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Holly Farm is a business that is jointly owned by Charles and Gillian Giles. In the year 2003, the Holly Farm extended its operations and was opened to the paying public due to the reduction in the revenues from milk and cereal activities. Charles and Gillian invested the whole of their savings to construct a 40 space car park and an area that can accommodate six 40-seater buses. They also created a safe area where the public can use to view the milking parlor.
Moreover, they also constructed special trailers for passengers to be transported within the farm on guided tours, a permanent exhibition of equipment, a rare breed paddock, a children’s adventure playground, a picnic area, a maize maze and a farm shop. They also built a small factory to manufacture real dairy ice cream, pasteurized ice cream and eggs, sugar, flavorings, and other products purchased but not purposed for the public viewing.
The actual situation in the operation of the Holly Farm
Gillian took charge of the new developments while Charles operates the commercial farming business. The number of the public who visited the farm increased steadily due to the advertisements and public lectures they provided. Advertisements are very crucial in ensuring that clients get attracted to the business. In 2006, the promotional activities declined because Gillian was committed in her business.
This made the number of visitors to the farm to level out to approximately 15,000 per year. The farm was open to the public at 11:00 am and closed at 7:00 pm after milking practices were over.
Approximately 90% of visitors in cars or coaches would arrive later than 12:30 pm, those who attend the picnic would arrive until around 2:0 pm, and they tour the farm until around 4:00 pm after which approximately 20% would have visited the farm shop and departed, but those remaining would wait to view the milking process, then visit the shop to buy ice cream and other products after which they depart.
Gillian opened the farm each year from April to October inclusive, a period when the demand is very low and the condition very unfavorable for the tractor rides and most of the animals had to be kept inside. Earlier experience indicated that the demands were too low during mid week, but on Mondays and Fridays the business was very viable, with almost exactly twice of the visitors on Saturdays and Sundays as on Fridays and Mondays.
In 2008, Gillian decided to increase the number of visitors in the farm by 50% so as to improve the return on the farm tours and to help the farm shop to meet its targets. The extra sales from the ice cream assisted to keep the factory at full output.
The challenge was whether to make sales to coach firms or to intensify local advertising to attract more families in cars. The other option was to collaborate with schools for educational visits. However, the farm guide workers were not to be used on extra week days as they were needed by Charles for three days weekly for real farm work. Most of the farm workers were happy for the extra time of work since it fitted well with their family life and helps them to make more income for their luxuries that most of the farm workers could not afford.
The milking parlor has 150 cows to milk. Charles invested in carousel parlor where cows are milked on a slow milking turntable. Milking is done between 4:30 pm to 7:00 pm, during which visitors can view from a purpose-built gallery having a space and explanatory tape recordings via headphones that can accommodate 12 people.
According to Gillian, spectators could watch for 10 minutes including 5 minutes for the explanatory tape. The milking parlor is very busy on Saturdays and Sundays and a que develops at 4:00 pm when visitors want to watch the milking and then depart home. The challenge is that neither Charles nor the cows want to start earlier; however, many people are patient as they wait for their turn to watch the technology. In a busy period, approximately 80 visitors per hour pass through the gallery.
The ice cream factory is in operation 48 weeks yearly and four days per week and eight hours per day. The three employees, farm workers wives, are supposed to work in line with farm opening from April to October but hours are under negotiation in some months. The output is in one liter plastic boxes and they make 350 on daily basis which is the maximum mixing and fast freezing-capacity. The finished goods freezer hold a maximum of 10,000 liters, but to allow stock rotation it cannot be loaded to above 7,000 liters.
The finished goods inventory at the end of December 2007 was 3,600 liters. According to most recent figures by Gillian, all flavors cost about £ 4.00 per liter to produce. This cost included variable cost of materials, packaging and labor; the layout of the factory is by process with material preparation and weighing sections, mixing area, packing equipment, and separate freezing equipment. This is operated as a batch process.
Most sales of the ice cream are done through regional specialty shops and food sections of department stores. The outlets are given a standard discount of 25% to allow a 33% mark up to the normal retail price of £ 8.00 per liter. The minimum order quantity is 100 liters and the deliveries are done by Gillian using the van on Tuesdays.
Moreover, many farm visitors purchase ice cream at the farm shop and carry them away in well insulated containers that prevent it from melting for two hours. According to Gillian, on average, one out of two coach customers buys one liter box. A car with four occupants leads to sales of I liter boxes purchased.
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The farm shop retail price is £ 12 per box that provides a much better margin than the sales to shops. Moreover, a separate fence road makes other customers to purchase goods at a separate counter on the farm shop without paying for other farm facilities. This is another regular source of sales.
This happens because house holders make very infrequent visits to stock up their freezes almost regardless of the time of the year or weather. In addition, local hotels also make a lot of purchases in this manner and their use of ice creams is throughout the year with the peak during the Christmas Eve when there are large numbers of banquets. The sales in this category are at the full retail price of £ 8.00.
The finished products are sold at three categories of customers. The option is to increase the number of natural flavors of ice cream to ten from four in order to increase the competitive advantage against competitors.
The current capacity of Holly Farm
In the current situation, the milking shed can handle 80 people per hour for two and half hours, with only 80% of the visitors who go to the farm visit the milking shed. Therefore, in order to calculate the maximum capacity it is important to identify what the farm is designed to do, that is its design capacity and what it can actually handle over a sustained period, also referred to as the effective capacity.
In order to obtain the maximum capacity of the farm, there are always tradeoffs between having appropriate capacity to fulfill the visitor’s needs and having too much capacity that results into a poor utilization of the resources.
The total number of people that can be accommodated in the milking shed is 80 people per hour for two and half hours. 80% of those who go to the farm visit the milking shed. Therefore, is practical that 80% of the total capacity is 80 people. This means that the total number that can be held in the milking shed per hour is 100 visitors. Thus, in order to get the total number that can be held in the milking shed for two and half hours, the total number of people that are accommodated in the farm is (100×2.5), thus the total capacity is 250 people.
If 50% of 250 are added then the capacity will increase to 375 visitors.
The following chart indicates the number of people that visits the farm on a daily basis.
|time||Number of visitors|
The capacity of the milking shed will be 200 people for two and half hours, therefore the capacity of the whole farm will be (200+250) people
This makes the capacity of the whole farm to be 450 people.
Gillian and Charles should put more effort on effective management of the Holly Farm’s resources and activities that are undertaken by their workers. This should include a wise management of their staff, available resources that are needed in the farm to ensure an efficient delivery of goods and services. In addition they should embark on the design and manage the farms processes as well as activities that actually produce the goods and services.
Gillian and Charles should put more effort on Holly Farm’s processes so that the products and services that they produce meet the demands of the visitors who attend the milking shed. They can achieve this by involving efficient delivery of their products to the clients. An appropriate business strategy involves a process that enhances a successful processing activity in manufacturing (Cochran and Alberto 2005).
Thus, for Gillian and Charles to achieve the benefits of the Holly Farm, they should ensure that they obtain reliable resources that are cost effective. This will boost, to a greater degree, the probability of achieving high margins for the products. In addition, the processes employed in the farm should be at par with the established structures. This is useful as it provides a chance for achieving efficiencies in the production process.
Critical in realizing such achievement are several factors, which include “employee training, setting feasible production goals, and establishing an achievable maintenance program for their production machinery”. They should also focus on an improved sales and marketing and to put in place workable strategies to make their clients aware of their products and services.
In order to achieve this, they should improve on their public relations and advertising strategies and develop a simplified means of placing orders that will make the farm secure clients who will be wiling and ready to purchase their products and services. The management should ensure that orders are processed in a timely manner and at the end they should ensure that they obtain feedback from their customers regarding their level of satisfaction with the farm’s products and services as well as the efficiency of the actual delivery.
Gillian and Charles should implement capacity planning. Capacity planning is very important in determining the production capacity of their Holly farm to meet the demands of the visitors. In this context they should determine the maximum amount of work that the farm workers are able to complete within a given time period and determine the effective capacity that the staffs are able to complete due to constraints like delays in the operation of the workers (Jonsson and Stig-Arne 2005).
Through capacity planning, the farm will yield more financial benefits. In a case where by the demand and supply are not in balance and there is no option to reserve in advance, the visitors will have to wait in line for their time to get into the milking shed. However, this may lead into a risk because some of the visitors may become impatient and decide to leave.
The advantage of queuing for the service providers is that the personnel is kept busy and the resources are fully utilized and at the same time, as the rate of arrivals nears the service rate, the average length of the queue will become longer. Therefore the imbalance of supply and demand will lead to different impacts on the front and back of the service system in the farm (Slack, Chambers, and Johnstone 2010).
Capacity planning should be done at different levels so as to increase of the farm.
Moreover, for the farm to obtain an increase in returns, Gillian and Charles should outsource. Outsourcing will ensure that the farm increases productivity through outsourcing order fulfillment. This increases the order volume since the fulfillment providers can handle the farm operations with ease. Outsourcing is the best option for the operation that has a set up that is impersonal and a venture that has an order volume.
Outsourcing order fulfillment will enable the farm to achieve high returns during a specified period of time because it pays to ensure that the sales department is able to process all the orders that are needed from them. Outsourcing is also important because it prohibits spending too much time on various details of running the business.
Most farm managers have realized the merits of outsourcing certain roles in the farm business like financial, human resource as well as risk management (Krajewski and Ritzman 2005). Holly farm is a very cost sensitive environment, thus outsourcing will ensure that the farm obtains some benefits such as hiring a professional on a full time basis.
In addition Charles and Gillian should consider controlling the production cost which forms an important part in managing a manufacturing process. They should identify both direct as well as, indirect costs for their products in order to establish an appropriate baseline for making appropriate decisions in their pricing.
Charles and Gillian should perform a breakeven analysis to demonstrate how changes in the variable and fixed costs and the production volume may affect the breakeven cost of production of producing any additional unit (Meredith and Scott 2002). Moreover, it is crucial to implement a managerial accounting system that will provide the farm workers with regular reports concerning the unit costs that they are assigned either directly or indirectly.
The owners of the Holly farm should perform a SWOT analysis and establish a response to projected situations that may enhance a competitive advantage. Thus, to fulfill the strategic role of managing the farm, it is important to have outsourcing solutions in order to effectively manage the activities of the farm business.
The outsourcing solutions should be made limited to satisfy the needs of the visitors. This may include, outsourcing for services such as security, marketing, information technology as well as advertising which the Gillian and Charles may not be able to handle. When the workload is outsourced, the farm will achieve a steady growth hence preventing the Holly farm from collapsing because the employees cannot manage to handle all the activities.
This may increase customer satisfaction. On the other hand, the most possible solution is to hire more workers, but the problem is that the business does not have sufficient funds to pay for extra salaries. Gillian and Charles should identify an appropriate supplier that they trust who specializes in the services that they offer to the visitors in order to be very competitive in the line of services and goods that they provide.
On the other hand, outsourcing has many advantages that may make the business reduce costs instead of employing many workers to cover all the aspects of the business. Outsourcing can be done in all the activities of the farm. Moreover, outsourcing will enable them to have a steady and a reliable supplier who will ensure excellent support without having to employ more workers (Mullins 2007). It may also lead to the ability to choose from a diverse range of suppliers for different outsourced services.
In order to get a better supplier for outsourcing, it important to identify the best supplier with an attractive rate and who is able to provide quality services. Moreover, is important to consider their other clients. Gillian should determine the budget that they may allocate to outsourcing hence, this may require additional funds to cover all the costs that are not expected (Vollmann, William, Clay, and Robert 2005).
Outsourcing will enable Gillian and Charles to dedicate more time on their main functions and build a strong customer base to promote the farm business. Therefore, they should prioritize on their roles and those of their workers in order to obtain results with an improved productivity. This will ensure that the farm business gains a competitive advantage with other similar businesses; hence by using outsourcing they can provide other support services and gain a higher competitive advantage in the business.
Cochran, J., K, & Alberto, M., U 2005. “A set covering formulation for agile capacity planning within supply chains.” International Journal of Production Economics 95, no. 2, pp 13940-13949.
Jonsson, P, & Stig-Arne, M 2005, “Use and applicability of capacity planning methods.” Production and Inventory Management Journal 43, no. 3-4, p.p 890-895.
Krajewski, L., J, & Ritzman, L., P 2005. Operations management: processes and value chains. Upper Saddle River, New Jersey, Prentice Hall.
Meredith, J., R, & Scott M., S, 2002, Operations management for MBAs, 2nd edition, John Wiley and Sons, Inc New York.
Mullins, L., J, 2007. Management and organizational behavior. 8th edition, Prentice Hall Harlow, FT,
Slack, N, Chambers, S, Johnstone, R 2010, Operations management. 6th edition, Prentice Hall, Harlow FT.
Vollmann, T, E, William L. B, D. Clay, W, & Robert F. J 2005, Manufacturing planning and control systems, McGraw-Hill, Boston.