MBA 501 : Operations Management

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MBA 501 : Operations Management

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MBA 501 : Operations Management

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Course Code: MBA 501
University: Victoria University

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Country: Australia

Question:
1). What kind of operating decisions are facing Chad Thomas’ business today?2). What might Thomas have done differently to avoid some of the problems he now faces?
Answer:

1). The operating decisions that Chad Thomas faces are divided into both short-term and long-term decisions. Beginning with the short-term decisions, we have; One, how to set both priorities and schedule of different orders. Chad receives orders for standard pieces and custom-made pieces, which may be in high-volume or low-volume orders. Besides, sales have skyrocketed but the production capacity and amount of equipment necessary for production have not increased. Different orders from custom to standard lines are competing for the same production capacity hence the standard line is suffering. In addition, the stock is piling due to the increased inventory not being used up.
Secondly, the type of work policies to be maintained for the employees in the company. Employee policies are crucial for the great running of the company; however, they will depend on the nature of the business or size (Employment policies, 2018). Decisions that might be incorporated include the number of hours to work in a day, the number of employees to employ, and also hours for working overtime. Thirdly, the allocation of equipment, resources, money, and labor for each product line. Since the two product lines are competing over the same resources, Chad will have to decide how he will allocate each product line the resources, and labor required to ensure quality is still met. The company has gained a good reputation for its creative designs, and it would be a shame to reduce on quality due to lack of the right labor, or other resources that are key for the success of the product lines.
Lastly, the level of inventory to be maintained in the different stages of production. This decision is also linked to the long-term decision however its impact is felt more on the short-term. The inventory to be considered includes raw materials, work in progress and finished goods. Excess inventory leads to greater needs for storage or maintenance hence increasing holding costs (Srivastava, 2018). This further leads to increased expenditure in a company. Chad will have to decide the inventory to be allowed for both of its product lines to ensure efficiency.
On the hand, the long-term decisions faced by Chad include; One, the total money to be tied with total inventory investment. Since the company is growing, this means that inventory will automatically grow. Besides, Chad might consider other product lines along the way. Therefore, Chad has to consider the total investment on inventory he might need to have in order to ensure the company meets the growing needs and demands of customers. This will be important since he will also be able to forecast future demand and be able to meet the demand without delay (Penn State Executive Programs, 2018).
Secondly, the investment to be made on equipment for the support of efficient production. Due to the growth of the demand of Chad’s products, Chad might have to decide on when it would be effective to purchase more specialized equipment for the manufacturing of both standard and customized furniture. Besides, the equipment would be required to support the production of high-volume of orders. Thirdly, the skills and capabilities to be maintained in the company. According to Lindzon (2018), valuable leaders are those who are able to shape the impacts on businesses rather than react to them. Chad’s creative concepts designs is growing hence Chad will have to think and decide on the skills that will be incorporated for the long-term operations of the company. Due to competition, Chad will have to develop new strategies and train his employees in order to remain competitive.
Lastly, the layout/structure of the facility. Since the company is producing two product lines, it will be significant for Chad to decide on how the company will be laid out. This will be essential since, in the event that new product lines are introduced, there will be no shortage of inventory or resources since the company will able to handle any shortage. Besides, the present product lines will be produced without delay hence meeting the company’s policy in lead time.
2). Thomas would have avoided different sets of problems in the company if he considered some aspects. To begin with, Thomas would have established a plan for a more controlled growth for the company. According to Swyers (2018), the uncontrolled prosperity of a business affects the capability of the same business to maintaining its success. Therefore, Chad would have focused on developing an appropriate infrastructure for controlling growth in terms of the markets his business would capture, defining the manufacturing capabilities to maintain or introduce and lastly, determining the products to develop.
For example, as most businesses enter new markets, they may be well received by the customers. Besides, the businesses may decide even to diversify into different products so as to acquire a greater market share since the business may be making money. However, when the company gets to understand that some money is getting lost over time due to some flaws in management, it can be a disaster for the company. This clearly outlines that consideration of different aspects of a business is critical in ensuring a business prospers without having to sacrifice something for the success (Swyers, 2018). Chad should have structured his business properly before choosing to venture into the new product line. He would identify the business requirements for ensuring his business performs under different market conditions. This is important since Chad could be able to project the intensity of growth for the company and be able to meet the demand. Secondly, he would be able to ensure resources needed would be available so as to produce products effectively.
Secondly, Chad could have focused on producing the custom-designed furniture only. The company enjoyed most of its success from designed the custom-made furniture. This is because the business model was primarily for custom designs. Chad could have prevented the move to enter the retail space since the business model was not ready to support many product lines at the moment. Secondly, customers were mostly intrigued by the custom designs since they would order in accordance with their tastes. The company operated a single manufacturing facility whereby the same equipment used in developing the customized furniture was still used for the standard furniture. This affected the production of the standard furniture since the custom furniture was given priority.
The alternative issues caused by the diversifying into the standard product line presented different challenges to the company. For example, the future growth of the company was negatively impacted. However, by maintaining the custom product line, issues such as scheduling conflicts and competitive priorities could have been prevented. Product extensions can be beneficial if they meet the segment of the targeted market only by increasing the variety of offerings (Shopperception, 2018). What companies should do is to question whether their parent brand is strong such that it can share its reputation with new brand extensions. Chad’s custom product line commands a large percentage of the profit margin for the company. However, the product line is not yet self-sufficient to allow the standard line to grow continuously. Even though standard line sales have improved, lots of its production was halted. Therefore, Chad should primarily focus on the main custom line only for now.
Lastly, Chad could have focused on the manufacturing of the two product lines by designing requirements for each product line. This would have allowed the needs of each product line to be met. Prioritizing the custom line was a disaster for the company. The standard line had just begun to grow, but since the main product line commanded the market, the other product suffered the consequences. Besides, by using the general-purpose equipment, the focus on each the product lines was not complete. Chad could have purchased equipment for each product line hence ensuring efficiency. In addition, Chad could have separated the workforce such that each product line is handled by a specific team. This could ensure each product grows exponentially.
Conclusion:
Division of labor is important in organizations since it helps in achieving different benefits (Singh, 2018). One, we have better quality of work. This is due to the improved quality of production. In addition, the work structure and management could be much effective. Secondly, greater efficiency. By dividing the workforce to handle the two product lines, the company product lines could grow due to the efficiency in production. Chad could have enjoyed such benefits hence ensuring his products perform well in the market. In conclusion, the costs associated with increased inventory could be prevented hence reducing the expenses in the company. The lead time could also be decreased hence ensuring customers are happy and satisfied.
Introduction:
Chad’s Creative Concepts is a company that focusses on the design and manufacture of wood furniture. The company was founded by Chad Thomas. Chad’s company had initially been focusing on custom-made pieces hence being able to grow its reputation. However, with the introduction of the standard line furniture, the company began having some production challenges such as increased lead times, delays in delivery and also capacity problems. This means Chad Thomas, the owner of the business will need to make some important decisions regarding operation, expansion, production, and other departments so as to allow the company to maintain its reputation.
References:
Employment policies, (2018). Employment policies: what types should I use? [online] Available at: https://www.nibusinessinfo.co.uk/content/employment-policies-what-types-should-i-use [Accessed 5 Oct. 2018].
Lindzon, J. (2018). Five Skills You’ll Need to Lead the Company of The Future. [online] Fast Company. Available at: https://www.fastcompany.com/40420957/five-skills-youll-need-to-lead-the-company-of-the-future [Accessed 5 Oct. 2018].
Penn State Executive Programs. (2018). Forecasting and Inventory Management. [online] Available at: https://psep.smeal.psu.edu/supply-chain/forecasting-and-inventory-management [Accessed 5 Oct. 2018].
Shopperception. (2018). Product Diversification: dangers and opportunities. [online] Available at: https://www.shopperception.com/blog/product-diversification-dangers-and-opportunities/ [Accessed 6 Oct. 2018].
Singh, S. (2018). What are the Advantages of Division of Labor? [online] Preservearticles.com. Available at: https://www.preservearticles.com/2012022323618/what-are-the-advantages-of-division-of-labour.html [Accessed 6 Oct. 2018].
Srivastava, V. (2018). Why is Excess Inventory Bad for your Organization? Maintain an Efficient Inventory Management System. [online] Buy or Sell Salvage, Idle Assets, Excess Inventory, Rejected Stocks, Scrap. Available at: https://salvagespace.com/blog/why-is-excess-inventory-bad-for-your-organization-maintain-an-efficient-inventory-management-system/ [Accessed 5 Oct. 2018].
Swyers, M. (2018). 4 Essential Steps to Managing Growth. [online] Inc.com. Available at: https://www.inc.com/matthew-swyers/4-essential-steps-to-managing-growth.html [Accessed 5 Oct. 2018].

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