With made easy to evaluate where improvements

With the creativity and individuality of businesses at the
current stage of the world, this report discusses the pros and cons of:
capacity utilisation, productions methods and managing change (stock control
and quality).  

The aim of this report is to explain and provide the best
techniques of all methods and what I personally believe that would mostly
benefit the company into making the highest total revenue possible.

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This report includes a graph and a table from the previous
year, which shows how the company is currently producing products. Therefore,
it is made easy to evaluate where improvements need to be made.

This report includes descriptions of the most beneficial
methods for businesses, so it is made easy for you to make the best judgement,
followed by comparisons to other useful methods. Finally, the most efficient
methods are recommended.

2.1

 

Stocks at start
(thousands)

Monthly sales
(thousands)

Production level
(thousands)

Stocks at end
(thousands)

Jan

40

55

90

75

Feb

75

60

65

80

Mar

80

95

90

75

Apr

75

140

90

25

May

25

110

90

5

Jun

5

80

90

15

Jul

15

70

90

35

Aug

35

65

90

60

Sep

60

75

60

45

Oct

45

80

75

40

Nov

40

60

60

40

Dec

40

45

45

40

 

3.

Capacity utilisation is a measure of the extent to which an
organisation is using its maximum possible capacity is usually expressed as a
percentage. There is a capacity utilisation issue with MowRite, as they can’t
always keep their production level at 90,000 because they do not have the storage
(80,000)/demand to hold the stock. As the demand increased for MowRite they
clearly couldn’t produce enough stock to keep to their minimum (buffer) stock
level at 40,000 units. This is shown in the table from the stock at the end of
the April-July, as the stock was below their 40,000 thresholds. Capacity
utilisation is significant, as it is often used as a measure of productive
efficiency, also the average production costs tend to fall as the output rises,
thus higher capacity utilisation can reduce the unit costs, making an
organisation more competitive and more efficient. Therefore, organisations
usually aim to produce as close the full capacity (100% utilisation) as
possible.

4.

Job
production is normally completed by a single worker or a group of workers, the
job can vary from complex and high technology to small scale and low
technology. An example of low technology jobs are hairdressing and tailoring,
where the production is very simple, requiring low skill and easy obtainable
equipment. This method allows customers specific requirements to be included,
normally as the job progresses. Whereas high technology jobs include a lot more
complexity, which means there is a greater management challenge. You should
always keep a clear definition of your objectives, like milestones and dates.
Also, the Decision-making process is essential, like how are decisions taking about the
needs of each process in the job, labour and other resources. Examples of high
technology / complex jobs: film production; large construction projects.

As a business grows and production volumes increase, it is
not unusual to see the production process organised so that batch production
can be used. Using batch production obliges the work for any task to be divided
into sections or operations. Each section is finished through the whole batch
before the next section can be performed. It is possible to achieve
specialisation of labour, by using batch method. Careful planning is needed to
ensure that production equipment is not left idle, but the capital expenditure
can also be kept lower. The main aims for batch production are to concentrate
skills (specialisation), plus to achieve high equipment utilisation. Batch method
is probably the most commonly used method of for organising manufacture. An
example for batch method is the production of electronic instruments. Batch
production does have the faults though. Having to finish an operation on all
the products, before you can move onto the next section, means that there can
be a high build-up of significant stock. There is a high chance of unpleasant
work flow, especially if the batches are not optimal in the process.

Flow methods are analogous to batch
methods, but the problem of resting/idle production/batch waiting is
eradicated. Flow productions target is to: improve work and material flow,
reduce the need for labour skills and to complete work faster and more
efficient. Flow methods has been defined as a “method of production
organisation where the task is worked on continuously or where the processing
of material is continuous and progressive”. Flow method means that as work
on a task at a particular stage is complete, it must be passed directly to the
next stage for processing without waiting for the remaining tasks in the
“batch”. When it arrives at the next stage, work must start
immediately on the next process. For the flow to be silky, the times that each
task requires on each stage must be of equal duration and there should be no
movement off the flow production line. Several requirements must be met for
flow production to work well. The demand must be substantially constant, if the
demand is unstable or irregular, then the flow production line can lead to a
significant amount of build-up in stock, also maybe even storage issues. Many
businesses using flow methods get around this problem by “building for
stock” – i.e. keeping the flow line working during quiet periods of demand
so that output can be produced efficiently. Flow productions are unadaptable
and inflexible, the cannot deal very well with abnormalities in the product.
Although some variety can be made at the end of the production line like
applying different finishes, decorations etc.
For flow production to work continuously, it is a bad idea to use materials
that vary in style, form or quality. Very importantly, if the required
materials are not available, then the whole production will come to a pause as
the next section cannot be executed until all the bath has finished its
original section, which may have a significant cost consequence. Each operation in
the production flow must be carefully defined and recorded in detail. Since the output from each stage
moves forward continuously, there is no room for sub-standard output to be
“re-worked” (compare this with job or batch production where it is
possible to compensate for a lack of quality by doing some extra work on the
job or the batch before it is completed). The achievement of a successful
production flow line requires considerable planning, particularly in ensuring
that the correct production materials are delivered on time and that operations
in the flow are of equal duration. Common examples where flow methods are used
are the manufacture of motor cars, chocolates and televisions.

MowRite uses flow
production, as it makes such a vast amount of lawn mowers. The use any

other production method wouldn’t make
sense for MowRite as it wouldn’t be able to keep up with the demand that
MowRite has. Which would foresee a bad reputation.

5.

Stock control ensures that all forms of stock are accurately
accounted for within the organisation. Different stocks will require different
forms of storage. Stock control systems should ensure that materials/resources
are always available to meet demand.

Organisations aim to build effective links with suppliers so
that short-lead times can minimise quantities of stock being held. Some
organisations will require a buffer level so that production/sales continue
whilst awaiting delivery of new stocks.

Stock management may include FIFO or LIFO systems which will
depend upon the type of stock/materials. Just-in-time is a method of stock
management that aims to keep minimum stocks, and hence cash tied up in stock,
but does rely upon suppliers. The Kanban system can be used to employ
just-in-time production, preventing a build-up of stocks.

 

There are two types of stock rotation: FIFO (First in first out)
and LIFO (Last in first out).

FIFO means that the
stock that has been delivered first are first to be sold, which is highly
recommended to perishable items and products that are likely to become out of
date. For example, such as meat,
vegetables, dairy products and even prescription drugs. LIFO means that the
latest stock is used rather than earlier stocks, these technique is used if
stocks are bulky and/or difficult to handle. It’s not suitable to use this for
perishables as it would cause a lot of stock to go off or/and out of date. A
problem for this is that old stock will be stored for extended periods of time,
maybe even get forgotten about, therefore wasting money on stock not being
used.

Just in time was developed in the
1950s in Japan. A form of ‘pull’ system. An organisation only produces, and
therefore orders, what is required at the required time. So, all stocks kept to
a minimum, it requires efficient and effective scheduling, plus it is usually
managed by a computerised system, also ensures supplies are delivered only when
required.

Advantages of just in time is that your cash is not tied up
in stock, so you can spend your money on other business expenses. It reduces
storage costs as you won’t have the stock to store, because you’ll order stock
when you need it, and using it straight away when It is delivered, also making
it very unlikely for your stock to become obsolete. Also, it reduces waste
because you will order the amount of stock you need.

Disadvantages of using just in time is that it’s extremely
dependant on having reliable suppliers, because if you get an order due in for
a certain date and your supplier is late with the delivery, then you will have
to deliver you order late, which may dampen your reputation. If there is a
sudden change in your demand it will be difficult respond. One huge
disadvantage of using just in time is that you lose the opportunity of getting
bulk buying discounts.

The Kanban system is used as part of the just-in-time
process. It ensures only materials/resources needed for a particular stage are
authorised for movement. Therefore, avoiding a build-up of unnecessary stocks. A
Japanese method meaning ‘signboards’ or ‘cards’. It is used to move materials
through the different stages of production. The ‘kanban’ can be in various
forms e.g. a physical card; a plastic marker.

Some advantages of using IT are, the range of new products,
for example you can get anything from touchscreen computers to routine updates
on your computer software. It can massively increase productivity, as any
mistakes that are made are easily corrected when on a computer, but if you have
all paper work then it can make your work look scruffy and once you’ve sent it
off it can be a hassle to make any adjustments, whereas if it’s on a computer
you can quickly go onto the website and change what you’ve done. Also, using IT
can create a lot more waste as there would be no paper waste as every would be
done electronically. It can massively improve communication as you can email
and fax things with computers. Having your work on computer can make your
working conditions a lot more flexible, as you would only need a small laptop
to complete your work and not a bunch load of paperwork.

Some disadvantages of using IT are, the stress it can be on
employees if they are not computer friendly, which could create a bit of a
hostile environment. It may reduce jobs, as you wouldn’t need people for all
the small jobs. If there are any issues with your IT equipment its reliant on
specialists, which could cost a lot and may even interrupt your normal routine
as you wouldn’t have the equipment you are used to and need. The software on
computers are updated very regularly, which could put the person using the
computer under pressure making them feel like they must do things which they
don’t know enough about. The costs of IT equipment aren’t cheap by any means,
for you would need an initial amount of money to invest in or have someone
that’s happy to make the investment. Lastly, employees may feel like the
traditional crafts/skills are lost as it is all controlled by computers.

The benefits of innovative technology cannot be denied, and
businesses cannot ignore the change, otherwise they will be slacking behind
every other business that are embracing technology and making their company
more streamlined. Introducing new systems may be problematic but can be
successful provided those applying them are enthusiastic and confident. Technology
is only another ‘set of tools’ relying on good understanding of customer and
staff needs and wants; internal auditing and knowledge of the external
environment. So good management of it is no different to good management
generally.

Quality control involves testing of
units and determining if they are within the specifications for the final
product. The purpose of the testing is to determine any needs for corrective
actions in the manufacturing process. Excellent quality control helps companies
meet consumer demands for better products.

Quality testing
involves each step of the manufacturing process. Employees often begin with the
testing of raw materials, pull samples from
along the manufacturing line and test the finished product. Testing at the
various stages of manufacturing helps identify where a production problem is
occurring and the remedial steps it requires to prevent it in the future. A quality product or service is
one which is fit for its intended purpose, and is produced at an acceptable
cost. An organisation will need to consider the cost of failing to meet quality
requirements.

Quality management initiatives enable
an organisation to focus on both customer and employee satisfaction. However,
this may be at a cost in financial terms and in meeting requirements of
shareholders.

6.

From the table and graph provided, we
can tell that lawn mowers sell a considerable amount more between March and
June. To counter the issues of not being able to keep the buffer stock where we
would prefer it to be, I would advise to make more lawn mowers a few months
before and keep them in storage and it can then be more consistent with
production, making it more consistent, which may make your employees more
comfortable than having to rush at certain times throughout the year. Flow
production is the most suitable way of production for MowRite as make a lot of
lawn mowers and on such a consistent basis, therefore keeping things the same
is most beneficial.

I would advise FIFO to be adapted
at MowRite, as it would reduce the waste made, making sure that all the stock
being bought is being used and not going to waste, making the money go further.
MowRite using just in time is very constructive, as you can tell how much stock
you would need. You would be able to invest your money into other ventures, as
using just in time would mean you cash isn’t tied up in stock. So, making
investments in other areas like marketing or advertising could be easily made.

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