Refer back to your answers in Assignment #3 and Assignment #6. Select four of the challenges listed in the assignment instructions. For each of the challenges selected identify specific and detailed recommendations related to each challenge to assist and improve Albatross Anchor.
(b) List and detail three implications and three complications that may occur as a result of the changes recommended in (a) above. Remember activities in one area of the facility may have an impact on other areas of the facility.
(c) Create a Gantt chart showing a timeline for when the different changes proposed should be made, detailing which changes may overlap and showing how long each change will take to institute. Provide information to support your decisions and to explain your choices as shown in the Gantt chart.
(01) Gantt Chart
(02) Explanation of the Gantt Chart.
**This is Unit 3 and 6 assignments**
here is Assignment 6 followed by 3
The Albatross Anchor Company suffers from a myriad of operation issues ranging from sub-optimal floor design to inefficient administrative functions. These operation issues have negatively impacted Albatross Anchor such that they are unable to successfully compete against the competition. There is much room for improvements for Albatross including both long and short term solutions. These solutions can help Albatross more effectively and efficiently operate such that they can better perform against the competition. In addition, given the substandard work environment, Albatross suffers with employee issues such as job retention, poor morale and lack of employee dedication. Addressing a few operational issues can drastically improve these measures.
Long Term Operational Changes
Contemporize manufacturing technology. Better technology will allow for a safer and faster production of product. Albatross is currently limited to small batch orders with large batch orders taking up to 4 weeks. Updated manufacturing technology will allow Albatross to produce large batch orders with less lead time being able to better serve the client base versus the competition. In addition, given the increase in efficiencies, Albatross can explore price reductions to gain further competitive advantage.
Divide manufacturing area. The manufacturing area should be divided with area dedicated to the product of both anchor types. Currently, there is 36 hours of down-time with the change-over of manufacturing process. While manufacturing floor area would be reduced for each anchor type, Albatross could increase productivity due to the loss of down-time. Albatross will be able to produce more product in less time, which will increase customer satisfaction and better profit margins. In addition, given the increase in efficiencies, Albatross can explore price reductions to gain further competitive advantage.
Move shipping to West end of the building. Before Albatross expanded into the international market, it made sense to keep shipping on the East end of the building as shipments were going out via truck. Now that Albatross has expanded into the international market shipping is both via truck and via rail, with rail access located at the West side of the building. Moving shipping to the West side will allow for the consolidation of shipping out of one area and will free up receiving for receipt of materials only. Receiving will not have to do double-duty any longer and this will result in increased efficiencies in receiving. Increased efficiencies will result more work completed in less time with less labor, which will result in lower overall costs and ultimately better profit margins.
Note, this assumes that there is a road/truck-access on the West side of the building
Short Term Operational Changes
Institute safety procedures and protocols. The Albatross plant does not meet US safety and environmental standards, which, combined with plan antiquation, results in small batch production and long lead time on larger orders. Instituting safety procedures and protocols will bring Albatross into compliance regarding safety and environmental standards. With increased safety, workers will be able to increase batch production and Albatross will gain a competitive advantage. This advantage will be maximized with the long-term goal of updating of technology, but having defined safety procedures and standards established is a critical step and Albatross can expect some benefit in the short term.
Update and organize administrative office. Administrative offices are currently shabby, unorganized and inefficient. An update to administrative offices (including updated technology such as computers, faxes etc.) will allow Albatross to operate more efficiently and better run their business overall. Disorganized offices can result in poor billing, missed payment, mismanagement, poor communication, as well as poor customer service. Technology updates will allow Albatross better organization providing the ability to better manage the business and better service their customers. With better technology and organization, Albatross can set goals for best-in-class administrative functions such as billing, customer response, customer communication, etc. providing a distinct customer service advantage over the competition.
Divide administrative office/staff. The administrative staff currently services both anchor types and customers, despite the clear differences. Albatross should have dedicated administrative staff for each anchor type. Dedicated staff will be able to better serve the specific needs of each product and its corresponding customer base. Files and records for each type of anchor will be separate and will allow administrative staff to more effectively (and strategically) focus on each business. With a more focused strategic eye, better product insight and better customer knowledge, Albatross is positioned to better compete in the marketplace making smarter decisions and cultivating better customer relationships versus their competition.
Job retention: Cross-training will make employees feel that that they have more opportunity at Albatross. With more opportunity, employees will look for work in another department/area vs. looking for a new job and thus, will encourage job retention.
Employee morale: Allowing employees to cross-train will make them feel valued and provide the feeling of opportunity. When employees feel valued and know that there is opportunity with their employer, positive morale results.
Employee dedication: Cross-training can make employees feel that they are valued and that Albatross is investing in them and their career/skill set. Employees show dedication to companies that invest in and value their employees because they feel that their effort and hard work is appreciated.
Gain sharing and profit sharing
Job retention: Profit-sharing creates the feeling that all employees can benefit from the financial success of their company. Albatross has experienced exponential growth and it is the effort of the employees that help to achieve that success. When employees know that they can get benefits from their employer's success, they are more likely to stay, particularly since all employers do not offer gain sharing/ profit sharing.
Employee morale: Financial rewards, like gain sharing and profit sharing, makes employees feel appreciated. When employees feel that their hard work and labor is appreciated, and rewarded, positive morale is created and everyone wants the company to do well.
Employee dedication: Profit-sharing creates a personal responsibility and accountability for the financial success of a company, since everyone benefits when the company does well. Employees will be more dedicated when they know that they can directly benefit from success.
Job retention: Manual labor, as is done at Albatross, can provide much stress upon the workers, often resulting in short and long term damage. Ergonomics will work to ensure that workers operate in the safest and most productive manner. Employees will be more likely to stay with a company if they know that their physical health will be addressed in such a manner.
Employee morale: Instituting ergonomics communicates to the employees that the company cares about their well-being. This is especially important in fields where there is a lot of manual labor and risk of injury is high, as with Albatross. When employees know that their well-being is a concern of the company they work for, they feel like they work for a great company, and morale improves.
Employee dedication: When employees feel that their physical well-being is a priority for their employer and that they are working in a safe environment they are more likely to be dedicated employees. They feel like the employer cares about their employees and have invested in their well-being, and that feeling is usually returned with employee dedication.
Technology and automation
Job retention: Improvements in technology and automation of manufacturing processes will make Albatross a safer and better place to work. These efforts will greatly positively impact the work environment, allowing Albatross to meet safety and environmental standards. In addition, employees will feel that they are learning and working with the most up-to-date technologies. With a better work environment, more employees will stay with Albatross.
Employee morale: Workers take little pride in a dirty out-dated and unsafe environment, which can drastically decrease employee morale. When those environments are improved, employees take pride in their work environment and employee morale improves as well.
Employee dedication: Employees enjoying working for companies that maintain up to date work environments and invest in the best technologies for their employees. Employees make feel that the company has invested in their employees through the improved work environment that has been provided. The employees are proud of the work environment and show dedication to the employer who ensures that they are working under the most ideal conditions.
Albatross has many possible paths to improve their position against the competition and to improve employee relations. Long term solutions such as contemporizing manufacturing, dividing the manufacturing floor and moving shipping all require significant investment and will take time to implement, but will result in much more efficient and competitive operations for Albatross. Solutions such as instituting safety standard procedures and protocols, updating and organizing the administrative office and creating dedicated administrative staff per product can be completed in the short term and will also have a positive impact on operations. Lastly, Albatross should directly address operational issues that can positively impact employee relations such as employee cross-training, profit-sharing, ergonomics and technology and automotive improvements. Investing in these areas will bring improved retention, positive morale and increased dedication.
Based on the information presented in the scenario/case study discuss Albatross Anchors competitiveness in relation to (please address all items in the below list and provide support for your conclusions):
a) Cost or Production:
Due to operational inefficiencies, the production cost is much more than it should be leading to a decreased profit margin. Albatross Anchors has a cost disadvantage compared to competitors as far as production cost goes. The costs of manufacturing mushroom/bell anchors are $11.00 per unit snag hook anchors cost $8.00. Albatross Anchor is charging the same price per unit as its competitors and is putting a 35% decrease on the profit margin due to lack of operations and efficiencies. What about product size bulk, and weight? The maximum load requires the anchors be shipped by truck, rail, and ocean going freighters. These are the only two methods of product shipment that is available to the customer.
b) Economies of Scale:
Russell & Bernard (2001) suggest the economies of scale cost less per unit to produce high levels of input. Russell & Bernard (2001) has examined economies of scale will hold true if fixed costs can be spread over a large number of units, production or operating costs do not increase linearly with output level, quantity discounts are available for material purchases, and operating efficiency increases as workers gain experience. In this case, Albatross Anchor is not able to realize that the economies of scale due to production in small batch sizes. In material purchasing, the Albatross Anchor is able to get economies of scale however, it will lead to large idle inventory that will be left sitting at the warehouse.
c) Cost of Raw Materials Sitting Idle in the Warehouse:
For international orders, finished products keep sitting in warehouse until they are ready to be shipped out. The raw material sits idle as the production is only in small batches. This leads to large cost of holding both raw material inventory and finished goods inventory. The cost of raw materials is transported by rail and just before the anchors are sold to international markets, the shipments of completed products are soon transported by truck. If we have limited product shipping availability into the international markets, every product will go out of the receiving department for shipment and soon be dispatched by rail or ocean freighter. Prior to expanding into international markets, there is a limited shipping supply in the shipping and receiving departments and the problem is now the receiving department is taking on twice the work of shipping all international orders and delivery of all raw materials.
d) Cost of Finished Goods Sitting Idle in the Warehouse:
The cost of finished goods sits and continues to idle because production is only in small batches. This also leads to large cost of holding both raw material inventory and finished goods inventory.
2. Speed of manufacturing process from order to finished product.
Due to limited number of products the manufacturing processes are effectively used. The number of complexities is low; Albatross produces what they can produce at the speed demanded by the marketplace. Skinner (1974) has determined manufacturing planning and control address decisions on the acquisition, utilization and allocation of production resources to satisfy customer requirements in the most efficient and effective way. Typical decisions include work force level, production lot sizes, assignment of overtime and sequencing of production runs. Choices must be made as to which resources to include and how to model their capacity and behavior, and their costs. Also, there may be uncertainty associated with the production function, such as uncertain yields or lead times. One might only include the most critical or limiting resource in the planning problem, for example, a bottleneck. Alternatively, when there is not a dominant resource, then one must model the resources that could limit production.
3. Flexibility in filling order(s)
Stuart, Ian, Boyle, & Todd (2007) examined the manufacturing process and concluded that it is not flexible to account for a wide variety of products and is not modular to allow production processes to change output rapidly. For example, each type of anchor requires different manufacturing line and the time required to switch from one manufacturing line to other is 36 hours, which is a large timeframe.
Kotelnikov & Vadim (2001) defines a flexible manufacturing system (FMS) is a group of numerically-controlled machine tools, interconnected by a central control system. The various machining cells are interconnected, by means of loading and unloading stations, by an automated transport system. Kotelnikov & Valdim (2001) suggest that operational product designs in small quantities and with faster delivery. It has been described as an automated job shop and as a miniature automated factory. Simply stated, it is an automated production system that produces one or more families of parts in a flexible manner. Today, this prospect of automation and flexibility presents the possibility of producing nonstandard parts to create a competitive advantage.
The manufacturing process is technology deprived and still follows the traditional method of manually engaging in the manufacturing activities.
5. Capacity and facilities
The current floor plan is inefficient. The space for raw materials and finished goods is towards the far south of the facility which consumes lot more time in shipping and receiving activities. If the manufacturing area is moved to the end, it would lead to reduction in time for product movement within the facility. The foundry not being a part of manufacturing is another flaw in the floor design. If that can be pushed to the manufacturing space, there would be more leeway for international shipping orders.
For mixed model manufacturing, focused factory type would be ideal. A Focused Factory strives for a narrow range of products, customers and processes. The result is a factory that is smaller, simpler and totally focused on one or two Key Manufacturing Tasks.
1. Determine Service Level Requirements.
The first step in the capacity planning process is to categorize the work done by systems and to quantify users expectations for how that work gets done.
2. Analyze Current Capacity.
Next, the current capacity of the system must be analyzed to determine how it is meeting the needs of the users.
3. Plan for the future.
Finally, using forecasts of future business activity, future system requirements are determined. Implementing the required changes in system configuration will ensure that adequate capacity will be available to maintain service levels, even as circumstances change in the future.
6. Service to customers (what types of services would an anchor company provide to marine wholesalers?
The company is focused on providing a better service to customers. Albatross Anchor delivers a good service to customers by offering quality and variations in both products. It offers a customer satisfaction warranty that covers labor and parts. However, the company is not able to draw upon the resources and capabilities of industry leaders to better serve customers.
The company is focused on providing a better service to customers. Albatross Anchor delivers a good service to customers by offering quality and variations in both products. It offers a customer satisfaction warranty that covers labor and parts. However, the company is not able to draw upon the resources and capabilities of industry leaders to better serve customers. Here is what KU has concluded when it comes to servicing customers:
1. Try to make your customer service staff feel valued. They are an important part of your business. If theyre not happy then its highly unlikely that they will deliver quality customer service. Good staff and good staff morale are key players in the success of your company.
2. Lead by example. It is important to show your staff respect and this should be equal at every level of your business. If you show employees the respect they deserve then this will be translated to your customers as well.
3. Listen to your customers and try to identify common areas of complaints and issues that come up more frequently than others. Ask your customers what you can do to help this is a key step in preventing problems and is really the only solution when a problem arises.
4. Aspire to resolve issues and complaints as soon as possible. Keeping the customer happy is key, especially if you want that customer to keep coming back to buy from you again and again.
5. Improve the workplace. If your staff are happy and comfortable in the environment they work in then you will see the benefits. Having a happier staff equals happy customers.
There are many ways that mushroom/bell anchors may be manufactured. Albatross Anchor is considering two new manufacturing processes (Process A and Process B) to reduce costs. Analysis of the information below will help determine which process has the lowest breakeven point (this validates the process is more cost effective).
For each process the following fixed costs and variable costs are identified below:
Anchor and ProcessProcess AProcess B
Sale price per anchor$ 42.00$ 42.00
Total Fixed cost $ 650,000.00$950,000.00
Variable cost per anchor$ 36.00$ 29.99
Based on the information in the table above complete the table below:
Anchor and ProcessProcess AProcess B
(a) Fixed costs per anchor$650,000 $950,000
(b) The total number of anchors to attain
breakeven point for Process A and Process B$42$35
(c) Based on your calculations which Process (A or B) that you would recommend for adoption (you can select only one). Please make sure to explain how you arrived at your conclusion.
Based on my calculations, the break-even point equals to Total Fixed costs/ (Sale price variable cost). By viewing Process A, the break-even point is equal to $650,000/ ($42.00-$36.00) = 41.99994462 rounded up to 42. As we look at Process B, the breakeven point is $950,000/ (35-23) = 34.99997579 rounded up to 35. The decision to choose a process would depend on the number of units which are scheduled to be produced. If the small number of units is to be produced, Process A should be selected due that it has a lower breakeven point and lower total fixed costs. However, if large number of units is to be produced, Process B should be selected as it has lower variable cost per unit.
Albatross Anchors is a small manufacturing firm which has potential to grow much beyond the current growth rate. There are several ways through which the firm can gain competitive advantage, like diversification, technology, operational excellence, employee participation, etc. The firm is into production of specialized products that have a specific use in the marine craft. The opportunity lies in an overhaul of the entire facility for better management of processes as well as improved working environment to further boost productivity.
1. Russell, S. Roberta & Taylor III, W. Bernard. (2011). Operations Management Creating Value along the Supply Chain 7th Edition
2. Skinner, Wickham, The Focused Factory, Harvard Business Review, May-June, 1974.
Database: Business Source Complete
3. Kotelnikov, Vadim. (2001). Efficiency Improvement, Retrieved from http://www.1000ventures.com/business_guide/effectiveness_operational.html
4. Stuart, Ian & Boyle, Todd. (February 2007). Advancing the adoption of lean in Canadian SMEs, Ivey Business Journal, Retrieved from http://www.iveybusinessjournal.com/article.asp-Article
2.1-2.4 of book operations management 7th edition Russell & Taylor
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