Analysis Of Turbo Exhausts Operational Issues Accounting Essay

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Turbo Exhausts, established by two motor-racing drivers in 1994 is an enterprise producing custom-made automotive extractors and exhaust systems. It is a developing enterprise and has good prospects. With the social development, it faces new market situation. There are more and more different demands of the customers. In the process of satisfying the needs of the customers, on the one hand, Turbo Exhausts expands its business; on the other hand, it begins to face some operational problems. This paper will first introduce the current production process of Turbo Exhausts, and then analyze the operational issues including issue caused by the contract with the Performance Shop and issue caused by producing off-the-shelf products, and then there are some measures for the current situation. As a development enterprise, Turbo Exhausts should not only grasp the new opportunities to meet different demands of customers, but also should have a balanced production and operation management. The managers should consider the impact brought by new opportunities, and make the production plan, organize the operation process, strengthen the control in the production and operation, try to improve the work efficiency and reduce the production cost in order to maximize the benefits.

Analysis of current business

With the progress of technology and higher and higher requirement of people for the products, modern production and operation management faces new environment. The product life cycle is shorted; the market competition is more and more fierce; what the enterprises cares most is that the requirement of the customers is diversified. In terms of Turbo Exhausts, it first serves for motor racing industry, and all the products are custom-built. With the growing reputation, more and more demand comes from private motorists who want to improve the performance of their street cars and there are also more and more requests for off the shelf products. At the same time, there are also more and more other enterprises which tend to cooperate with Turbo Exhausts. According to the explanation about the operation management, one of the purposes of the effective production and operation management is that the enterprise should adopt the changes and develop new products or services to meet the new requirement of the customers (Kempf& Keskinocak&Uzsoy, 2010). For Turbo Exhausts, in order to adapt to the market and satisfy the needs of the customers, on the one hand, it begins to develop the expertise to produce exhaust systems for more popular and common makes and models, which expands its market and makes it become suppliers for both motor racing industry and the performance street car sections. On the other hand, it begins to produce off-the-shelf products, which leads Turbo Exhausts to produce a more standardised line of performance extractors and exhaust systems; and the cooperation with new enterprise also expands its business. According to the theory of production and operation of the enterprise, there are two main parts of the production and operation management, the first is the strategic decision of the production and operation system; the second is the design management of it. The second also includes product development management and factory facility and machinery system construction management (Krajewski, 2009). For Turbo Exhausts, its manufacturing facility is located in Blacktown, and the facility has three service bays that facilitate the tuning and fitting of custom systems. The tube cutters and tube benders are grouped respectively. There are also skillful staffs in the enterprise.

In all, the production managers of Turbo Exhausts make some seemingly correct decisions in order to meet the needs and development of the market. The location of the enterprise, the high-tech used and the skillful staffs all conforms to the requirement of production and operation management. It seems there is a sound production system in Turbo Exhausts, but unfortunately, Turbo Exhausts faces invisible operational problems remained to be solved.

3.0 New problems faced by Turbo Exhausts

3.1 Problems caused by the new contract with Performance Shop

With the expansion of Turbo Exhausts' business, it begins to cooperate with other enterprises. The Performance Shop, a national car parts distributor specializing in the supply of high performance automotive components for both motor racing people and the general public makes a contract with Turbo Exhausts with the requirement of an initial stocking of the high performance exhaust systems for the 5.0L Ford "Boss 302" SVO and the 5.0L Chevrolet small block racing engines and also regular replenishment of the stocks in line with sales. It seems it is a good business, but there is just a low demand of the Performance Shop, and it costs an overtime production about several weeks. Though the sales of performances systems through the Performance Shop steadily increased, after weighing the interest, it is far less than the profits gained from the custom-made systems. In all, the managers don't design a good performance measurement system about producing the systems needed by the Performance Shop, so the outcomes can't meet the objective of high-efficiency of production and operation management. On the one hand, since the production of the systems needed by the Performance Shop is not a urgent job and there is not a required processing time to finish the production, the staffs may produce the system with a low speed; the scheduled lots of components for the Performance Shop systems are often left sitting around the factory in various stages of completion; it will take a long time to perform the task. Thus overtime production is scheduled for the sales of performance systems through the Performance Shop. On the other hand, compared with producing the needed system of the Performance Shop, producing the custom-made systems is an urgent job; staffs will invest time and energy concentratedly, which makes doing the task efficiently. The longer time for producing systems for the Performance Shop may reduce the time for the custom-made systems, thus increase lead times for both custom and The Performance Shop orders, which causes longer promised delivery times, and causes difficulty to meet the demand created in the contract. Besides the time, cost is also raised for the systems of the Performance Shop; money is being tied up in inventory, including money for raw materials and for the labor. On balance, the problem caused by the contract with the Performance Shop is the result of the managers' lack of correct strategic decision of the production and operation which is an important part of the production and operation management. The strategic decision of the production and operation mainly aims to solve the problems of what to be produced, how much to be produced and how to be produced according to the enterprise's marketing system's analysis of the market demand and the development condition of the enterprise(Krajewski&Ritzman&Malhotra, 2012). To be specific, the strategic decision is a guiding ideology for the enterprise to choose the structural style and operation mechanism of the operational system (Malakooti, 2012). In term of Turbo Exhausts, the managers don't make a good decision about the production of the custom-made systems and systems for the Performance Shop, and there is not a clear strategic orientation for its production and operation systems, which is disadvantageous for the Turbo Exhuasts.

Issues caused by producing off-the-shelf system

In terms of the systems for the Performance Shop, they are also off-the-shelf products. On one hand, just like the analysis of the above, more time will be spent for the off-the-shelf products, and more space is needed to accommodate the growing inventory volume. Capacity is being pushed, and with the current layout, no space is left in the plant for expansion. What is the most important, the move the producing off-the-shelf systems may affect the company's financial structure. Since the off-the-shelf products may not be sold immediately, there should be some space to accommodate the products. That is to say, there should be many inventories, which include raw materials, semi-finished products and finished products. It has played an important role in the production and operation management of the enterprise. As an asset, inventory is the important material foundation for the production and business operation; it takes up for more than half of the total amount of the liquid assets of the enterprise. When there is large amount of inventories, it means a large number of products are backlogged; a large amount of working capital is used, and the enterprise will lack of liquidity; at this time, the enterprise faces serious financial risk (Nahmias, 2003). Moreover, the inventories are often in the process of continuously selling and reproducing and have high liquidity, so inventories play a most important role in the paying short-term debt. The management of inventories does not only have a great influence on the liquid assets, but also have a big impact on the business operation, and the success or falling of the business operation has also an direct impact on the financial structure of the enterprise(Muller, 2011). Inventory is also a key consideration in the accounting, and the analysis of inventory can help to understand the turnover rate of the enterprise's asset. In addition, large amount of manpower and materials are needed for the production of off-the-shelf products, which is also a cost of the enterprise. In all, producing off-the-shelf products may have affected the Turbo Exhausts to a great degree from different aspects.

4.0 Measures for solving problems

Faced such problems, it is time for the managers to take a careful look at the overall impact and takes some measures.

First, the managers should take some measures to improve the work efficiency of the staffs. The managers can strengthen the enterprise culture construction of the Turbo Exhausts, improve the execution of the employees, and focus on the psychological management of the staffs. At the same time, the Turbo Exhausts needs to establish reasonable performance management system and the reward and punishment system. The work flow should be continuously optimized in the work process and the job responsibilities and evaluation standards should be clear (Lievano, 2010). All the products should be required to be finished in a fixed time, and everyone performs their duties. The cooperative spirit of group should be strengthened in the enterprise. In addition, the managers can improve the work efficiency from the angle of self-improvement. To be specific, the manager should have good personal accomplishment, manage the emotion properly and allocate the task reasonably, which can make them be a heroic leadership and make the staff's psychology in best state. What is more, Turbo Exhausts can also introduce advanced technology and equipment, which can reduce the production time and improve the work efficiency.

Second, Turbo Exhausts can reduce the production cost properly to increase the benefits. In the market economy condition, the control of production cost is an important part in the cost management. The consumption level of the raw materials, the labor efficiency of the labor and the utilization of the equipment can be reflected in the production cost. Theoretically, for an enterprise, it should establish a sound budget management system, and then form a strategic concept of cost management. In this process, the managers first need to know the cost structure of the products and make an analysis of the off-the-shelf products and the products needed by the Performance Shop. Then they should control the actual condition of the production activities. The labor cost, materials cost and the manufacturing expense can be made appropriate adjustment. Turbo Exhausts can also proper cheap warehouse to accommodate the growing inventory volume, which is also a way to reduce cost. The number of inventory products and the products for sales should be kept in proper proportion, which can also control the cost to a certain degree. What is more important, the Turbo Exhausts can reduce cost through management innovation. In all, the reduction of production cost can improve the overall benefits, especially the benefits from the off-the-shelf products and the products for the Performance Shop.

Third, the Turbo Exhausts should pay attention to the inventory management. No inventory, no profits. Inventory management refers to managing and controlling various products and other materials in the process of production and operation to make their storage keep in a economic and reasonable level. From the above analysis, not only the money is being tied up in the inventory, but also much warehouse space is needed to accommodate the inventories, which causes that no space is left in the plant for expansion. The turbo Exhausts should conform to the principle of "1.5 times", which is the main content of the inventory management (Viale&Carrigan, 1996). At the same time, the managers should emphasize the inventory turnover, which is also an important task of the salesmen. The salesmen should replace the defective products timely according to the company's regulations and standards. Inventory turnover can stimulate sales directly and effectively and it has many tangible benefits for both the enterprises and the customers (Waters, 2003).


In all, the development of enterprise can't leave without the sound production and operation management. Strategic decisions, personnel management, product management and facility management and so on are all important elements in the production and operation management. As a growing business, Turbo Exhausts has relatively sound management, but with the expansion of the business, there are also some problems which need to be addressed and checked fairly and quickly. In order to realize the management goal and improve the economic benefits of the enterprise, it needs to plan, organize and control various activities in the process of production and operation. Improving the work efficiency, reducing product cost and controlling the inventory can be three good measures to solve the issues faced by Turbo Exhausts, and through the measures, the business of Turbo Exhausts will be scale new heights.