Introduction
The Morrison Company is a large producer of radio frequency identification (RFID) tags. Due to the market growth, its sales had increased dramatically over the past year, which exposed major production problems (Wheelwright & Myers, 2011). In order to provide recommendations for operations improvements, the current issues need to be identified, and an analysis of the production processes needs to be conducted. Changes in both retail and pharmaceutical lines are needed for the company to meet the quality and production targets and satisfy the growing market demand.
Major Facts
The Morrison Company was founded in 2003 by its current President and CEO, Jason Robbins. It specializes in developing and manufacturing RFID tags, also known as smart labels, for the retail and pharmaceutical industries. It is a highly fragmented market, and Morrison’s competitors include around 150 other manufacturers, with the biggest of them being Avery Dennison (Wheelwright & Myers, 2011). All Morrison’s manufacturing-related activities are based in a single facility and are performed by 60 hourly production employees (Wheelwright & Myers, 2011). Over the past year, the company’s sales have boomed, and production levels have increased dramatically to meet monthly and quarterly shipping targets, which exacerbated the existing manufacturing problems.
Major Problems
The two major problems that the company currently faces are supply shortages and the ineffectiveness of the production control system. For production, the company needs 240 components, each of which, as a matter of policy, should be supplied by at least three vendors (Wheelwright & Myers, 2011). However, as of 2011, only about 40% of the parts were available from three or more sources, and 30% had only one source (Wheelwright & Myers, 2011). The company places orders bi-weekly with the expectation that the goods would arrive no more than two days before they were needed (Wheelwright & Myers, 2011). Due to high demand and the insufficient number of vendors, no orders are supplied on time, which creates disruptions in the production process.
The second operations problem is connected with the ineffective organization of production controls. Morrison managers make decisions on a day-to-day basis, giving assignments to workers at the start of each shift. Sometimes, they find it difficult to specify assignments due to parts shortages and other disruptions in the production schedule (Wheelwright & Myers, 2011). Throughout the day, managers and employees coordinate the production flow throughout the plant to maximize machine utilization and accommodate unexpected deviations from the schedule (Wheelwright & Myers, 2011). It can be concluded that the current system is ineffective because it requires continuous monitoring and constant adjustments.
Capacity and Utilization Analysis
The capacity and utilization analysis are performed based on the Monthly Unites Forecast, Planned, and Actual Output table for the year 2010, which provides information on each of the two lines’ monthly and yearly output. According to the table, in the first half of the year, from January to June, the actual production of both lines outperformed the plan, and since June, it went on a downward spiral. From July to December 2010, both the pharmaceutical and retail lines on average produced less output than was planned. The total yearly output was 15,000 units less than forecasted for both lines, amounting to a total of 274,237 units instead of the forecasted 305,472 units. However, the retail line outperformed the aggregate production plan, which was 115,180, with an output of 125,792 units. Overall, it can be concluded that the company is struggling to meet its production targets.
Production Processes Analysis
Morrison produces RFID finished tags, which are also known as smart labels, for the pharmaceutical and retail industries. RFID tags are used to track pallets and cases of goods after they left the shipping dock, and are most frequently applied in such areas as supply chain management, security access and control, asset tracking, and contactless payment. The earliest adopters of RFID technology were the defense and pharmaceutical industries, but over time, it started to be used increasingly in retail to track merchandise (Wheelwright & Myers, 2011). The retail and pharmaceutical industries are the two main consumers of Morrison’s products, and the company produces different types of smart tags to meet the demands of each market.
The pharmaceutical line manufactures smart labels specifically designed to meet rigorous industry standards. In 2007, Morrison patented a process of producing parts whose performance was unmatched inaccuracy, which allowed the company to acquire a 30% share of the pharmaceutical smart tag market (Wheelwright & Myers, 2011). Drug companies value RFID tag performance over price, and most pharmaceutical products come with expensive HF chips that perform better and are smaller in size than standard chips (Wheelwright & Myers, 2011). At Morrison, the vast majority of pharmaceutical products are built to stock. The main feature of pharmaceutical production is the variation of packaging of different types of products that calls for special materials.
The retail industry is characterized by strong market competition, which makes price the primary factor in purchase decisions, and high demand for customized products. To meet the industry requirements, Morrison offers personalization services, which consist of custom printing on finished labels. Almost 85% of the retail units manufactured by the company have some type of customization, with the remaining 15% being a core set of standard products (Wheelwright & Myers, 2011). Furthermore, the market is growing rapidly, with large retailers demanding apparel manufacturers to tag their products and the decreasing prices for RFID tags allowing small independent retailers to implement the technology. To increase its market share, Morrison has recently purchased exclusive rights to patented technology and plans to develop a new line of products with it, which has already attracted the interest of the largest retail chains (Wheelwright & Myers, 2011). Overall, the main features of retail production at Morrison are customization and increased demand for constant technological improvements due to the rapid market growth.
The main differences in product lines are that retail production requires customization, and pharmaceutical production needs a wide variety of packaging. The vast majority of pharmaceutical products are built to stock, and most of the retail products are made to order to accommodate customization requests (Wheelwright & Myers, 2011). The two lines use different technologies and parts, with only 30% of components being common to both retail and pharmaceutical industries.
Morrison’s competitive advantages are different in the retail and pharmaceutical markets. In the pharmaceutical industry, the main advantage is its unique patented technology, while in the retail industry, it is the customization services offered by the company. The new technology recently purchased by Morrison can also become its competitive advantage in the retail sector. The company’s main competitive priority in both markets is to increase its capacity to meet the growing demand, especially for the pharmaceutical line (Wheelwright & Myers, 2011). In retail, it also includes developing a new line using the recently purchased technology to address the needs of large retailers.
Recommendations
To address the existing problems and improve the company’s operations, several actions are recommended. The first issue is the need to increase the company’s capacity so that it could meet the growing market demands, which can be solved by the introduction of a second shift. The second issue is the ineffectiveness of production controls, which can be addressed by hiring skilled managers who can analyze the current system and suggest improvements. The third issue is supply shortages, which are the most difficult to address since it does not depend on the operations within the company. It can probably be solved by purchasing the required parts from China instead of from local vendors. Overcoming these three main issues will allow the company to reduce costs and improve its performance in the short-term perspective. In order to address the more fundamental problems, the deeper sources of production difficulties need to be identified and a strategy needs to be developed to eliminate them.
Conclusion
Although the Morrison Company has significant advantages over its competitors, its production process is poorly organized, which results in the company’s failure to meet its shipping and quality targets. The main operations problems include supply shortages and the ineffectiveness of production controls. They need to be addressed in the short term in order for the company to meet the growing market demands and improve its performance.
Reference
Wheelwright, S., & Myers, P. (2011). The Morrison Company. Harvard Business School.