Two inventory systems, just-in-time and manufacturing resource planning, would be analyzed via this research paper. Their limitations and advantages would also be contrasted to prove a better inventory system. The APICs have defined Management Resource Planning (MRPII) as a method that allows for the effective planning of a manufacturing company. It is considered an ideal situation when this system is used to address all the various operational; planning units, financial planning, and even have a financial stimulation carried out to deal with “what-if” scenarios and the extension of the closed-loop.
This system is not considered to be a software function. It is rather a combination of people skills, the dedication to database accuracy, and computer resources. However, it is a company management concept that allows the company to make more effective use of human resources. Almost all such systems are modular in their structure. They include Mater Production schedule, Item Master data, Bill of materials, Production Resources data, Inventories and Orders, Material Requirement Planning, Shop Floor Control, Capacity planning, Standard costing, Cost management, Distribution resource planning, etc.
It also includes several ancillary systems: Business planning, Lot traceability, contract management, Tool Management, Engineering Change Control, Configuration Management, etc. Related systems such as general ledger, Accounts Payable, Sales Order Management, Project Management etc. The MRP II integrates such modules that allow easy exchange of data and information to be exchanged. Therefore, distinguishing it from the point solution approach, in which individual systems are used to help out a company project. By the very definition of this system, it is fully integrated or fully interfaced. (Davenport 1993).
Another type of inventory system is the just-in-time inventory system. It allows the return on the investment to be improved due to the reduction of time required to process the inventory and the other carrying costs associated with it. To achieve this sort of inventory system, the process has to have some signal devices that can relate to what is going on in another place. After implementing this inventory system, just-in-time, there can be substantial improvements in the organization’s return on investment, a factor behind having such an inventory system in the first place.
According to some, just-in-time is considered to be a more appropriate name for this system as this inventory system stresses that the stock should arrive “on time”. A key to having such a system is having quick consumption of the previous already lying stock which will act as a triggering device. Due to this, the company can save upon warehouse space and costs as well. An issue that can arise is the fact that historical demand determines the stock levels. Therefore, any fluctuation in the demand levels can hurt the already existing stock levels, which can deplete faster than the usual one and thus affect the customer servicing.
To compare and contrast these two inventory systems, the pros and cons must be analyzed to establish a better system. The MRP II system has several benefits that can be utilized by a company that implements this system. It results in better control of inventories, improved scheduling, and productive relationships with the suppliers. In terms of the design and engineering side, this inventory system can result in better design control and quality control.
In terms of financial planning and costing, the benefits are reducing working capital for inventory, improved cash flow through quicker deliveries, accurate inventory records, and timely valid cost and profitability information.
The benefits of a just-in-time inventory system are; set-up time is sufficiently reduced in the factory resulting in more efficient production. The focus time spent on other areas would also increase. As a result, the flows of goods from the warehouse goes up as well. Such employees are made use of more efficient and multiple skills, better consistency in terms of scheduling, and employee working hours. There is an increased emphasis on the relationships between the suppliers as no company would want a break of any sort in the inventory system, resulting in a shortage of supply available for inventory. Lastly, the supplies would continue around the clock, making sure that the workers remain reproductive and focused on the turnover.
These were the benefits as can be shown above, both of the systems have certain significant advantages attaché with their implementation. However, after analyzing the disadvantages, it can be proved which system is more viable. The problems with the just-in-time inventory system include a critical issue that leaves the supplier and downstream consumers open to supply shocks and large variations in demand and supply shocks. Hence, this inventory system is only a solution to an inventory crisis and not its solution.
A major problem with the MRP II system is the integrity of the data. As a result, of the errors in the inventory data, the outputted data will also be affected. Another major issue with this system is the requirement of a user specifying how long it would take for a factory to make a product. The system design also assumes that the lead times for each manufacturing goodwill are the same irrespective of the type of good.
Therefore, it is no use to the company, which has production plans in several countries, the MRP assumption of requiring no materials since it is available many thousands of miles away already. Parts have to be booked in and out much more regularly than the MRP calculations allow it to do so. Hence, other systems in the company will have to be worked on for a successful implementation of the MRP system.
Another major issue with this inventory system is that it does not take into account the capacity in the calculations. The MRP II requires fluctuations in the forecasted data, including simulation of the master production schedule, hence creating a long-term control.
Hence, it has been seen that both of the systems have their own pros and cons and the type of system that is better for a company depends on the company’s need, product and even location.
Benchmarking Technique can be defined as a technique through which an organization compares and contrasts itself with those companies which have established industry standards. Hence, any wide discrepancies between the company and the trend-setting organization are evaluated and corrected. It is a strategic management technique that various organizations use in order to evaluate their performance in relation to the best practitioners. While in certain instances, it can be considered as a one-off event, in most scenarios, the companies treat it as a continuous process through which companies constantly try to improve their performance.
The various types of benchmarking techniques that exist include; process, financial, performance, product, strategic, and lastly, functional benchmarking. Process benchmarking is a method that allows the firm to focus its investigation on the goal of identifying and observing the best practices from one or more benchmarking firms. In this case, activity analysis will be required for the benchmarking of the cost and efficiency. Financial Benchmarking includes performing a financial analysis through which the company’s competitiveness can be assessed.
Performance benchmarking allows the firm to compare its products and services with the benchmarking companies to assess its performance. Product benchmarking includes a process of designing new products or upgrading the already existing ones. Strategic benchmarking varies as it involves a comparison of the way others compete. Since it is not industry-specific, other industries can also be analyzed. Functional benchmarking involves focusing the benchmarking technique on a single function to improve the performance of that particular function.
For a company like Adidas to establish itself as a noteworthy competitor with competitors ranging from Nike, Puma, etc., it will have to benchmark itself against such competitors. Such an analysis can include two benchmarking techniques like the Performance and Product benchmarking techniques. Through the performance analysis, it can compare the current products and see if the ones are offered by Nike are in any way superior. If the quality difference is substantial, then Adidas will need to evaluate and develop its products appropriately in order to improve its performance. In terms of product benchmarking, Adidas will have to analyze whether the products have to be upgraded or any products have to be developed to meet the industrial standards.
Business Process engineering is an approach that aims to improve through means of increasing efficiency and effectiveness of the processes that exist within the company and across. The important thing that has to be noted is that the observations have to be carried out with a new and clear perspective, allowing an unbiased opinion of how the business conducts its operations.
The following diagrams will be used to explain the concept of business process engineering. If one was to look at two cases of object interaction; the diagram would be something like the following:
It has been observed that if the orders were to be considered a part of the production process, then the number of stockouts would be reduced without actually over-stocking. A customer survey showed that the customers could often cope with a lead time if up to 2 weeks before the delivery time itself.
A revised form of the two-object interaction can be devised as the following:
It has been seen that if the nature of the behaviour of the individual objects was changed and the way they interacted, the production line would be able to produce optimal output. In fact, by changing the schedule of production even by somewhat, orders can still be met. In this case, restocking can be avoided. In other cases, extra stock of certain lines might be required to meet the orders.
However, the businesses basic operational structure will not suffer a radical change. In the case of bulk chemicals production, this might be possible. If we were to source some goods from another supplier, then the diagram would look like the following:
What can be observed is that the company is doing exactly what it would be doing if it were designing some software-however. In this case, the goods are physical ones.
Quality is defined as the degree of excellence of goods and services for individuals and a population that results in customer satisfaction. Quality improvement programmes include zero defects, quality circles, etc., and is considered to be important as with quality, the product and service’s usefulness rises. It also ensures future-proof projects, and by having quality assurance, documentation, and practices become meaningful.
An American statistician had a strong influential role in Statistical Process Control and Total Quality Management. He outlined fourteen points of management that allowed Japanese efficiencies to be achieved. For a company like Nestle, these fourteen points can be pretty useful in improving its efficiency. The first point of creating constancy of purpose and continual improvement will allow Nestle to replace short term planning with long term planning. Secondly, by adopting the new Japanese philosophy, the workers and management would be adhering to one system. According to another principle, the quality would no longer be dependent on inspection but would be built into the product and the process.
Nestle would be able to choose quality suppliers over low costs suppliers allowing it to minimize variation in raw materials and supply. The company would be able to improve constantly by introducing a reduction in all the areas. Proper training would be carried out on the job for the management and the workers. Proper leadership would be in place not to meet mere targets but would ensure better productivity. By having a two-way communication network, Nestle would be able to eliminate the fear capacity and encourage the employees to work in the interest of Nestle. Internal barriers would be broken down, and the departments would work together as one body.
Any slogans that would result in a bad ambience would be eliminated as it would be realized that processes are the cause behind the mistakes and not people. Numerical targets would be removed in favour of MBOs, which would help Nestle to have better workers’ satisfaction. All barriers to worker satisfaction would be removed effectively, allowing motivation to rise. Self-improvement and education for all would be inculcated for all in Nestle, and most importantly, all the workers and managers would be held responsible for the continual improvement in quality and productivity.
The transformation process in operations management can be defined as the use of resources to change the nature of something to produce output. In order to get a desired level of output, it is imperative that the quality of inputs be monitored regularly, and a comparison should be made between the real output and the desired output. This process can occur in a setting of randomness in certain cases and hence, can be unexpected.
Operations Management uses the above principle, and it is done through a systematic direction and control of the processes that transform the inputs into the outputs. In the case of large organizations, operations are a large functional area with special people assigned to it –it is as significant as it impacts customer satisfaction. Operations Management involves the transformation model by transforming the design and management of the system to transform goods and services. Operation managers are hence, required to contribute to all those activities which can involve the delivery of some goods and services. The responsibilities of these managers are quite diverse, from managing the operations process, embracing design, planning, control, and performances management and operations strategy. Decision making is a central role of all operations managers and has to be done in times of designing, managing, and improving the operations system. Hence, the transformation approach is required by these managers to achieve the desired outcomes through the various decisions.
Order Winners and Order Qualifiers; a methodology which was created by Terry Hill, which refers to the process through which internal operational capabilities are converted into criteria that may result in a competitive advantage and market success. The people responsible for providing the order-winning and order-qualifying criteria enable products to be won in the market. An order qualifier can be defined as a characteristic of a product or service that is required for a product or service to be considered by a customer. An order winner can be classified as a characteristic that will aid the bid. An example of a firm that would be used to illustrate these concepts would be Nestle. Hence, Nestle would need to provide qualifiers in order to establish itself in the market and even stay on in the market. If qualifiers are provided, they need to be as good as the competition else sales would be lost.
Nestle would also need to exercise some level of caution while making decisions based on order qualifiers and winners. Order winners and qualifiers are both market and time-specific as they work in different combinations in markets and customers. Therefore, Nestle would have to develop varying strategies to support the various marketing needs, which can change over time. If NestlĂ©’s perception of the order winners and qualifiers matches that of the customers, this situation is defined as a “fit” between the two perspectives. However, in reality, this is a rarity. In the case of a good fit, as happens to be in the case of Nestle, which has amended to garner a good market for itself, the sales performance is positively affected.
Dell introduced a dynamic business model which allowed the company to sell directly to the customers, built- to order- system at competitive prices. This model allowed Dell to become a leading server providing company. The company under this new model only holds a small amount of inventory and responds quickly to customer orders. Therefore, a good communication system must be in place with the supplier to meet the customers’ specifications.
This successful policy has been carried to through the implementation of the Dell Sales ODS custom application, which supports the customer-facing portion of the process. This process revolutionized the value chain system and including satisfying the end customer.
This process allows the sales representatives to quote, order, and provide customer information as they directly contact the customers. It allows the company to work with the customer to put accurate orders into the system and keep the customer aware of the entire process. Thus, the responsiveness is build up, and hence, customer satisfaction and sales are also increased.
The introduction of the Oracle 9i allowed the company to make it possible to run a single database across a cluster of Dell servers, hence increasing the total availability. Dell also integrated a configuration system that allowed the customer to have a complete solution, reducing risk and streamlining the implementation. The concept of the system failure had been eliminated, and individual servers’ breakdown had also been tackled. Due to the use of industry-standard servers and a tested configuration, the future upgrades and the ongoing management was simpler and even less expensive.
The strategic options available for capacity planning- order to meet the capacity with the level of external demand, several options are considered ranging from revenue, costs, technologies, volumes, markets, acquisitions, sourcing decisions, capital equipment and expansion decisions as well.
Outsourcing is defined as a process through which products design; manufacturing is subcontracted to a third party. It was often done to reduce the cost and make effective use of time. It also involves the transfer of management and day–to–day implementation of an entire business area. The contractual agreement is carried out between the client and the supplier, and the means of production is transferred. Segments that are usually outsourced include technology, human resources, customer support, accounting etc.
The reasons for carrying out such activity are quite substantial. They range from costs savings and cost restricting. Through outsourcing, the company can balance the operating leverage ratio and make the variable costs more predictable. The quality level improves, important knowledge is exchanged, services are provided via a means of a legal contract. The operational expenses also decrease substantially, a larger human resource pool can be accessed, and as a result, a greater sustainable source of skills is available. A better method of capacity management comes into play as the risk of excess capacity is borne by the supplier. The increased development of products is done through the introduction of more capability, a wider range of businesses have access to services that were available to larger companies, and effective use of risk management rules can be applied.
However, there are certain disadvantages of this process; the public opinion as this process results in damaging to the local labour market since all the skilled labour is outsourced, outsourcing fails to realize the business value that was promised to the client, language barriers are also an imperative problem, and in areas where lower-income jobs are being met through outsourcing, the exploitation of the lower-paid workers can be done. In certain contracts, the quality of service isn’t established, which becomes a concern for the client later on, and since there are a number of stakeholders in question, one opinion of quality is difficult to achieve. The number of employees being outsourced can also be questionable as that may result in the quality level of the workers for the present companies suffering. It can also create communication issues for the transferred employees as the same access may no longer be available to the data.
In certain cases, the qualifications of the outsourcers themselves are questionable. The real productivity of a firm can suffer at the hands of this activity as companies can end up gaining non-productive employees. The labourers can also feel exploited, especially if sent to areas where the work quality is lesser. When the employees are outsourced, they are no longer liable under the same laws and regulations, and hence, a legal and security issue can arise in these circumstances.
Kaizen is a process that stresses continuous improvement throughout all the aspects of the product’s life cycle. It results in the improvement of such activities as manufacturing, management, and by having such standardized processes, this procedure results in decreasing the waste amount. Firstly introduced in Japan, it has now been introduced in several businesses around the world.
It is known as a daily activity; whose purpose goes beyond the simple productivity enhancement. It results in a humanizing of the workplace itself by teaching the people involved how to spot the waste and eliminate it. People from all the various management ranged can engage in this process, whether it is an individual or even a large group. The methodology of this process is making changes and monitoring the adjustments accordingly.
Business Process Engineering is a totally different philosophy as it is an approach that does not include eliminating waste but improving the efficiency levels and effectiveness existing within the organization. According to this process, everything has to be studied from an unbiased perceptive and hence, it is quite different from Kaizen, which engages the entire different management workforce.
The theory of constraints is defined as a philosophy that aids organizations in order to achieve their purposes. It is done through a few processes, logic tools, and effective use of the applications to the desired fields.
According to this theory, every company does at one point face some limitation –internal or market. As time passes, the constraint can change, and the analysis has to begin again. The solution engages the materials through the system, and the primary method of doing so is a process through which nothing gets wasted. Hence, the process defined as Kaizen does come into play as, under the constraints theory, wastage is eliminated. Hence, the Kaizen principle is fact included in the implementation of this theory. The business engineering principle is also made use of through this theory as this theory aims to reduce not only the waste but also to improve the efficiency levels. Hence, through the implementation of such a theory, both the above-noted principles can be made use of effectively.
The just-in-time method is a manufacturing organization philosophy that decreases waste by supplying parts when the assembly process requires them. This system is primarily used for the high volume repetitive flow of manufacturing processes. The goal of this process is to speed up the customer responses while decreasing the minimum inventory levels at the same time. The methods through which this can be achieved is by having a smaller level of inventory, smaller production lots and batch sizes, having a stricter quality control procedure, complexity reduction and transparency, flat organization structure and delegation and lastly, through minimization of waste.
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