Operations management report help online:  Report analysis on:Issues on Leagile manufacturing

Executive summary:

The purpose of this essay is to discuss the issues related to operations management in the case provided of Leagile manufacturing. In this regard, problems related to operations have been identified on the basis of analysis of case study. The case is all about the manufacturing process, sales, strategy and distribution in Leagile manufacturing. Moreover, essay has attempted to indentify the root causes of operations management problems in Leagile manufacturing. In addition, the concepts, theories, and models related to operations management has supported the issues identified in the case study. Accordingly, it would be clear by the study of this paper that focus has made exclusively on the identification and specification of the problems, root causes of those problems in Leagile manufacturing. Subsequently, there are some integrative approaches that are used for lean manufacturing or just in time implementation by the said manufacturing company have also been discussed in this essay. Similarly, essay has reflected some important tools for understanding and identifying the problems in the case provided such as root cause analysis, value chain analysis of the company, fishbone diagram, etc. Finally, the essay reaches to a conclusion at the end of the discussion by drawing some decisive points from the essay.

Introduction:

Before identifying the problems and their main causes in Leagile manufacturing, it is obvious to discuss the case first in order to get a general idea about the mistakes made and problems. Scott Murphy, vice president of operations in Leagile manufacturing was directed by the CEO of the company to examine the concepts of lean production in multiple companies and to implement it in Leagile if it seems suitable and profitable. Accordingly, Scott read some books and magazines about lean production system and just-in-time methods and evaluated their appropriateness in dozens of companies using such systems. Based on his readings, he implemented lean productions system in Leagile and started facing the problems and operational issues after implementation. Therefore, it can be said that problem started with the idea of Scott for implementing lean production and just-in-time system without discussing it with supervisors, managers and employees who all are involved in the manufacturing, sales and distribution process of the products (New Age publishers, 2012).

Problem identification:

Consequently, lean productions system failed in their company and reported loss in company’s figures. Lean is concerned with getting the right things, to the right place and at the right time. Moreover, it is all about producing the right quantity at the same time as minimizing waste and being flexible. More prominently, it is also articulated that all those actual employees who manufacture the products and own the entire processes need to understand, appreciate and grip the lean concepts and models. Moreover, lean manufacturing system holds five main concepts. First, there is need to stipulate value in customers’ eyes by producing the quantity demanded by them and delivering it to them in time. Second concept is to identify the stream of value on going and eliminate the waste during the process. Next concept introduced in lean system states that value flow is required to be made at the pull of the customer. Afterward, every employees involved in the process should be empowered. Finally, focus should be made on continuous improvement in the quest of accomplishment and success. As a result of case’s analysis, it can be clearly mentioned that not a single concept among these five was present in Leagile manufacturing during the implementation of lean production system. This in turn slimmed down the sales, customer base and overall profit of the company (Chopra, Lovejoy & Yano, 2004).

Furthermore, as main objective of problem identification has to be met with, 5Ws can be used to generate insights for identifying the main problem in the case. As per the case’s analysis, problem occurred in each area of the operations management. First problem was discussed by the purchasing manager, and then shipping supervisor, production supervisor and sales manager shared their issues with Scott Murphy. According to them, employees, suppliers, customers and other staff were not satisfied with the lean system implemented by Scott. In this framework, all of them considered their earlier method MRP (manufacturing resource planning) most suitable for their operations management (Brown al, 2005). Moving to the problems identification, JIT and lean production cost much to the company and therefore suppliers were also getting angry and dissatisfied with them. Thus, from suppliers’ point of view, Leagile manufacturing unit used to order a good number of raw material inventory from them. Now, cost has been cut down on raw material inventory and it will be ordered as per the requirement only. Besides, suppliers were given rush orders which were costing them a good amount of money in holding and managing the inventory. The problem occurred while beginning with lean production and as a result, suppliers started demanding for price increases in order to cover the cost of holding and managing the inventory (Bayraktar, Jothishankar, Tatoglu & Wu, 2007.

Operations management:

Additionally, operations management concept can be presented here in response to such problems occurred in Leagile manufacturing. Operations management refers to manufacturing, placing and distributing the products to the customers. In includes input that are gone through a conversion process and converted into output. Inputs are the raw materials which are supplied by the suppliers working for company. As suppliers supply the inventory or raw materials, it is necessary to build strong and healthy relationship with them. In case of Leagile, relationship was good with the suppliers when the company had MRP concept in practice. But as they introduced lean manufacturing in their system, it changed the role of suppliers and made the relationship weak (Dess, Lumpkin & Eisner, 2007).

However, it has been noticed on the basis of case’s analysis that just-in-time method reduced the cost of inventory for Leagile but it could not meet with operations objectives. JIT refers to a production strategy which is taken into consideration for improving return on investment. Thus, JIT includes reduction in process inventory and associated carrying costs (Hay, 1998). Equally, transaction cost, environmental concerns, price & quality volatility, demand & supply stability are concerned during JIT process. But, Leagile could not maintain demand and stability factor with the implementation of JIT in their operations management system. Moreover, just-in-time left both suppliers and downstream customers open to supply shocks and large demand or supply changes. Nevertheless, it is considered desirable to introduce coordinated stream and JIT through complete supply stream. None of the employees had knowledge about this process in detail therefore they could not use it properly all the way back through the processes to obtaining the raw materials from the suppliers (Lorefice, 1998).

Similarly, problem can also be identified from production perspective with the help of value chain analysis of the company. Value chain presents a chain of operations activities that are operated by an organization in order to deliver quality products to the customers. Demand fluctuations through finished goods inventory rather than through oscillations in production level took more time of buyers which in turn made them dissatisfied with the company (Heizer & Render, 2006). Apart from this, value chain includes both primary and supportive activities throughout operations. On one hand, primary activities are those that are concerned with manufacturing and delivering a product. On the other hand, support activities are those which are not directly related to production or manufacturing and delivery process but may increase or decrease efficiency and effectiveness of the product such as human resource management of the company (Islam & Mahboob Ali, 2011).

But, in case of problem was directly related to the new system implied in the operations management system. Employees of Leagile who were working with old system of manufacturing resource planning were not aware of jut-in-time process properly. Thus, operations activities undertaken by them were not adequate and up to the expectation as per the business requirement (Roth, 2007).

It can be understood by company’s value chain system. Starting it with its inbound logistics, Leagile started making frequent schedules for the suppliers and cut down the number of raw materials. Therefore, suppliers had to make extra cost in order to hold and manage the inventory for Leagile manufacturing according to the frequent and unexpected demand ordered by them. This activity of receiving and storing raw material from suppliers disturbed the entire system as suppliers increased the rate for supplying inventory to Leagile. In addition, Scott ordered not to manufacture extra finished goods in order to eliminate the waste as per just-in-time process. It became a big issue when customers change their demand after product is manufactured. Moreover, engineering and designing phase in operations became worse since MRP system was replaced by JIT process. For manufacturing the quality products, engineering design is changed at the moment of production and different part is said to be used.  Thus, company fails to fulfill the desired order of the customers as they do not have goods in stock (Shafer & Smunt, 2004).

Similarly, outbound logistic of Leagile also faced problems of making sufficient orders to the customers. Customers started pushing for price cuts because they are getting late delivery of products. Moreover, some of them are intimidating to leave Leagile for taking products from it. According to customers of Leagile, company should cut down the price on account of increased cost of raw materials. Customers make frequent orders with the company and it gets late for them to deliver that order on time as they do not have inventory in stock. Furthermore, talking about marketing & sales activity of value chain analysis, it includes informing buyers and customers about price, use and benefits of products & services. Leagile manufacturing did not inform its buyers that the company has increased the cost of inventory and started eliminating the waste from their inventory. It can be supported by the concept of production and operations management. Inputs included in operations of the company are men, materials, machines, information and capital. All these go through the transformation process which includes product design or engineering, product planning in accordance with customers’ requirement, production control and maintenance of the product and services. Afterward, products or services are obtained as an outcome of the transformation process. This entire process goes on with a continuous improvement and development on inventory, quality and cost of the product. Based on the concept of production and operations management, it can be noticed that problems were faced at the initial stage in sourcing of materials from the suppliers, redesigning of equipment parts and information about the process, inventory and delivery system. Likewise, process planning was not also going along with the trend used in company. Planning got delayed which in turn affected the production control phase of the process. Basic problem started with planning of frequent schedules for manufacturing process and sourcing of materials and inventory.

All such activities used in JIT process led the company higher cost due to frequent changes in inventory sourcing, planning, manufacturing and delivery to the customers. Moreover, production planning became complicated as employees did not have any idea about material to be used for future perspective of manufacturing the products. Apart from this, main issue was regarding the material handling because of irregular, longer and inadequate flows. The cycle time of allover production was also getting affected by delays in sourcing of material, production planning and eliminating waste. Coming toward delivery and shipping of the products to the customers in Leagile, it was the main problem faced by shipping supervisor as dictated to the vice president Scott. Transportation costs were high in case truck is loaded less than full. Therefore, the transportations and delivery costs were going high with more frequent deliveries of smaller loads of inventory. Thus, accelerating cost is adding amount to the budget of the company which is costing very high. Moreover, it is showing delay in the delivery as goods are being sent in smaller loads by trucks. Customers are committed to deliver the products on time and request is delayed from its commitment that may cut down the number of customers of Leagile.

Key problems:

On the basis of such operations activities done in Leagile, it can be stated that main problem is with production planning and control. It refers to the planning of production activities in advance. Sourcing of raw material, establishing the standard and exact route of each piece, securing the starting and finishing dates for production of items, make appropriate purchase orders, follow up the progress of the products according to the demand and orders and finally making delivery of right quantity of products to the right customer on right time. In case of Leagile, planning was not done regarding production, control and delivery system. It is considered on the basis of operations management that customer’s satisfaction demonstrates the appropriateness of delivery system of the manufacturing company. As a result, transportation and delivery system failed in Leagile manufacturing because customers had reported their issues with company in relation to late delivery of the product. There is a statement related to the principle of production planning and control that first planning should be done for work and then working according to that plan. Planning decides in advance, what has to be done, how has to be done, when has to be done and who has to do it. In sum, planning helps bridging the gap from where the company is and where it wants to be. It would make it possible for things to take place which would if not occur. Subsequently, Leagile also could not select the right path for each part of the production that was to be followed. Afterward, scheduling was the most noticeable part of Leagile manufacturing which was not proper at all. Scheduling is concerned with having a possibility to determine the programme for the operations activities in a firm. It also may be described as the fixation of date and time for each activity and operation. Leagile manufacturing made most of its mistakes in frequent scheduling for suppliers, production, inventory control and transportation.

Root cause of the problem:

Besides, root causes of problems can be identified through root cause analysis and fish bone diagram. It is a step by step analysis which identifies the problem’s root cause. Thus, an investigation through root cause analysis will follow the cause and effect route of failure of the operations back to the root cause. Therefore, analysis of Leagile manufacturing case represent that root cause of problem was inappropriateness and lack of knowledge of just-in-time method. Vice president of Leagile implemented JIT process in operations practices on the basis of his readings (Ganeshan & Harrison, 1995). He did not exercise it for trial first so that a blueprint could be prepared with respect to production planning and quality control after examination. Results should be evaluated based on the performance of JIT process, then only it should have implemented by Scott in operations management. It is clear by case’s analysis that there were not any physical causes in the failure of Leagile operations. There was a great role involved of employees in causing the problems because they were not fully aware of just-in-time process and started working on it without exercising it. This step automatically led them led them to failure in their operations activities. Moreover, root cause for the problem was improper scheduling and delivery system of the company. It can be supported by the statement given in the case that frequent scheduling became the main reason for failure of Leagile operations and reported loss in their financial reports (Materials engineer, 2012).

Effect of problems:

Additionally, problem has affected each area of operations such as human resource management, supply chain, production, engineering, sales, transportation and delivery. Improper sequence of operational events in Leagile led to the problem. First, purchasing orders were making late due to the late supply of raw materials. On the other hand, supplies were not making on time due to imperfect and frequent demand of materials. It is considered that a strong supply chain and operations management is linked with location, production, inventory and transportation decisions. Production and inventory decisions may have big impact on success, effectiveness and return on investment of the manufacturing business (Yung, Hsu & Ching, 2002). One of the main decisions is made in relation to production and manufacturing scheduling. This decision includes the creation of principle production schedules, scheduling on machines and parts of equipments for use, suppliers’ scheduling, workload balancing and control measures. Besides it, focus was made on continuous improvement of processes rather than outcomes of the entire value chain. Thus, outcome was not as per the expectation and dissatisfied both employees and customers in this regard. They had anticipated making a continuous flow of products through physical rearrangement, control mechanisms and system structure in order to avert the delays in delivery (Jayanthi, 2009).

However, Leagile got success in controlling inventory but this created main issues and difficulty with suppliers, production, purchasing and shipping supervisors and managers.

Moreover, the problems were in relation to poor organizational leadership quality, faulty value chain system, incapability of the operations management to solve systematic risk factors that may be avoided and faulty system to solve the problems. It can be supported with an example of Just-in-time process’ implication in Egypt where it got success and represented profit in their business. Egypt manufacturing firm created a strategic framework to start with the process and improved its operational performance with the implementation of JIT. They provided value to the customers, added value to their business and on the other hand, empowered their relationship with the suppliers and maintain the inventory cost and quality. This was a noticeable achievement of Egypt based manufacturing firm which Leagile could not attain in their organization (Salaheldin Ismail Salaheldin, 2005).

Strategy:

To overcome such operational issues, strategy can be linked with the solution at three organization level:

Corporate strategy: It is also considered as highest level of strategy. This strategy will help the company setting their long-term scopes and directions for the organization as a whole. In this strategy, human resources used in operations would be trained and allocated as per their specifications. Most probably, corporate level strategy is mentioned and applied in the organization in the form of company’s vision and mission statement. It will further help knowing how to achieve their strategic operations objectives and through which methods.

Business level strategy: It refers to a strategy concerned with how business unit compete with their operations management and within the industry and what should be their business aims and objectives and timelines. It settles down the lack of resources for operational work and limitations. In addition, managerial level communication will also be a part of business level strategy. In managerial communication strategy, timely check is kept over the operational framework and issues are communicated and taken into account by the operations management during the operations. Therefore, incidents taking place before or after managerial communication may create a big problem otherwise.

Functional level strategy: It is also known as bottom level of strategy that keeps a check on individual level functions such as operations, purchasing, supply, finance, marketing and sales. This strategy can be lined up to make an alignment between strategic objectives and operations in order to manage the resources in pursuit of set objectives. This level of strategy will include managerial engagement because higher level of management’s involvement will seek the importance of individual level functions and evaluate overall profitability of the firm. Managerial engagement will also help in problem solving among different level managers and units. This strategy will also help understanding the exact skills and competencies required by the staff and technologies to be used in operation and other organizational functions (Cengage Learning, 2007).

Conclusively, it can be depicted that these three organization level strategies will help Scott and the company solving their problems related to operations and set new business objectives and achieve them in an effective and productive manner.

 Conclusion:

On the basis of overall discussion, it can be concluded that Leagile manufacturing’s main problem was with inappropriateness of lean production and just-in-time methods of operations. Vice president Scott made changes to the operations department on the basis of his readings solely. Despite just-in-time process is not considered that much difficult, the stages of its implementations are not easy to face and practice with easily. However, it is noticed that JIT can bring competitiveness and effectiveness to the manufacturing and operations systems; it may harm the business if not processed properly. Same happened in case of Leagile manufacturing, employees, managers and supervisors were satisfied with earlier system of manufacturing resource planning but got distracted with the introduction of lean and JIT process in company. However, Leagile succeeded in achieving its sales target but the delivery part was not acceptable by the customers and therefore they started threatening to leave. Since Leagile started with JIT process and increased its inventory cost and cut down their supply with suppliers in order to reduce the waste of inventory, it started facing problems. The problem may be with incorrect specification, use of improper methods, poor supervision, out of adjustment, equipment problem, material handing problem, poor process design and ineffective quality management. Afterward, paper has described root cause analysis and attempted to identify the key ground of the problems occurred in Leagile manufacturing. Finally, a three organization level strategy has been defined in this paper that will help the company understanding its main issues and overcoming them with a good implementation plan of those strategies.

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