints as consumers return bread to the retail outlets because of poor quality issues.
2. A significant decrease in the overall profit margin experienced by Dough.
3. Production problems including breakdowns of machinery installed in 2012 when the factory was new, and internal quality problems resulting in wastage as poor quality bread is sold off to pig farmers, or destroyed.
4. An increasing staff turnover in the factory.
You have undertaken some early investigations and you have found that:-
1. The factory was set up with machinery with a design capacity of up to 1400 loaves of bread per hour.
2. Experts who were employed to help design and build the factory advised that its effective capacity should be 75% of design capacity.
3. When the business started to expand in February 2013 the factory was operating two 8 hour shifts, 6 days per week. with baking commencing 2 hours after the start of the first shift to enable preparation and for the ovens to heat up, and ending 2 hours before the end of the second shift to allow staff to clean up ready for the first shift the following day. For the 12 hours the factory actually baked bread it ran at 60% utilization.
1.There are 4 weeks in each calendar month
2.Calculate production based upon sales (make no allowance for wastage).
3.Production has increased linearly over the last 12 months (by the same number of loaves / month)
a. the production of loaves per month in February 2013, and February 2014. Explain how you used the factory’s capacity and utilization to calculate these values.
b. Calculate the efficiency of the factory in February 2013, and February 2014, and explain why the increase in production over this period may have contributed to the problems the factory is now experiencing
2.Explain why using a simple moving average as the basis for forecasting production need is likely to be inaccurate during the current business growth. Include in your explanation why a weighted moving average calculation may be more accurate. Your answer should include suggested weightings for each of the previous three months for the calculation, and a representative calculation to show how using WMA forecasting will reduce the forecasting error calculated using the Mean Absolute Deviation
3.Complete the table below and explain the changes in operating profit as a percentage of revenue, and the inventory turnover as a result of probable increased costs and inefficiencies in the supply chain management, production planning, and inventory management and distribution, due to the business’s rapid growth
4. Explain how this business would benefit from using a master production schedule and by linking this to materials requirements planning.
5. Explain how an integrated approach to supply chain and inventory management will benefit this organization. You should include in your answer the possibility of implementing JIT and Kanban systems.
6.If the current growth continues suggest and justify a capacity management strategy that will enable the business to satisfy demand whilst minimizing risk.