Information Flow Between Departments Accounting Essay

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In OPM42 assignment 1 we have identified some key issues and some improvement techniques about the case study of Southern Paper's Toccoa Mill located in Toccoa, Geogia, United States of America. Toccoa Mill is facing some difficulties due to production planning, technology, plant personnel, machines, scheduling and quality.

In assignment 2, we will consider ourselves as an operations consultant who hired by the manager of the Toccoa mill, Curtis Shelton. As an operations consultant we are wanted to highlight the problems faced in Toccoa Mill and come with some solutions about the problems.

This report mainly covers, issues related increase output, cost reduction and improve quality which are company's desires. This chapter will cover a ranking of all the issues faced in the mill with their reasoning behind their ranks. A process flow charts and commentary will be explained in details which will cover manufacturing operations and order processing schedule activities. In chapter 3, You are expected to encounter simple payback analysis. Chapter 4 will cover an alternative development plan divided into 2 parts as short-term and medium-term actions. In chapter 5 I will conclude the report and will give some recommendations included some data collections and analysis. By writing this report, I will use techniques and methods covered in Operations and Management 42 module. You are expected to observe and encounter some techniques listed below;

Operations Improvements

Process analysis and throughout

Performance objectives and measurement

Inventory Management

Operations Strategy

Payback Analysis

Scheduling and resources

Quality Control

Demand, Capacity and Forecasting

Project Management.

Brief History of the Toccoa Mill

Toccoa Mill is located in a town called Toccoa, Georgia, United States of America. Toccoa mill started to produce market pulp in 1941. In 1959, mill has been bought by Louisville Paper Company. Louisville Paper Company invested capital in Toccoa mill after 8 years of manufacturing under Louisville Paper Co. In 1984, Toccoa mill had acquired by Southern Pulp and Paper Company. By purchasing Toccoa Mill, Southern Pulp and Paper Company, added a new product to their product range; Bleach board. Although, Southern Pulp and Paper Company focused on the production of market pulp, production of bleach board paid attention by the main headquarters of Southern Pulp and Paper in Birmingham.

CHAPTER 1

For a company in production environment, facing problems both in production and managerial areas are unavoidable. Every problem needs a solution but the main key issue with the solutions is to rank them from the highest ranked problem to the lowest ranked one. This will also create time for a company to focus on the problems which are more important than rest of the problems. By following the ranking will also reduce the loss of profit and minimize the time spend on the problems because most of the problems are going to be linked with each other and improvements affect directly rest of the problems. In chapter 1 I will rank problems with their reasoning behind.

Workload on Machine #5 and Machine #6

For a company in production environment, machines are the main capitals of the company because company will generate interest and profit in production and manufacturing via these machines. Lifespan of the machines can be extended by using them with their rated capacities. Capacity management is the answer for the problem. A proper capacity management provides the production to meet the demands of customers (Slack (2010))

Bottleneck

Heizer (2004) believes that bottlenecks can be eliminated by increasing the machines capacity, changing the lot size, rerouting the work, changing work sequence, accepting idleness at other workstations. According to R. Sivasubramanian, V. Selladurai, A. Gunasekaran, (2003) one of the most important issue in a synchronous manufacturing system (SMS) is to minimize the use of bottleneck resources and increase the efficient utilization on bottleneck resources. By doing that there are key issues related with them;

raw materials shortage;

lack of skilled labour and absenteeism;

queue of jobs waiting for processing;

priority rules.

Solving bottleneck issues affects direcltly the time consupmtion of the process, minimize the cost of the operation and allocate the resources more efficient and also improve the scheduling efficiently.

Quality Control

According to Slack (2010) customers' expectations are consist of consistent quality. Operations must be processed right in order to meet with the customer demands. But this will show variety from an operation to another operation. Quality shows the actual operation from the point of customers if it right or not.

In addition to that, if the quality goes up the other processes will be affected directly by that as well. Also improvement in quality shows us, the reduction in cost and revenues. By saying that; reduction in process times, inventory, scrap and service cost. Furthermore an improvement will be observed in productivity and profit.

Secondly, in my ranking Quality Control gets higher ranking than scheduling process because, it is clearly stated in the case study that if the quality of the papers or bleach boards don't meet the demand with the customer requirements and specifications, customer will directly return the product back. And if the customer is in a crisis situation, the whole existing process will cancel due to compensation of the customer's loss. Since reproduction of customer loss, schedule needs to be rescheduled.

Scheduling Process

Scheduling process answers 2 main question of the production environment. When to produce and how much to produce in a manner of time to meet the customer requirements?

Furthermore, as stated by Slack (2010), scheduling is a sequence of the processes that done over the work and a detailed timetable shows start and completion of the job. They are stated as volume and timing in manufacturing environments also some in other environments. For better production output and for better utilization of the capitals that are used in the mill, a better and more detailed schedule is needed.

Information Flow between Departments

It is clearly stated that in the case study, workers especially mill scheduler is not satisfied with the scheduling done in headquarter in Birmingham, Alabama. Production planner in headquarter doesn't pay a lot attention on optimising the processes in the mill. Thus resulted as problems in actual scheduling, maintenance and production and grade changes in the machines because of the lack of information. Mill scheduler has more control over the maintenances and potential problems can be occurred in the mill. It would be more accurate to schedule the production in Toccoa mill.

Inventory

As seen in the case study, inventory is not one of the big issues faced in the mill. Also the manager, Shelton Curtis stated that having a little room for an inventory forced them to ship the delivery on time to customers and avoid a lot of work to have a proper inventory with finished products in it.

However, having an inventory will help to a company in manufacturing environment to have lots of flexibilities in the operations. For Heizer (2004) believes that there are four functions of inventory can add flexibility to the processes;

To decouple: To allocate and use some parts of the products in the processes.

To have a various of selections of finished goods for the customers and to always be ready for fluctuations and variations in demand.

To benefit of using economical order quantities for highly used items in the production.

Having an inventory will save the firm for fluctuations of price going up for the items that are used in the production. Also avoid will avoid inflated prices of products.

Human Resource Strategy in Toccoa Mill

For Toccoa Mill, manpower is a vital part of the business. As a very important part of the processes in the mill, manpower may not seem the very first problem but an important problem. Undoubtedly, without skilled and experienced labours, the mill cannot achieve its goals. So it is mandatory to have a strategy on human resources for the mill.

Heizer (2004) states; a company needs to focus on 2 criteria in human resource strategy;

Utilization within the constraints of the operations decisions

To optimize the quality of work by developing the mutual commitment and trust between management and employee.

Last Second Changes

Last second changes in the production may cause very problems for a company. It is stated in the case by the workers that Toccoa Mill suffers because of the last second changes in production. These problems can be solved by a proper and accurate scheduling plan.

CHAPTER 2

Market pulp and Bleach Boards are produced in Toccoa Mill. Both products are produced in same operations also according to the customers' requests and products' own specification. There are some different operations as well in the production. In this section, I will explain the operations in detail from customer order to the end finished goods.

To run the manufacturing, Toccoa Mill waits until the customer places an order in the Customer Service from the headquarter in Birmingham, Alabama. After customer service receives the order, reports will be prepared according customer requirements on amount, size, brightness level and quality. After collection of the reports, Customer Service will send these reports to the Production planner in Toccoa Mill. Production Planner in the mill puts the data in a computer model to get calculation of optimal sequence, settings and scrap estimations for the whole month. Also Production Planner needs to analyse and organise the first week's operation plans to avoid any possible disorder. Also first week's production plan allow for last minute changes and orders. These production plans are sent to Mill Scheduler before the start of production. Mill scheduler checks the monthly schedule to monitor any potential problems. If there are problems mill scheduler needs to send these plans back to Production Planner to work out on the plans and re-schedule production for the month and for the first week. Afterwards plans will be sent to manufacturing department of Toccoa Mill. Manufacturing department will start the production of the selected and required products. If any problems monitored, mill scheduler has the authority to take actions and make changes to the schedule if foreseen problems occur.

C:\Users\Kaan\Desktop\OPM42 Assignemnt\Chapter 2\Order Processing and Scheduling Activities1.png

Now, I will explain the processes in the manufacturing department that have taken place to produce market pulp and bleach board.

C:\Users\Kaan\Desktop\OPM42 Assignemnt\Chapter 2\Process Chart.png

2.1 Market Pulp

Timber and wood chips stored in the wood yard till they are needed in the production. They are taken to reduce to pulps. Afterwards chemicals are mixed with pulps for desired brightness level and bleached to desired brightness level and quality. Then market pulp will be taken to pulp dryers or paper machine operations according on the final product. Rolling and baleing operation will be take place. At the end the final product will be ship to the customer.

2.2 Bleach Board

Timber and wood chips stored in the wood yard till they are needed in the production. They are taken to reduce to pulps. Afterwards chemicals are mixed with pulps for desired brightness level and bleached to desired brightness level and quality. Then market pulp will be taken to pulp dryers or paper machine operations according on the final product. Rolling operation will be take place. Rolled products will be taken to the last operation called bright white finish. At the end the final product will be ship to the customer.

CHAPTER 3

Payback Analysis

Payback analysis basically gives an answer to the question 'How long will the business pay back the investment made on a particular business or work?' The method I will cover on this analysis will not be the best way to analyse an investment. It has been stated that a company in a business is more interested in the profit part of the investment rather than only looking only for the payback period (Ward, 1990). Since, my calculations only give a simple answer to the question above.

The equation above will be our main equation for the calculation of the payback analysis for Toccoa Mill's computerization proposal.

The computerization proposal for the Toccoa Mill guarantees a better flexibility in the production. One of the problems in the mill was the time consumption of the grade changes due to last second changes and unplanned grade changes. Main attraction in the proposal is, it guarantees quick grade changes, reduction in the quality problems and also easy switching between short and long period grades. But the engineering firm estimated the value of the new computerization system as $15,000,000. On the other hand forecast results show that with the new system throughput of the machine #5 will be increased by 25 Tons per day and machine #6 by 40 Tons per day.

Throughput of the machine #5 will be increased by 25 TPD

Throughput of the machine #6 will be increased by 40 TPD

Average contribution per ton in 1995 for the machine #5 was $250/ton

Average contribution per ton in 1995 for the machine #6 was $350/ton

According to the information given above we can calculate the payback period;

First of all we need to calculate daily inflows of the both machines, machine #5 & machine #6 by;

For Machine #5;

For Machine #6;

To find the annual inflow of the machines we need to sum up the daily inflows and multiply them by 356 days since mill operates 356 days in a year.

As you can see in the equation above, the net annual cash inflow is $7,391,000. Now we are going to use our main equation of payback analysis;

The result indicates that the computerization system will repay itself in 741 days if we convert the days in to years, it will repay itself in 2 years and 29 days. By the result, we can say 2 years and 29 days of period is not a long term payback period. Due to the calculations, we can say that the payback period of the computerization system investment is an acceptable investment. This investment can be considered as a medium range investment with a medium payback period. It is plain that the investment of computerization system for the mill will be useful and with the new implemented system production in Toccoa mill will show progress of improvement in manufacturing. These results forecasted also can be seen in the reports of the engineers' who are offering the computer integration package to the mill.

However, $15,000,000 investment repays back in 2 years and 29 days. Our calculation is not highly accurate. As a stand-alone tool payback analysis indicates not much things. It can be very useful but simple tool to compare 2 or more investments. A company which is consider investing should also consider the time value of the money as a profit in the future to the present value. Also the future cost of the machine and the entire costs cover machine (like maintenance, service, and energy consumption) should be put in to account. These costs also need to be calculated as a future value of the cost with the future value of the profit. Also the calculations should include the risk assessment. That will give a proper and accurate idea to the company if it is a good investment to invest on or not.

CHAPTER 4

Toccoa Mill of Southern Pulp and Paper Company has faced some problems. These problems can be categorized in 3 main aspects;

Manpower Problems

Quality Problems

Scheduling Problems

I will try to develop an alternative improvement plan for the problems listed above as short term improvement plan and medium term improvement plan. Therefore, I will use the techniques, tools and theories which I have learnt in Operations Management 42 module. These techniques, tools and theories will guide me through the processes for developing an alternative plan.

Improvement Plan

4.1. Short-Term Improvements

4.1.1 Master Production Scheduling

MPS (Master Production Scheduling) is the main aspect of MRP 1 system. As the name itself, MPS is dealing with question 'what is going to be produced?' Like all the companies, it is not easy to allocate capacities and resources to the operations. MPS allows the schedulers to allocate these variables to specific operations. According to Slack (2004) MPS provides;

Utilization in resources (Labour and Equipment)

Provision of materials and costs

Since, the scheduling is a big problem for Toccoa Mill, integration of MPS will be highly efficient and beneficial for the mill. Since the production planner of the mill is located in the headquarters in Alabama, he doesn't have enough information and data to optimize the production runs to minimize the grade changes.

4.1.2 Master Requirements Planning

Nowadays, decreasing the cost of the production and the production time are the one of the most important goals for every company in manufacturing environment. By achieving these goals, companies assure to decrease the price of the product and to allow time for new operations. For this instance, companies in manufacturing environment needs to determine the number of parts needed for a particular product and needs to easily understand the issues behind the problems which cause the problem. MRP I (Master Requirements Planning) provides these information to the companies.

To understand the main logic of MRP I, we need to look deeply in the parts that MRP I consist of. According to Slack (2004) there are 8 main parts of MRP I. These are;

Customer Orders (Demand)

Forecasted Demand

MPS (Master Production Schedule)

Inventory Records

Bills of materials

Purchase Orders

Materials Plans

Works Orders

In the case study it is stated that Toccoa Mill suffers from the complex variety of customer demands. With the implementation of MRP I, Toccoa mill will have easy access to the bill of materials, MPS and the reasons behind the manufacturing problems.

Chase (2011) provides the information that; a company in manufacture-to-order industry will be highly beneficial to have MRP I system. Since Toccoa mill's industry type can be defined as manufacture-to-order, Southern Pulp and Paper Company's investment on Toccoa Mill with a MRP I system will be highly beneficial.

4.1.3 Human Resource Management

It is known that work related stress affects the quality of outputs directly. The relation between work related stress and quality of the output known for more than decades.So eliminating issues caused by stress in Toccoa Mill is very important fact. This can be achieved by;

4.1.3.1 Job Design

Chase (2011) believes that job design is to specify the tasks of workers and worker groups according to activities are managed in the organisation within the consideration of technology and requirements of the company and individuals.

4.1.3.2 Work Measurements and Standards

Achieving the firms standards in production only can be done by work measurements. Work measurements are tools for set time standards (Chase 2011). Allocation of capacity in production is one of the benefits and aims of work measurements. It is also necessary to motivate the workers by setting goals in production. These measurements also can provide information about how the work can be improved to Toccoa Mill.

4.2. Medium Term Improvements

4.2.1 Implementation of Six Sigma

Six Sigma is originated and invented by Motorola in 1986. These technique consists of some tools which are aimed to decrease the errors in outputs in every stage of the production and to minimize the variability in the processes. These tools are quality management tools which can be defined as statistical quality methods.

Hammon p (2007) believes that Sig Sixma consist of 5 main stages;

Define

Measure

Analyse

Improve

Control.

4.2.1.1. Define

Hammon (2007) states that Define stage consists of 2 phases; first one is to draft a charter. Charter is designed and created by the project sponsor or team champion. And charter should be clearly stated with the goals and aims of the six sigma project included milestones of the project and which processes should be taken in to consideration to accomplish the goals. After stating the charter broadly with it aims, the next step is to find out more information about the processes which are the problems. In Toccoa Mill, processes of making pulp in machine #5, and changing grades in machine #6 are the main problems to focus and implement six sigma. Also customer requirements should be taken in to account while the main purpose of the implementation is to satisfy the customer. For our case, the brightness level of the products, quality of the pulp and bleach board and the whole cycle consist from getting the order from the customer to last shipment to customer are the main aspects that we are going to focus on.

The process of manufacturing paper and pulp must be clearly stated as a flowchart in the report to understand the main logic and structure of the whole process. We can see the flowchart below for manufacturing pulp and bleach board;

C:\Users\Kaan\Desktop\OPM42 Assignemnt\Chapter 2\Process Chart.png

After defining the flowchart and understand the logic of the processes. We should focus on the processes that can be the problems. In this case, the problems are for pulp processes;

Mixing the chemicals with pulp for desired brightness level

Bleaching the pulp for desired brightness level

Pulp Dryer Operations

Paper machine Operations

For bleach board processes;

Mixing the chemicals with pulp for desired brightness level

Bleaching the pulp for desired brightness level

Pulp Dryer Operations

Paper machine Operations

Last finish for bright white finish operation

In addition, the team working on the implementation of six sigma should analyse the customer requirements on the finished good and what they expect to have. So a Critical to Quality tree should be constructed. For our case CTQ tree is;

C:\Users\Kaan\Desktop\OPM42 Assignemnt\Chapter 4\Critical to Order Tree.png

4.2.1.2. Measure

In this stage of implementation we need to construct measurements to provide data and values for the next stage, analyse. This stage will provide us data and values to overcome the whole potential problems and existing problems in the manufacturing environment of the mill.

According to Hammon P (2007) we need to there are 3 main thinks to measure;

Inputs: In Toccoa Mill, inputs are timber and wood chips.

Process Measures: Costs, cycle time, value adding processes, value and manpower.

Outputs: Finished goods shipped to customers.

Inputs can be analysed and measured by workers who are working in the wood yard. The workers in the wood yard should keep the track of quality of the materials which brought to the wood yard.

A survey form about the outputs filled by the customer may seem very simple. However, that feedback surely gave the mill a lot of feedbacks about the quality of the product. These data and information needs to kept under a statistical analysis program to give us the curves and graphs about the quality of the finished goods and raw materials.

In process measures, Toccoa mill needs to set goals and aims about;

Production time

Value

Variation in processes

Cycle times for each process

A fully comparison between aims and actual data will give the data how the processes are succeeded.

4.2.1.3. Analyze

3rd stage of the implementation is to analyse the data retrieved from our measurements. In some cases, there is no need to analyse the data because the person who works on that process may know the actual and potential problems. But in some cases, analysis is needed due to invisibility of the problem.

After we defined the actual and possible problems we need to rank a fishbone tree or cause-effect diagram for every each issue. A detailed cause-effect diagram will provide sufficient information about what may lead it to a problem.

Subsequently, these causes should be ranked by their costs, those with a higher cost should receive a higher priority.

Moreover, some processes may need to be redesigned to have sub processes within the process or the whole process might be re-engineered or might have a new definition to be more compatible with the whole manufacturing processes itself.

4.2.1.4. Improve

In this stage of Six sigma implementation, after the analysis the list mill prepared will guide them to improve the processes. These improvements can be analysed to observe if the new improvements satisfy the mill's new goals and aims. And if they don't show any progress, they can be reengineered to accomplish the goals and aims.

4.2.1.5. Control

This is the last stage of implementing six sigma to the business ventures. Control stage of the implementation is generally focuses on how to maintain the constancy of the changed and reengineered processes. At this stage, some of the processes might need to be redesigned and improved to maintain their constancy. Also control stage is seeking for some answers and analysis to ensure their goals to be achieved.

4.2.2. Inventory

According to Slack (2004), the most important role of an inventory is to support the five operations objectives, quality, speed, dependability, flexibility and cost. Firstly, having an inventory allows a production line to take faster actions due to any unpredictable or predictable production problems, quality problems in raw materials and finished goods, and also to respond unscheduled production.

Undoubtedly, in an inventory a range of products and raw materials can be stored. These items free up buffering time to take actions regarding the problem.

One of the supporting points regarding to have an inventory is, it allows company to buy raw materials with the best quality when it is available in the market and these materials can be stored in the inventory.

Moreover, having and inventory will cost to a company in short term but in long term will ensure the company to save money and decrease the production cost. The reasons underlying, inventory allows the company to apply EOQ (Economic order quantity) for their raw materials. Undoubtedly, companies will gain the decision of buying items with the lowest cost. Second reason, it will protects the company affected by the fluctuations and inflations on the cost of materials used in the operations.

Generally, one of the problems in a production environment is sometimes to face with critical stock-outs. However, a company invested on inventory will not affect by critical stock-outs directly. It is very important to provide constancy in a production environment.

On the other hand, inventories have disadvantages. Slack (2004) believes that;

By the growth in production range in long terms, inventories may not to correspond to the need in space sufficiently.

Can be damaged.

In case of any loss, it would be very expensive to re-create or re-build.

May require special handling and storing systems (woods, drugs etc.)

Additional space might be required due to packaging or isolation.

High insurance and administrative cost.

Inventory might be needed in several locations within the company, results duplications.

CHAPTER 5

Recommendations

In the report, I mentioned about a new development plan for the mill. Now I will explain some recommendations about some techniques can be used in the environment. The reason behind is there is no sufficient information in the case study to come up with a solution. So in this section I will make some calculations with the numbers I assumed for the company.

Forecasting Activities in Toccoa Mill

Forecasting is one of the tools to schedule a production. Forecasting looks for answers to 'When to produce?' and 'How much to produce?'. Simply it is the science of predicting future events by taking customer demands into account.

Steps of Forecasting can be shown as;

C:\Users\Kaan\Desktop\Forecasting.png

For Toccoa Mill, we can assume the most suitable forecasting approach is a moving averages forecast. Because if analyse the market, we can say no seasonality and fluctuations in the demands and there is no trend observed. As Heizer (2004) stated; if the demand in the market is fairly steady state over time, Moving averages method is the method for forecasting.

Moving Averages Forecasting;

where n is the number of periods in the moving average.

Moving Averages technique is one of the simplest techniques among the forecasting methods but it is highly accurate for a business which has low product range and has few customers.

CONCLUSION

I have covered the Southern's Toccoa Mill's problems in 5 main chapters. Ranking the problem related with the production, human resource, technology and scheduling are one of these problems. By ranking the problems I tried to show the importance of each problem due to their results in production and importance. I have supported my ranking with the support of the ideas in journals and books. In chapter 2, this report has covered the processes which are necessary to produce market pulp and bleach board products. Payback period is found by simple payback analysis to show the how long will it take to cover the cost by the investment. In chapter 4, I have tried to find short term and long term solutions for the company which I ranked the problems before. Suggestion of MPS, MRP and human resource management are covered in the short term implementations. Implementation of Six Sigma and inventory suggested in medium term implementations. These implementations are mandatory for a business in production environment. To grow in production and to ensure the constancy in production, I highly recommend to Southern Pulp and Paper Company's Toccoa Mill to take in to account these implementations. Forecasting activities are also very important for a company, to predict future events easily and accurately by the help of a forecasting. I also recommend forecasting activities for the mill to obtain data about future potential demands and create the possibility to take actions early.

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