| The Operation Management Essay
Operation management consists in managing all activities involved in acquisition of raw materials or other supplies, as well as their transformation into intermediate goods and services to |ers. To achieve profitability, all these activities need to be managed in an effective manner, since acquisition of raw materials or other supplies mostly involves heavy capital investment
Viverra Motors has managed to secure a fourth automotive deal. The network attends to a population of over one million people. The new deal is unique due to being concluded in the automobile market. Viverra Motors has grown tremendously over a period of 15 years and gained possession of Mitsubishi Company. The company employed policies that helped reduce cost and increase sales volumes. The company has succeeded in its marketing approach. The companies should adhere to the policies set. The companies that defy the terms of operation may fail to overcome stiff competition from others. Viverra Motors has succeeded due to the adherence to the set laws. The company has been able to remain profitabe through spare part deals. However, the auto super market deal has become another burden for the company. The finances and space available have to be planned for again, since three car lines have to be accommodated in a common facility. For the new deal to succeed, funds are required. To make the process successful, different issues need to be addressed, such as: purchasing and inventory management policies and procedures; the weakness of purchasing and inventory management; supply-chain and inventory management; the structuring of purchasing and inventory policies.
Purchasing and inventory management policies are looked into in the source documents. The documents shows the importance of inventory management in a firm,more importantly when preparing a balance sheet. The documents shows the importance of each inventory in a firm. Inventories policies should be set under special consideration of some factors in the firm. The policies touch on the maintainance of inventories, amount of inventories stored and accessing the inventories. The documents analyse the effects of forecasting method of determining |ers purchasing behavior. However a better method of forecasting is reccommended.
Inventory management determines the effectiveness of the balance sheet. Viverra Motors should give priority to inventory management to be able to manage its new signing with the automarket. Inventory in Viverra Mortors is the the good parts of the automobiles that the company chose to store (Thomopoulos 1990). The raw materials are also very important in the production process in Viverra Mortars. The company had in the past participated in the planned purchases of materials and service parts. The company depended on the seasons, and that is why it enjoyed high sales levels. Notably, there are spare parts that the company did not sell. There are also other motor vehicle parts that the company has piled up as scraps. The company should shun the idea of getting rid of the materials, since they can be of great importance in the future.
The target of inventory management is to ascertain the degree of inventories, which will reduce the cost of production and increase |er satisfaction. A good policy is also needed to satisfy the following factors: |er significance; importance of each of the different products; policy of transport; production flexibility and policy of competition. The inventory management bears the responsibility for the availability of inventories. The management of Viverra Motors is advised to consider the fact that overstocking of vehicle spare parts means that a large amount of capital is trapped there (Ghiani, G.; Laporte, G. & Musmanno, R. 2004). Understocking of motorvehicles spares leads to poor service delivery and unnecessary additional cost of production in case of emergencies. Understocking of inventories is, therefore, discouraged if Viverra Motors wants to make remarkable profits from its new deal. Notably,,spare parts comes in different forms, hence the inventory policies are bound to be different. The inventory policies that will be in effect at Viverra Motors include: inventory control policies; operational policies; the procedure of accessing the spare parts of individuals need; policy on the size of stock; policy on stocking and spare parts maintenance.
The operation policy on each might be different, depending on the demand for the spare parts. The operation policy at Viverra Motors should touch on the allocation of money for different spare parts. Notably, the cost of the spares might differ, hence the management should be keen on allocating funds to each spare part (Piasecki, D.J. 2003). The inventory control policy targets regulating the number of motorvehicle parts. Different spare parts have different level of purchases. Some parts are bought frequently, while others may stay in the store without being bought. For example, a |er might change tyres more often than the rim. Therefore, it is important that Viverra Motors consider |er buying behaviours before allocating money to any different spare parts. The policy of obtaining important spare parts also applies. Viverra Motors should also conduct research into demand for spare parts.
Spare parts that are in great demand become crucial, and at no time should the company run out of its stock. Its level of stock should be high, since it will leave the store easily. The company, therefore, will be able to manage the available storage space. The stock level policies, stocking guidelines and the maintainance of spare parts go hand-in-hand. Before stocking, the available space, guidelines for storage and spares maintainance should be considered. The level of stock for each spare part differs. Spare parts should be stored in a manner that adheres to the storage guidelines and maintenance procedures. Different parts have different socking policies and maintainance. This is due to the physical and chemical properties. For example, the storage procedure for storing a car battery and head lights might differ, since a car battery is heavier, while head lights are more brittle. Failure to observe the policies means that losses will occur due to damages to the product.
There is a weakness in the purchasing and inventory management practices in Viverra Motors. The problem was sparked by Viverra Motors stocking behavior. The stoking behavior of Viverra Motors has led to the problem that still need to be addressed. Viverra Motors normally anticipates |er purchasing behavior and stocks in advance. Relying on the season changes might not be as efficient and easy as it might seem. The change in seasons does not mean that owners of motor vehicles will purchase spare parts. If |ers do not buy the companys products, the company has to deal with a stock it did not expect to have. The unexpected stock in the warehouse results in the freezing of capital. The money spent on the product could have been invested in other spares to make a profit. Viverra Motors has a problem with the storage space due to systematic errors in the forecast. However, using better and proffessional means can also assist Viverra Motors in carrying out its forecasting in a more efficient manner.
Arima Forecasting is more accurate and proffessional, since Viverra Company leaves no room for mistakes in its new deal. The use of the Arima method means that Viverra Motors will make use of the inventories that have accumulated due to errors in forecasting. The capital trapped by unpurchased inventories is determined throughout the year and the information is presented in a table. The next stage involves the use of a program to evaluate the cause of |er behaviour. This will enable Viverra Company to assess the stock size relationship with both demand probability and purchasing value. The third part assesses the amount of capital investment in goods and spare parts bought annually. Then, the two results are added together to give the fluctuation index. The Arimas method not only minimises the forecasting error, but also determines its level. Two methods of observation are used. The first one involves relating the results of the forecast to actual monthly data. The second approach involves calculation of standard deviation for the spares. The company should implement this method and work hard to clear the stock of spares caused by forecasting error.
A strong supply chain should unite and enhance communication between members of the chain. A firm that effectively maintains a good chain reduce cost and the amount of space required for the operation. Training is portrayed as a special tool that can facilitate the formation of a successful supply chain. The document shows that there is a strong connection between dealers and manufactures of motor vehicle spare parts hence strategies of chain improvement are similar. Japan and Brazil should be emulated since they have succeeded in the field of automobiles but the information obtained should be discussed on to determine whether it can work in the firm.
There is a possibility of reducing investment and space requirement and still being effective in service delivery. To achieve this, Viverra Motors can use special supply-chain and inventory management strategies (Beamon, Benita M., 1996). The supply chain in the industry will be stronger if spare parts manufacturers, dealers and suppliers, as well as technical assistants are united and effectively communicate with.one another. A good supply chain enhances competition advantage of a company. This chain works in a manner that the cost of production is lowered but the quality of services delivered is impressive.
Supply chain management can also be done through a comprehensive approach (Johnson, J.B. and Scott Randolph 1995). This method entails training of workforce to improve its skills and planning, human resource services provision, upgrading of infrastructure, as well as and provision of relevant information related to the firm. The strategy also considers the importance of the external factors around the firm, thus forming a strong relationship with the government and other firms. Viverra Motors should try this method in its quest for expansion, as well as sales and profit maximization. The method has worked in Brazil and Japan, and there is no reason why it should not work for Viverra Motors.
Japan manufactures automobiles but operates in a way that reduces the cost of production by getting rid of some ineffective production procedures. However, it is still able to achieve the objective of providing high quality automobiles. Japan has a system in place called Kaizen, which aims to improve everybodys skills in the firm, including managers and common workers (Arntzen et al 1995). The quality of a product will reach its maximum value when everyone in the firm gains skills and committments towards the success of the firm. The workforce in Japan becomes motivated to the extent of improving quality without any fear of external threat. Japanese automobile companies do not limit the extent of education received by their workers. Instead, the education received touches on both end, implying that the labourer is at liberty to learn beyond his scope of competence. This serves to improve their skills and makes them capable of handling technical jobs.
The lean production system unites firms in a common supply chain through connection of the production process (Davis & Tom 1993). Firms are not prohibited from outsourcing, but they should not use the information gathered directly in operation before approval has been obtained. Automobile makers and dealers fall under the same supply chain. Any information that transforms the automobile industry positively impacts dealers the same way. Viverra Motors dealers should resort to some of the tactics employed by other automobile makers to successfully accomplish the new deal.
It is evident that the supply chain will help Viverra Motors obtain necessary spare parts at the right time and at a lower cost. Supply chain management cuts down on storage, labour needed and transport cost of inventories. The new deal means that Viverra Motors should upgrade its technological power, since automated networks have a strong technological connection. Viverra Motors should also make the necessary acquisition of technological facilities early enough to avoid future inconveniences (Towill & Denis R 1996).
Motor vehicle spare parts dealers deal in two types of inventories. There are those inventories that are obtained directly from the manufacturer while there are others that are second hand inventories. The motor vehicle spare part dealers should be stay abreast with any release of car models inorder to stock thier spare parts before it is too late.
The restructuring of purchasing and inventory functions should be done carefully in order to avoid making mistakes and giving the competitors a chance to take over the market. Viverra Motors should have two classes of important segments. The first one deals with original inventories suppliers, and the second part involves the aftermarket suppliers. The original inventories will be getting into the business directly from the suppliers. The products that will be getting directly into the firm from the suppliers will be classified as primary products.The primary inventories should be of top quality and comprised of wheels, frames, bearings and other inventories that ensure high sales volume.
There is a strong likelihood that a research on the use of the new inventories will be needed. This is due to the fact that the new dealership is a unique and technological complex. The second part deals with used inventories. This implies that spare parts were obtained from another vehicle, but its good condition allows it to be used in other vehicles. Primary inventories commonly used as aftermarket supply inventories include spark plugs, exhaust pipes, brakes and pads, struts, springs, rotors and filters. The aftermarket sales will be very profitable but care should be taken to avoid damaging the reputation of the new business signing. Viverra Motors should try to be unique and properly check the quality of used spare parts. Failure to prevent acquisition of poor quality spare parts will mean that the quality of service to be delivered will be compromised, thus leading to the loss of some |ers. Viverra Company should, therefore, avoid errors caused by ignorance.
Viverra Motors should also consider the factor of growing variety of motor vehicle parts. This means that the business should form a department to research the range of motor vehicles manufactured (High Beam Business n.d.). This is due to the fact that motor vehicle production designs are changing faster than they did in the past. The updates on the type of vehicles present in the market will help the firm stock spare parts for a new car model. New car models are likely to be complex, hence the firm will have ample time to learn about the replacement of motor vehicle parts. If the firm is able to observe these things, it will emerge as the best and preferred by most |ers.
Viverra Motors is a businesses undertaking that performed consistently well in the past. The new signing means that the firm has to work hard and address other issues, too. Expansion of a business implies that the business is likely to encounter more challenges. Viverra Motors will succeed in its new dealing, since it has observed the issues early enough, and will more likely be the best performing spare parts and materials dealer in the future.
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