Operations Planning In Relation To Profitability Commerce Essay

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Operation planning and control is absolutely important to the profitability of a business. It is the management's duty to ensure the company stays on course in order to deliver satisfactory income.

The ability to organize plan and manage time are highly essential skills for efficiency and effectiveness in a company. This deals with how the manager knows the product and processes, how the company forecasts the market demand.

The manager has to transform time, knowledge of processes and forecasting into a working plan to deliver customer satisfaction.

I have been commissioned by OGEL to observe and make recommendation for the company. As a consultant, the purpose of this report is to carry out the analysis of Ogel's operations. Also evaluate in detail planning, control and management issues in the company.

This report would analyse the planning and control and also management issues within the ogel operations.

This report will analyse the problem with the factory as a whole, including the different symptoms and causes of these problem. These problems especially have to do with the complicated supply chain. The kind of supplier the company is dealing with, and also the inability to satisfy customer demand.

Finally i will make recommendation to change, as to how the company can maximise effectiveness in its operations and production.

BACKGROUND OF OGEL

Planning in a business involves taking decisions on what the objectives of the company is going to be and the planned action that would be taken to achieve this goal. Whereby control is the monitoring of the actual business performance and comparing it with the actual set of objectives and plans of the organization to know if the organization is on track.

Looking at ogel, it can be seen that they are far from the set targets because of poor planning and control. There is absolutely poor decision making amongst the board. The do not know which raw material to buy, the do not know the quantity they want. They are also not sure if they should make the products and stock or make as at when demanded for by the customers.

Poor planning has resulted to inappropriate objectives in the company, and this has caused the company to go in the wrong direction even with all the effort put in. There is no strategy at all in firm, each department is operating on its own. Taking decision on its own because of the inability of the decision makers to communicate with the employees as to whether the strategy is to work for immediate profit or for long term profit. They are not sure whether to reduce sales volume or increase sales volume.

Also poor control has reduced the ability of ogel to assess how it is performing and take corrective action for improvement. ogel have demands for their goods already and that should be the objective. There duty should be to set sales target, plan its sales, production and distribution activities accordingly. It is important for the actual sales to be in line with plans.

Ogel has found it impossible to reach the set targets, sales have been lower than the companies projection. This has occurred due to inadequacy in the whole departments of production. As a result of ineffective control, ogel has not been able to root cause of the deviation from plan and take suitable corrective action.

The consequence of having poor planning and control has resulted to the failure of ogel and in order to solve these problem, they will be accessed individually to get to the root, find the cause and solve it once and for all.

PROBLEMS OF OGEL

This company has the ability to move forward, because it has the machinery, perfect workforce and a good supplier even though not completely ideal, due to the fact that the supplier dictates the number goods it sell to the company.

Manufacturing to demand:

The major problem the organisation has is the fact that it is trying to manufacture the products according to the demands of the customer. ogel looks at the immediate demand of the customer and produce their goods, instead of looking at the long run. The produce exactly what the customer wants for that moment. This is wrong because a customer might want a particular product today, and for the next month they might want a completely different product throughout the next week.

Because the target was the immediate demand, it might become very hard to satisfy the demand for the other future weeks, this definitely leads to late delivery. Constant late delivery is the worst thing that can happen to a company, because when a company has the reputation of late delivery, it becomes hard for customers to trust and rely on the company because there is no assurance that the goods will be delivered. The customer will definitely lose patience at a certain point and end up looking for another alternate because the company has created a poor image by having lots of backlog from not delivering goods on time. Low reliability in ogel has created a lot of negative effect due to the lack of satisfaction of the customers.

Poor supply chain and layout: The factory layout in ogel is too poor because the communication gap is too much. This goes back to the supply chain of the company. The supply chain is so complicated in a way that it is hard for information to pass from one sector to another, it is not straight forward in any way.

Supply chain is one of the most important aspects of running a company. Most people who are not directly in the industry do not understand this because it is the consumer who directly experiences the effects.

The supply chain in ogel starts from when they get the raw material through the different plants that turn these materials into finished products, and gets to assembling where the customer gets the product.

Lack of coordinating the overall supply chain system in ogel has caused the different departments to create its own and agenda and as a result of this, they are operating independently from the others. The mismanagement in the network has resulted to general inefficiencies. Due to lack of communication, they end up getting the wrong information about what to produce and also the quantity to produce in the different departments. This in the end leads to accumulated inventory or lack of stock.

This problem is a matter of emergency in ogel and should be addressed as one.this is because of the variability in customer demand. The customer cannot need a particular good every time, Therefore without the coordination of the different departments, there will definitely be poor service and this will cost the company more.

Problems of bonus scheming

This is the incentive scheme to make the worker hard, but in the end this strategy works against the ogel company at large.

Even though incentive schemes are one of the one of the most popular and effective benefits available to the employee, we find out that sometimes it simply makes workers exceed their targets. Even though this in basically an incentive to motivate employees to maintain high productivity, there are also significant defects.

We could firstly observe the advantages of incentive scheme in ogel by saying that in ogel, basic salary might not a be a reason why a staff would work as well as they could. These workers probably do enough to safe guard their jobs, and that is the end. They do not do extra, meaning that they do not work to their full potential.

One of the major negative effects of bonus scheming is the possibility for rifts between employees. If some of the workers believe that they are being treated wrongly. This has a downbeat effect on the other ones who do not receive bonuses. Even though there might be increase in sales from those receiving the bonus, the other group might purposely sabotage their work.

Also another problem with the incentive strategy is the fact that sometimes the workers on the incentive scheme produce products the customers would not want to buy, so as to seem busy. These workers keep producing, because it counts that they are very busy due to the amount of time the put in. Finally all these effort is a waste because products will be more than demand. By so doing, the sales manager will be under pressure to sell out those goods that were overproduced, and he will need to sell it at a discount because the customer is not in need of the product and the company is also not in need of it, because it would not make sense stocking products that are probably going out of date.

Generally these are the major problems of the ogel and also including the fact that the supplier detects the number of certain raw materials to supply which actually slows down the pace of work in the organisation.

RECOMMENDATION

Simplification of supply chain:

In the business world of today, customers have unlimited options, and there are so much competition globally. This is the reason why is has to be a major priority for companies to satisfy the demands of their customers by responsive fulfilment of their goods and services.

For ogel to maintain a competitive age of its rivals, it is critically important to reduce the complex nature of their supply chain by Assessing ogels supply chain level of complexity and ensuring that any increment in the complexity adds value to the organisation as a whole.and if does not help in achieving organisational goals,the management should break down the barriers and increase visibility in order to allow for easy access between the different department for easy communication.

Supply chain planning: because of the fact that ogel has not put in effort and time into supply chain planning, it has been to the detriment of the company financially.because when a company does not make sales,there are no income.and since there is no income, the company will definitely be running at a loss. Therefore,as regardes to revenue, attention should be paid to supply chain planning as the initial step to supply chain management strategy which will help ogel in making sure that they are geting the products to the customers as at when due and minimizing the cost of inventory management.

A good supply chain planning will creae a good network in ogel that will facilitate the performance of the different departments in their different functions of procuring raw materials,transforming these raw materials into intermediate or finished goods on time to the customer.

Team working: team working in ogel has great importance for so many reasons.once ogel has embraced this,there will be increased performance in work production and stimulated new growth.this method of group work will improve employee morale and increase input withing the organisational circle.

It is very important for all the employees in ogel to work as a team,because it is very clear from the past operations of ogel,that has been mostly invidually,it has not been successful.this will allow all the members of the organisation to air their views without fear of discrimination.thus utilizing the teams members efforts and also skills to reach organisational goals.

Team work also helps in organisation when one of the team members is not at his best by providing motivation and support because everybody is working towards achieving the same goal. Team work will give ogel continous output in the case of absence of one member,the others will cover up to finish the job all the same.hence the company cannot depend on one person.

Team work in ogel will reduce the overall cost the company will incur because the team as a whole completes the tasks faster than an individual could. It also saves cost in the sense that when there are new procedures to be completed,the company will not need to get a new person to do the job, but would simply give it to a team that will break down the work amongst each other.team work increases participation of individuals by encouraging division of labour.

Each member has his or her own different skill including experience in the organisation, which enables the company have flexibility and this will also promotes competition in the firm. These talents will supplement each other which will be of advantage when facing competitors. This will increase organizations edge over other organizations.

Applying master planning : master planning in ogel will help the organisation plan what it wants to produce in specific configuration nand models.it specifies the items and quantities that will be produced and their scheduled dates.this helps in understanding how much component is needed and when it would be available.it also helps determining how much raw materials and when it will be available too.this means that the company will compare the work load with availability of personal and equipment available.

Master scheduling makes for an effective operations management system.this makes for perfect timing for product manufacture and product purchase,making sure that each particular good is in store for the customer at the right time.

This should be the sales and manufacturing tactic of ogel so that the organisation can prepare the utilization of equipments and labour and determine the requirements for materials and money,

Reduction of set up and lot size: this is a lean manufacturing activity targeted at reduction of the amount of time and effort required to change over production from one product to another. preferably, the goal should be to reduce the set up activity so as to reduce time wasting in the production process in ogel.

In a company like ogel, there are long lead-times, excessive work in process, missed delivery dates, lost sales and outages in finished product inventory. To solve this problem in ogel,there is need to reduce the set up time. This is reducing the set up time from the last good piece of the previous product run to the first good piece of the next product run). Since setup activities add no marketable form or function to the product, they are by definition non-value adding. By reducing setup time, more setups can be completed each day in the company, and this makes for speed and reduction of unnecessary protocol.

If the set up time is applied in ogel, it would

lead to the reduction of batch size, which will increase the frequency for each particular product.

It would always decrease cost of inventory, while increasing capacity.

It would also reduce lead time and improve faster delivery.

Improve documentation of setup processes, leading to better class of products.

Where by lot size is the amount of units of a product to be manufactured at each setup or is to be purchased on each order so as to minimize the fee of purchasing or setup, and the cost of holding the average inventory over a given period.

This will help ogel improve quality control,because when ogel produces a lot,there is a chance machinery might go out of control at a given time.therefore ogel should produce smaller lots because when there is problem in machinery,it will produces defective units throughout the production of that particular lot.and the system incures extra cost for rework or any other operation regarding the deformed lot.this is so that ogel would have small fraction of spoilt lot during production if anything goes wrong.

Utilization cash flow: cash flow is inflow and out flow of money in an organization. Cash inflow could be in the form of different activities like financing, operating and or investing and also donations.whereby cash out flow could be in the form of investment or expense.cash flow is used by analyst to measure the financial performance of the company.

Cash flow can be seen as one of the most important aspects in business organisation and the same applies to ogel. it is among the most single reason why a business fails and that is why ogel is failing because gradually the organisation has been losing cash. Hence managing cash flow is very important in the running and survival of a successful business.

Ogel has been suffering from insufficient cash flow for a while. And if the company has no cash, the firm will not be able to pay rent, lease, etc. If the situation is not remedied, the company might be declared insolvent.

Therefore ogel company needs the input of money in other to improve operations unless the organization will be stagnant and will lose all its customers.

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