QUESTION

Assessment task 2—Analytical report
Due date:
1PM AEST, Thursday of Week 11
ASSESSMENT

Weighting:
30%
Length:
2500 words ±10% (excluding front matter and reference list)
Objectives
This assessment task relates to course learning outcomes numbers 1 to 5.
Purpose
The primary purpose of this assessment task is to help students develop skills in the use of OM principles,
t
heories and models in the analysis of the current operations of a service organisation. The assignment
requires you to analyse the current situation, identify the operational problems within the organisation, and
develop a set of recommendations that when implemented, will overcome the identified problems without
creating new ones. In this assessment piece you are expected to solve the case
.
The secondary purpose of this assignment is to give students the opportunity to further develop analysis and
problem identification skills, as well as skills in presenting an argument for change within the framework of
a business report.
Details
Before starting this assessment read the marking criteria (at the end of this course profile) and Chapters 1,
2 and 4 in the Faculty’s Guide for students on website:
http://www.cqu.edu.au/faculties/faculty-of-arts,-business,-informatics-and-education/generalinformation/guide-for-students

You should also read the Assignment Writing Guidelines on the course website.
The objective of the case study is to provide an operations management situation that can be studied and
analysed. You will need to put yourself in the role of a management professional who is asked by the
organisation to identify why or how the problem happened and make recommendations as to what should be
done.
This assessment involves the presentation of a case study which relates theory and research in an area of
POM to a practical application. Refer to Chapter 4, Guide for students for guidance on formats for report
writing. Be sure however to comply with the formatting requirements published on the course website in the
Assignment Writing Guidelines section.
This assessment item involves researching your assigned topic to enhance your understanding of Production
and Operations Management concepts and utilisation of academic literature. Whilst you should AVOID
using only textbooks, the prescribed textbook for the course should be cited in regard to broad operations
management principles. You will be expected to present information and evidence from, and cite, at LEAST
eight (8) relevant peer-reviewed, academic journal articles (minimum requirement).  Refer to your
recommended readings for examples of academic journals. While you can cite these articles, you must find
at least eight (8) peer reviewed journal articles not listed in the course materials. The quality and number of
citations will demonstrate the breadth and depth of the literature used to formulate your argument. Your
marker is interested in the analysis that you have developed from YOUR review of the literature and how
well you use the literature to respond to the topic.
AVOID presenting a descriptive account ONLY of your readings. What is required in this assessment is a
critical evaluation of the academic literature as it relates to the specific details of the case study.  Your
2

marker is interested in the conclusions that YOU arrive at from YOUR evaluation of the literature and of
the case study.
Case study: Planning for Growth at Viverra Motors
Llew Gwych, CEO of Viverra Motors, has just returned to his office after visiting the company’s newly
acquired automotive dealership. The new dealership was the fourth Viverra Motors’ dealership in a
network that served a metropolitan area of over a million people. Beyond the metropolitan area, but
within a 45-minute drive, were another half a million people. Each of the dealerships in the network
marketed a different make of car and historically had operated autonomously.
Gwych was particularly excited about this new dealership because it was the first “auto supermarket” in
the network. Auto supermarkets differ from traditional car dealerships in that they sold multiple makes
of cars at the same location. The new dealership sold a line of Hyundais, Volkswagens and Cherys.
Starting 15 years ago with the purchase of a bankrupt Mitsubishi dealership, Viverra Motors had grown
steadily in size and in reputation. Gwych attributed this success to three highly interdependent factors.
The first was volume. By maintaining a high volume of sales and turning over inventory rapidly,
economies of scale could be achieved, which reduced costs and provided customers with a large
selection. The second factor was a marketing approach called the “hassle-free buying experience.”
Listed on each automobile was the “one price—lowest price.” Customers came in, browsed, and
compared prices without being approached by pushy salespeople. If they had questions or were ready to
buy, a walk to a customer service desk produced a knowledgeable sales person to assist them. Finally,
and Gwych thought perhaps the most important, was the after sales service. Viverra Motors had
established a solid reputation for servicing, diagnosing, and repairing vehicles correctly and in a timely
manner—the first time.
High-quality service after the sale depended on three essential components. First was the presence of a
highly qualified, well-trained staff of service technicians. Second was the use of the latest tools and
technologies to support diagnosis and repair activities. And third was the availability of the full range of
parts and materials necessary to complete the service and repairs without delay. Gwych invested in
training and equipment to ensure that the trained personnel and technology were provided. What he
worried about, as Viverra Motors grew, was the continued availability of the right parts and materials.
This concern caused him to focus on the purchasing function and management of the service parts and
materials flows in the supply chain.
Gwych thought back on the stories in the newspaper’s business pages describing the failure of
companies that had not planned appropriately for growth. These companies outgrew their existing
policies, procedures, and control systems. Lacking a plan to update their systems, the companies
experienced myriad problems that led to inefficiencies and an inability to compete effectively. He did
not want that to happen to Viverra Motors.
Each of the four dealerships purchased its own service parts and materials. Purchases were based on
forecasts derived from historical demand data, which accounted for factors such as seasonality.
Batteries and alternators had a high failure rate in the winter, and air-conditioner parts were in great
demand during the summer. Similarly, coolant was needed in the spring to service air-conditioners for
the summer months, whereas antifreeze was needed in the autumn to winterise cars. Forecasts were also
adjusted for special vehicle sales and service promotions, which increased the need for materials used to
prepare new cars and to service other vehicles.
One thing that made the purchase of service parts and materials so difficult was the tremendous number
of different parts that had to be kept on hand. Some of these parts would be used to service customer
vehicles, and others would be sold over the counter. Some had to be purchased from the car
manufacturers, or their certified wholesalers, and to support, for example, the “guaranteed genuine
parts” promotion. Still other parts and materials such as oils, lubricants, and fan belts could be
purchased from any number of suppliers. The purchasing department had to remember that the success
of the dealership depended on (1) lowering costs to support the hassle-free, one price—lowest price
concept, and (2) providing the right parts at the right time to support fast, reliable after-sales service.
As Gwych thought about the purchasing of parts and materials, two things kept going through his mind:
the amount of space available for parts storage and the level of financial resources available to invest in
parts and materials. The acquisition of the auto supermarket dealership put an increased strain on both
finances and space, with the need to support three different car lines at the same facility. Investment
dollars were becoming scarce, and space was at a premium. Gwych wondered what could be done in the
purchasing, supply chain, and inventory areas to address some of these concerns and alleviate some of
the pressures.
Task
As a newly appointed Purchasing Manager at Viverra Motors you are required to prepare a report for Llew
Gwych that addresses the following questions:
1. How might purchasing and inventory management policies and procedures differ because the
dealerships purchase different types of service parts and materials (e.g. lubricants versus genuine
parts) from different types of suppliers?
2. What do you see as the main weaknesses of the current purchasing and inventory management
practices at Viverra Motors, and how could these weaknesses be affected by the new acquisition?
3. How can supply-chain and inventory management concepts help Llew Gwych reduce investment
and space requirements whilst maintaining adequate service levels?
4. What recommendations would you make to Llew Gwych with respect to structuring the purchasing
and inventory functions for the Viverra Motors dealership network?
The report should be a confidential report for the CEO, and be presented as a suitably professional
document.
It is expected that your discussion will refer to appropriate models and theories covered in this course, but
your research should extend the theoretical discussion beyond the course material. The assessment criteria
should give you a clear indication of what you need to include in this assignment. The report should include
an effective introduction and conclusion; an executive summary of no more than one page to preface the
report; and a table of contents to give guidance to the reader.

MGMT19126 – PRODUCTION AND OPERATIONS MANAGEMENT
Assessment task 2 – Marking criteria for case study analysis

Name:  ….………………………………………….    Student No.….……………

Your report will be assessed on the extent to which it meets each of the following criteria:
CONTENT: Does your case study analysis demonstrate:
Marks
• a thorough knowledge and understanding of
the problem(s) identified in the case study?
• a critical review of the academic literature
relevant to the problem(s) identified in the case
study?
• appropriateness of responses to the case study
problem?
• a well structured, concise and clear expression
of argument(s)?
• an appropriate introduction and comprehensive
conclusion?
• relevant and accurate literature (cited at
LEAST eight (8) academic journals)?

SOLUTION

Introduction

The case discusses the various aspects of operations management a part of the growth and thus the road ahead for the Viverra Motors. The CEO of Viverra Motors has four dealership including the dealership of the ‘Auto Supermarket’ which has been very thought to be as having high potential  of serving large number of customers with high level of service which has been the trademark of the company over the years. The company has the best practices in the market wherein they provide high end services like High-quality after sales service by having highly qualified and well-trained staff, technological advantage and the on time availability of spares.

The main points that have been the strength of the company has raised many points that have huge concern as that will result in increased cost for the company and also the application of management practices.

In the case these concepts and the management practices have been discussed that can be employed so that the issues and the concerns of the CEO of the company are addressed and the steps are taken to have framework in place to improve the working. The alternative and recommendations have also been made along with the discussion on how to implement the technology and the operations management models in the present scenario that may improve the productivity and also provide necessary solutions for the issue that have been highlighted in the case for storage and inventory management.

Issues Faced by Viverra Motors

As discussed in the given situation there are various concerns for the CEO of the company. The company has made investment in the auto supermarket which will be one stop shop for multiple brands, will result in keeping huge inventories for all the brands. Thus the inventory required for this auto supermarket will be huge as compared to the other dealership. This will add to the increased costs related to the cost of the inventories and the storage space. This has become the major concern for Viverra Motors as they had created market space for them based on the service provided and the availability of spares.

This concern of inventory for the company has raised several issues which have become the concern for meeting the day to day requirements. These issues are related to the investments required to meet the level of inventory and storage facilities that the company is already having and also the management of the activities related to the service of the multiple brands and the knowledge of the brands. Thus a huge amount of funds will have to be spent for the training and other related activities so that the service provided is optimum quality.

Thus the issues for the company range from structuring the purchasing and inventory functions for the Viverra Motors dealership network, deciding purchasing and inventory management policies for the dealerships, identify the main weaknesses of the current purchasing and inventory management practices at Viverra Motors and reducing investment and space requirements whilst maintaining adequate service levels.

These are the major concerns for the company and need to be addressed so that the dealership of the ‘Auto Supermarket’ for the company is profitable and thus the market standard is maintained by the company that has been built by the company itself. The solutions for the issues discussed above have been discussed in the subsequent sections and thus an attempt has been made to formulate strategy to take steps for the issues and thus maintain he standards for the company.

Discussion and Analysis

The major concern for the company is to developing purchase and inventory management policies for the dealership. The Auto supermarket dealership will provide service for a large number of brands and their products and also caters a huge population in and around the area. Thus the storage and inventory has to be planned in such a way that the spares are available to the supermarket at all the times and must have the best of the staff for the service and the sales service that have the knowledge of the products as well as understanding of dealing with the customers. In a way in this auto supermarket the main concern will be the storage facilities availability. Thus the inventory is the main issue for this supermarket.

The concept of supply chain management thus is very useful for the company which provides approaches to integrate all the aspects starting from the production to the distribution centers and includes inventory management and the warehousing (Heikkilä, 2002). Another important aspect of this situation is the operation management which involves Planning, Organizing and controlling the activities. Planning is the identification of the tasks guide the future tasks of a process. Organizing is the arrangement of the tasks so as to have a complete smooth process and in the end controlling of the complete setup. This includes managing the human aspect as well. Thus the basic of operation management becomes the basis of identification of the tasks and thus facilitate the complete process of servicing at the auto supermarket.

The concept of material management is very important in this context. Although this concept is associated more to the production line but it can be very well reproduced in this scenario also. The material management is associated with the making available the material and use of this material. In this case the material is the finished goods (Stevenson, 2005). Thus the main concern here is the availability of the goods and the efficient utilization of the same.

The center point of this case is the usage of operation models like inventory model, process control chart and the forecasting model. The inventory model has to be selected so that it satisfies all the conditions in order that the optimum inventory is maintained and the various control parameters is set.

It is very important that the operation management principles are also used in framing the complete setup for the auto supermarket.  In this context the theory of constraints is very important. According to this theory the constraint is first identified. This is done by putting a limit on the output of a process. Once the constraint is identified the constraint is exploited. This step involves identification of the step that can be used to increase the output of the process. This will provide an insight into the process and thus the steps will be identified that will elevate the constraint (Stevenson, 2005). Thus this step will help in removing the constraint from the system. The cycle is repeated till the constraints are ineffective or it is not possible to remove them under the given conditions.

The material management or the material requirement planning is the most important aspect and thus needs other models such as forecasting models and the inventory models. These models have to established and the inventory and the material requirement planning will have to be automated based on these models.  Thus the appropriate models will have to identified and implemented into the system.

An insight into the current system is that all the dealership makes their own purchase based on the forecasting. Thus the cost associated with the planning and the supply chain management is increased. Also in case such system is followed in the supermarket it will be a tedious task and will in most cases lead to mismanagement as the number of brands will be huge and also the number of spares will be more (Heikkilä, 2002). Thus this is one of the major weaknesses of the company. Another major factor that may not be considered as weakness but as the factors that may result in being the weakness for the company is the pressure that is being built up on the purchase department to purchase cost effective, genuine and quality products. This may lead to the inefficiency of the department and thus effect the quality of services being offered. Another major concern for the company is that it will have to handle inventory for the multiple brands. Currently the company is not having much experience in this, Thus it will be difficult task for the company to setup a complete framework for the inventory management and also to maintain the costs related to the inventory and storage.

The solution to the above issues that have been discussed lies in the supply chain management and the inventory management (Stevenson, 2005). By the application of the models and these concepts the issues can be handled in a scientific manner there by giving a scientific approach to the management of not only the inventory, but also the staff and other activities which are part of the complete process at the dealerships.

The implementation of these methods may not be easy and simple to implement but are certainly cost effective way of managing the things as the inventory management tools and the forecasting models will save a lot of time in compiling the data and interpreting them. The interpretation of the data can be easily done by the algorithms and calculations performed by these models. Thus the only concern will be to take decisions based on the outcomes of the models. Thus the outcome of the models will become the basis for decision making.

The implementation to such models will be time consuming at the first moment but certainly will assist in the decision making. There have been a lot of companies that have been providing the supply chain management tools and other such tools. Thus there are a lot of tools available that are robust and efficient in working.

The main advantage of implementing such tools is that these can be personalized as per the needs and are collaborative and flexible with real time excess to data. (Taylor,2006)Thus will be providing solutions that can be implemented at any moment. The supply chain management in this case will be providing necessary tools for network planning which include warehouse planning and the transportation flows and the tools for Integration and strategic partnering which include the level of integration that is possible and how the integration can be achieved. Thus implementation of supply chain management and other operations management models will be an important tool in this case.

Recommendations and Conclusions

It has been observed in the above discussion that much of the issues that have been discussed have the solution in the implementation of the modern technology and the concepts to the dealerships of the company. In this way the company will be able to have a scientific approach to the management of inventory as well as the costs and also to identify the steps that are cost effective and beneficial and also those steps that may have to be omitted from the system in order to have smoother operations and better functioning of the dealership.

The company will have to go in for implementation of the technology in the current framework as it will reduce the complexity of the system or will make it simpler to understand the system whether it is related to the inventory management or the supply of the spares. Thus the modern concepts will be boon for the company that is growing and can implement such technology for the future growth and benefits (Swink, 1997).

Secondly with the coming up of dealership of the auto supermarket the company can make it a the center point for all the requirements and thus will be the main inventory provider for all the other dealerships. Thus this will make the process smoother for the other  dealerships as they will have to interact with one centre for all their requirements and thus will help in reducing the cost associated with the inventory and also will make the supply chain efficient and simpler. In this case this will result in the management of inventory by the one present at the inventory management of the auto supermarket.

Another important aspect is that all the dealerships should be integrated. Currently the dealerships are making individual forecasts and thus the individual requirement for all the dealerships is developed individually. Integration of the dealership will result in one system that will estimate the demand of the market as a whole and thus will allot the inventory for each dealership based on the forecasting done (Swink, 1997).

. This will benefit in two ways. Firstly it will reduce the cost of forecasting that is currently being done individually but if the dealerships are integrated it will reduce the cost of forecasting. Secondly it will be beneficial if the forecasting models are employed for doing the forecasting. Thu the cost associated with the forecasting tools can be equally shared by all the dealerships.

Another important point is the training of staff. With the development of Auto Supermarket as the centre point for the other dealership the costs associated with the training of staff will be reduced as the staff can be trained at on central place and the knowledge can then be imparted at the other locations.

This will also result in proper planning of the inventory as the issue of proper planning of inventory at all the dealerships will be reduced and the same management of inventory can be done at one central place wherein the planning can be done.

Also once the dealerships are integrated the auto supermarket will be able to supply the spares to the other dealerships as well as the auto supermarket is a multi brand market and will be  covering the brands in the other three dealership, thus the inventory storage space will have to maintained at one point only.

Thus the above discussion shows that the dealership of auto supermarket is beneficial for the company and thus will become the centre point of contact for the other dealership as well. The integration of the auto supermarket and other dealership will be advantageous if and only if the technological changes have been brought about in the company as well as the concepts like supply chain management, inventory management and material requirement planning I implemented and is used for the estimation of the inventory and smooth flow of spares. The company will also have to implement the operations management principles discussed above like, Theory of constraints. There are many other methods of operations management that will be beneficial for the company. These Production and Operation management concepts implementation and changing the structure of maintaining the inventory will be very beneficial for the company. The use of technology is very important as it will provide a strong base for growth to the sizeable company of Viverra Motors. The technological changes are important as it will be a strong tool for the increased efficiency in maintaining the inventory and the reduced cost of maintaining the inventory. Also the effective forecasting tools will have to be employed in order to have smooth and better management of the spare parts. Thus the change in structure for the company will reduce the costs associated with the management of the inventories and spare parts there by creating the provision for making the investment for the storage and inventories. These some of the ways will be a strong points for the management of fund for the huge investments.

References:

Stevenson W (2005). Operations Management 8th Edition . 8th ed. London: McGrawhill.

Swink M L. (1997). On theory in operations management. Journal of Operations Management. 17 (1), Pages 97–113.

Stevens Institute of Technology (2005). Basics of Supply Chain Management

Russell R., Taylor B.W. (2006). Operations management: Supply Chain management. D: John Wiley & Sons, Inc. Ch10.

Jussi Heikkilä. (2002). From supply to demand chain management: efficiency and customer satisfaction. Journal of Operations Management. 20 (1), P747-767.

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