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Operations Management of Logistics Company

4298 words (17 pages) Essay in Business

08/02/20 Business Reference this

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Table of Contents

Introduction

Functional Strategy Importance

Specific Importance

Functional Strategic Plan

Operations Strategy Introduction

Inventory Management – Functional Strategy

Cardinal Logistics – Inventory Management

Goals

Objectives

Strategies

Product Categorization

ABC Analysis

Benefits of ABC Analysis

Cycle Counting

Evaluation and Control measures

Timeline of Control Measures of the Strategy

Measure of evaluation for continuous improvement

Implementation challenges

Firms resistance to change

Insufficient support for Project Management from Sponsor

Management’s insufficient attention

Insufficient trust in employees for implementing strategy

Communication

Weak or insufficient strategy

Future career for Usefulness

Career

Strategic Planner

Management Consultant

Business Developer

Competitive Intelligent Analyst

Strategic Cost Analyst

Conclusion and Summary

References

Introduction

Operations Management is chosen for the operational function for this report. Operations Management is the process of creating value in terms of services and goods via a given set of production units in a company by creating outputs from inputs. There are 3 main functions are carried out here:

  • Finance
  • Operations
  • Marketing

Operations is one of the major things and there are many functions under it. The important function under operations is Inventory, which occupy a hefty 50 % of the invested capital and also the most valuable asset of the firm (Heizer, Render, & Munson, 2017). Here, the company that has been selected for this report is an Accredited company in New Zealand – Cardinal Logistics, a logistics company in New Zealand.

One of the leading logistics and fast – growing companies in New Zealand is Cardinal Logistics. The company’s main goal is to provide storage and distribution facilities for grocery products and Fast – Moving Consumer Goods (FMCG’s). Some of the major FMCS companies who use Cardinal services are API, Mars, Lion, Hutchinson, Griffins, Red Bull, Sealord, Wilsons and General Mills. Inventory is the whole process of logistics and supply chain, which requires storage of goods and flow from one place to another (Cardinal Logistics, Waterloo Business Park, Christchruch – BBR Contech, 2016).

 Cardinal being an 3PL company, Inventory is the backbone of its survival. So, managing and controlling the inventory is the utmost priority, to give a good balance between inventory investments and customer service (Heizer, Render, & Munson, 2017). Optimizing Inventory Management is the functional strategy selected for Cardinal Logistics.

Functional Strategy Importance

 Managing the current asset of the firm is called Inventory Management. Maintaining optimum level of inventory is the ultimate goal of Inventory management. The main fear is to keep applying control systems and minimum investment which will be the best tools to reduce inventory cost and also provide the best customer support, which are the aim for Cardinal Logistics (Introduction And Importance Of Inventory Management / Accounting-Management, 2012).

Specific Importance

  • Increase in employee efficiency

    • Employee efficiency not only increases the employee’s efficiency but also increases the overall health of the firm. A good inventory system in place can stop employee from digging through log files, writing reports, email war on spread sheet to and back etc. By putting in an effective Inventory Management, the employee’s efficiency increases thus adding more value to the work being carried out, also making the management easier as all information is readily available (Bonvissuto, 2007 April 15).
  • Company productivity increases

    • For smoother running of the firm, Inventory management is mandatory. By properly maintaining the inventory records, it will increase the sales and production of the company. It also brings an equilibrium between customer service and inventory investment returns which directly impact the productivity (Kumar & Manohar, 2011).
  • Inventory location is easy to access for employee

    • For smoother running of the firm, Inventory management is mandatory. By properly maintaining the inventory records, it will increase the sales and production of the company. It also brings an equilibrium between customer service and inventory investment returns which directly impact the productivity (Kumar & Manohar, 2011).
  • Cost reduction

    • Excess investment is required when the inventory is managed poorly. This also means more capital is being tied up with inventory and reducing the profits and productivity of the firm. Apart from this, excess inventory also holds extra cost. To increase productivity and reduce cost proper inventory management is required (Wei-Shao, Yu-Jane, Yi-Tsung, & Robert, 2014 March) .
  • Reduce obsolescence and damage stock

    • Lack of inventory management may lead to damaged or out – dated products being sent out for customers; thus, customers might move to other competitors. Proper inventory management can detect and identify obsolescence and damaged products pre – hand and avoid being sent to customers (Kumar & Manohar, 2011).
  • Space utilization

    • Very important task of Inventory is optimized and best utilization of space. Best utilization of space can help reduce damage of stocks, identify expired stocks, so that they can be removed and new products can be placed (Kumar & Manohar, 2011).

Functional Strategic Plan

 To increase the profitability of any firm, new strategies must be used, which therefore requires strategic planning. Strategic planning help to identify the best strategy to be chosen to achieve the objectives and goals of the firm.

Operations Strategy Introduction

Operational strategy is the process of finding out where and how the product or service is manufactured, how to integrate it to the existing production process which also includes inventory, effective management of physical resources, life cycle of product, supplier and customer relationships (Wheelen & Hunger, 2012).

Inventory Management – Functional Strategy

The main goal of inventory management is to bring an equilibrium between customer service and inventory investment (Heizer, Render, & Munson, 2017). The key factor for Cardinal Logistics is Inventory management. Inventory management is crucial for both operational maintenance and producing new assets as these both bring in more revenue when properly handled by the firm (Kumar & Manohar, 2011).

Cardinal Logistics – Inventory Management

Cardinal Logistics should implement the following strategy, objectives and goals for best inventory management:

Goals

The following are the main goals for Cardinal Logistics, which will increase the profitability and productivity (Goals of Inventory Management | Your Business, 2017):

  • Managing the stock quantity
  • Decreases the excess stock
  • Accuracy of Inventory records
  • Safeguarding Inventory

Objectives

The art of inventory management includes having sufficient amount of inventory also not overrunning or causing excess of inventory, as these both are required for Cardinal Logistics. The following statements should be the objectives (What are the objectives of inventory management?, 2016):

  • To reduce holding cost, inventory carrying and ordering
  • To hold inventory in the higher end of sufficient requirement, to allow sales and production of Cardinal work smoothly
  • Decreasing the damaged, obsolescence and theft of products
  • Reducing the inventory investments to minimum and increase profitability

Strategies

Operational managers must adhere to the objectives and also the system must be in place working, for best inventory management. Before this could happen, we need to answer two important questions (Heizer, Render, & Munson, 2017):

Product Categorization

Cardinal Logistics is dealing with a variety of products such as nuts, biscuits, bars and chips. The initial step in inventory management is to distribute the products properly based on their categories, so that the warehouse space can be utilized effectively. It would also help the employees know where the products are placed in the warehouse, helping them to be more efficient (Hansen, et al., 2008).

ABC Analysis

Pareto Principle also known as ABC Analysis is the process of segregating the on – hand inventory, based on Annual Dollar volume into 3 classifications. The main point in the principle is – “Critical Few and Trivial Many”, meaning we should focus more on the critical items in inventory by implementing proper policies in inventory (Heizer, Render, & Munson, 2017). Cardinal Logistics has the category of chips to be the highest annual dollar volume, and the lest is bars and nuts. So keeping the chips category in the forwards, and then biscuits and finally bars and nuts (Supply Chain & Logistics Management | Cardinal Logistics, 2019).

Benefits of ABC Analysis
  • ABC analysis has provided results which show the requirement for reduction in clerical staff and also inventory levels to reduce cost.
  • Anticipation of highly demanding products can be accurate in terms of service level and carrying cost (Fuerst, 1981).
Cycle Counting

Accuracy of the records it the main ingredient for ultimate sales, production scheduling and inventory management. Several efforts are carried out to make sure, these records are accurate to the count, but it further needs company audits, which is called Cycle counting. This method is used to count the inventory products, where verification also takes place but still inaccuracies is also documented in the records. Cardinal Logistics must implement periodic counting for all its department, categories, so that fast going products must be counted, products like chips, bars, nuts and biscuits. By this act, we can reduce the inaccuracies that creep into the system, by tracing it back to the place where it all started. It helps to maintain integrity in the inventory records and also accuracy (Heizer, Render, & Munson, 2017).

Evaluation and Control measures

 The process of control and evaluation ensures the companies’ achievement, which needs to be achieved. This provides results based on performance comparison with the desired results, which is most important for improving company results and also company management (Wheelen & Hunger, 2012).

Timeline of Control Measures of the Strategy

Metrics

Stakeholders

Timeline

Resources

Outcomes

Functional strategy objectives and goals are defined

Inventory manager and Management

14 days

Records and Inventory data from WMS

Detailed goals and objectives can be achieved

Team formation for Cycle counting, ABC analysis and Categorizing

Employees, Inventory manger and Management

7 days

Employee’s data

Identify the root cause of the issue by forming a team

Analyzing inventory and gathering data

Team

28 days

List of products, all data of inventory from WMS

Analyzed output of pick face, their path, product movement and inaccuracies of records

Metrics

Stakeholders

Timeline

Resources

Outcomes

Evaluation of data and strategic planning

Team

28 days

Techniques and theories learnt from Operations Management

Functional plan is created

Implementation of Strategy

Team and Management

56 days

Draft plan made to implement the strategy

Focusing on root cause of the issue, other variables are identified, and steps are taken to control

Analyzing the feedback

Team

28 days

Results after strategy implementation

Employees KPI, calculate turnaround time for order picking and delivery, calculating the inadequacies and formulating measures to correct strategy implementation

Eliminate the root cause and improving continuously

Team

Employee’s feedback

Collecting data from feedback

Measure of evaluation for continuous improvement

Every employee is provided with questioner for collecting the feedback. These questioners contain question on how the strategy was implemented and find out the difference between achieved and planned strategy and how satisfactory the results are. Collective measures are taken to calculate strategy successfulness (Wheelen & Hunger, 2012).

Implementation challenges

 Cardinal Logistics will face several implementation issues with this new strategy. It would face several dilemmas such as management and partners of the company, employee’s confusion, how this strategy implementation might work. These are some of the challenges that Cardinal Logistics will face implementing the new strategy:

Firms resistance to change

Cardinal Logistics is a traditional company. They started experience exponential growth over a period of time. Inventory Management Strategy will always create political problems, based on the changes being implemented. For example, Inventory system changes will require the firm to re – engineer the complete business process, which is pretty complex, as other firms are also involved in Cardinal. This complex nature of Cardinal will create complex resistance to implement any major strategy (Hansen, et al., 2008).

Insufficient support for Project Management from Sponsor

While the implementation plan is proposed, the understanding between company leaders and partners is widely understood for the selected strategy and the change will also be considered by the partners for their own goals. However, mostly the partner firms don’t take part in any planning or strategy to clearly understand the requirement to change the company and do the implementation for a good change. They may be reluctant to invest in any major change that might affect the firms current flow, thus affecting the sponsorship for the implementation (Grabovica & Pilay Velic, 2012).

Management’s insufficient attention

Many company leaders see the strategy as a liner initiative for the company. After completing the documentation for the strategy plan, the companies executive committee or the managing partners who were in the process, many get themselves involved into other sections of the company, misunderstanding the documentation. Eventually, due to the negligence of the team, partners will lose interest with the firm, which will directly affect the implementation of the strategy planned (Hansen, et al., 2008).

Insufficient trust in employees for implementing strategy

Implementing new strategy will have various effects on its employee, such as increase in workload, increase in work hours to adapt to the change etc. These also lead to increase in uncertainties among the employee, which will make them think, these might affect their job. Lack of assurance from the management will have a negative impact on employee trust with the firm and also the implementation of the new strategy (Grabovica & Pilay Velic, 2012).

Communication

The main concern with Cardinal Logistics is the implementation of Strategy with Inventory Management, is communication. Communication here is the process of sharing data with the employees, data such as stock details, pick face details etc. Some firm may be reluctant to share data with their employee, this in turn creates trust issues with the firm (Grabovica & Pilay Velic, 2012).

Weak or insufficient strategy

The lack of Cardinals involvement, in developing leads and assessing the process to develop appropriate strategy, during the planning process may result in unachievable plan. Some company leaders also place in ill – fitting strategies to the company, which will also result in weaker strategy plans (Grabovica & Pilay Velic, 2012).

Future career for Usefulness

 Operational management is the functional area chosen for this study. In Cardinal Logistics, a sub part of Operations process, which is Inventory management is the strategy selected for implementation. By this study, apart from the lessons learnt in class, I have personally gained a wide range of knowledge in:

  • Cardinal Logistics functions of Operations
  • Operational process of Cardinal Logistics
  • The role of Inventory in an 3PL firm
  • What and how to choose a strategy for an organization
  • Implementation challenges to implement a strategy

I found these topics to be interesting to learn and also widen my knowledge. As per me, every retail firm has a supply chain linked to it directly or indirectly and supply chain in business terms is inventory. So, I find this area, where there can be multiple opportunities for employment and development (Why choose a career in logistics and supply chain management?, 2019).

I am pursuing my majors in Operations Management, which means eventually my ultimate career goal would be to become a team player in Operations team in any professional company. This study has deepened my knowledge in this field.

Career

From a student’s perspective, I may get myself an entry level job, there are various opportunities for a Strategic Planner, such as:

Strategic Planner

To be a Strategic planner, once must help the firm design plans which will help the firm grow and increase its profitability. Gathering information, analyzing the data, and putting the information in a usable format is the role of Strategic Planner. The basic idea is to help the organization. It also involves understanding what strategy has been in place and what will be the best course to follow from now on (Careers in Strategic Planning: Your Guide to a Job as a Strategist, 2019).

Management Consultant

Management consultant is like assigning a specific task to the strategic planner. For example, if a beverage industry is not gaining profits, due to its competitors, then it’s the work of the Management Consultant to check for a proper solution. The role requires to understand the market, collaborate with the management and recommend new strategy for the firm to allow gain profit and growth in business (Careers in Strategic Planning: Your Guide to a Job as a Strategist, 2019).

Business Developer

Business Developer is a related role to Strategic Planners. It focusses on steps that needs to be taken to put in place a strategy which involves acquisitions, new markets, licensing deals and mergers. A good business developer will help the firm make meaningful connections with external business and also help profit the firm (Careers in Strategic Planning: Your Guide to a Job as a Strategist, 2019).

Competitive Intelligent Analyst

Many companies spend in millions if not in billions trying to understand their competitors next step, the market view and much more. Well, a Competitive Intelligent Analyst will be the person who can do this easier for the firm. They stay on top of this trends, understanding markets, focusses on key competitive features and will be a valuable asset for the company (Careers in Strategic Planning: Your Guide to a Job as a Strategist, 2019).

Strategic Cost Analyst

Analyzing the business cost with a business is carried out by Strategic cost analyst. They used to determine breakeven analysis, which provides information on the cost given to the business vs the cost yielded by the business in all aspects including planning, implementation and response (Careers in Strategic Planning: Your Guide to a Job as a Strategist, 2019).

There are wide range of strategic planning jobs available for different organization, in different levels. But in general, getting those jobs are pretty tough. If I step forward as an Inventory Optimization Strategic Planner in Cardinal Logistics, I have to start from scratch as an entry level operator, and then start my career with much greater promising returns and make myself as a successful Strategic Planner.

Conclusion and Summary

 To maximize the profits of the company, one must approach the functional area, to achieve its strategies and objectives, which is call Functional Strategy. It will help in providing an edge over the competitors. Thus, I would like to conclude by saying, it is vital to choose a proper strategy which aligns with the company’s objective and goals, and also help the company achieve higher benefits. To increase the profitability, a company must be willing to risk the implementation of new strategy using Strategy planning. A perfect plan must be devised by the organizational leaders, on what strategy to choose, how to implement, how to carry it forward, forecasting the risk involved and other factors. This must be then discussed with the board members, partners, suppliers, employees and make sure everyone is comfortable adopting to it. Post evaluation is as crucial as the initial planning, as only an evaluation report can give proper view on how the implementation was a success or failure. I would like to conclude by saying, Strategic planning is a vast area, where I can build a successful carrier.

References

  • Bonvissuto, K. (2007 April 15). Manage your Frame Inventory: Basics including sticking to budget, avoiding ‘Inventory Bloating’. Ophthalmology Times, 38(8), 98.
  • Cardinal Logistics, Waterloo Business Park, Christchruch – BBR Contech. (2016, July 25). Retrieved from Contech: http://www.contech.co.nz/case-study/cardinal-logistics-waterloo-business-park-christchruch
  • Careers in Strategic Planning: Your Guide to a Job as a Strategist. (2019). Retrieved from Careers in Business: http://careers-in-business.com/sp.htm
  • Fuerst, W. (1981). Small Business Get a New Look at ABC Analysis for Inventory Control. Journal of Small Business Management, 19(3), 39-44.
  • Goals of Inventory Management | Your Business. (2017, November 21). Retrieved from AZ Central – Part of the USS Today Network: https://yourbusiness.azcentral.com/goals-inventory-management-3864.html
  • Grabovica, E., & Pilay Velic, A. (2012). The biggest hallenges of Successful CRM Implementation: Conceptual Framework. International Conference of the Faculty of Economics Sarajevo – ICES, 216-227.
  • Hansen, S., Michelson, E., Kamper, A., Borling, P., Stuer – Lauridsen, F., & Baun, A. (2008). Categorization framework to aid exposure assessment of nanomaterials in consumer products. Ecotoxicology, 17(5), 438-447.
  • Heizer, J., Render, B., & Munson, C. (2017). Principles of Operations Management. Essex, England: Pearson Education Limited.
  • Introduction And Importance Of Inventory Management / Accounting-Management. (2012, May). Retrieved from Accounting – Management: https://accountlearning.blogspot.com/2012/05/introduction-and-importance-of.html
  • Kumar, N., & Manohar, V. (2011). An evaluation of the size in the management of inventory in Tamil Nadu cement industry. Abhigyan, 28(4), 50+.
  • Supply Chain & Logistics Management | Cardinal Logistics. (2019). Retrieved from Cardinal Logistics: http://www.cardinallogistics.co.nz/supply-chain-logistics-management
  • Wei-Shao, W., Yu-Jane, L., Yi-Tsung, L., & Robert, C. (2014 March). Hedging costs, liquidity, and inventory management: The evidence from option market makers. Journal of Financial Markets, 25-48.
  • What are the objectives of inventory management? (2016). Retrieved from Career Ride: https://www.careerride.com/fa-inventory-mangement-objectives.aspx
  • Wheelen, T., & Hunger, J. (2012). Concepts in Strategic Management and Business Policy. Boston: Pearson.
  • Why choose a career in logistics and supply chain management? (2019, Januray). Retrieved from Prospects.ac.uk: https://www.prospects.ac.uk/jobs-and-work-experience/job-sectors/retail/why-choose-a-career-in-logistics-and-supply-chain-management
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