Introduction
The radio frequency identification (RFID) tags are produced by the Morrison Company and used to automatically identify objects they are attached to. In the recent years, the sales of Morrison increased, which led the production to the growth, while some operations management issues should be improved. This paper analyzes the given case study in order to reveal the key operational problems, conduct utilization and capacity analysis, and formulate recommendations.
Major Facts
The two key product lines of the Morrison Company include retail as well as pharmaceuticals. RFID tags are distributed among security control, contactless payment, chain management, the pharmaceutical industry, and other areas (Wheelwright & Myers 2011). Data scanned from these tags can be transferred to the information system to collect, analyze, and monitor it. The whole manufacturing was located in one facility, and the process of production included six steps, beginning with the receiving/inventory and ending with packaging.
It should be identified that Shauna Breen was hired as an operations manager by the CEO, Jason Robbins, in order to reveal the key problems encountered by the company. The review of the plant demonstrated that Morrison’s operations management was poor. Inventory management, operations planning, and day-to-day operation were examined by Breen to improve the existing situation and help the company succeed.
Major Problems
While Morrison increased its sales, the production process became challenging. The first problem faced by this company refers to the inefficiency in production controls. There were no electronic terminals, and all the lists were hand-written, which maximized production and made it inaccurate. More to the point, several employees were assigned the roles of a control manager, but a separate order management system informed employees of decisions to be adopted.
The second problem is supply shortages that were caused by the limited storage capacity and outdated technology. A lack of the floor space was perceived by the managers as the strategy, according to which the company manufactures the limited amount of products since they may become obsolete. In fact, it impeded the customization phase and meeting the demands from customers (Krajewski, Malhorta & Ritzman 2016). In addition, vendors of the company were unable to always provide their products on time, and there was no specific schedule, which affected other areas as well. One more problem that can be noted is a lack of proper communication between workers and supervisors, as the latter often failed to explain to the former what exactly they were expected to do.
Questions
Capacity and Utilization Analysis
Speaking of the capacity of the Morrison Company, it is essential to note that the number of available machines cannot meet the demand. As an example, one may note the fact that 80 percent of personalized tags are ordered by retail production line, while only four machines work for this field. At the same time, the limited number of machines increases the time allocated for production, thus lowering production rates.
The overall output of retail labels is 21,005, and 15,267 for the pharmaceutical line (Wheelwright & Myers 2011). The actual outputs of both lines are lower compared to the anticipated levels, which shows low capacity. The situation is deteriorated by the fact that Morrison cannot purchase more machines due to the limited space, which makes meeting the needs of customers impossible in the existing conditions.
The utilization analysis is beneficial for considering the potential output improvements. It can be calculated by dividing the actual number into the anticipated output to multiply the outcome by 100 (Borio, Disyatat & Juselius 2016). Taking into account that the retail chain’s average and potential output are 110,000 and 125,000, and those of the pharmaceutical line are 165,000 and 180,000, capacity utilization may be specified as 88 percent and 91 percent respectively.
In addition, the insufficiency of the workforce should also be noted, as there are only 60 employees, 20 of which work on machines, while others control inspection, packaging, and other processes. It is clear from the capacity and utilization analysis that the number of workers does not correspond to the demands and potential of the company that can produce more if operations would be improved.
Production Processes
The Morrison Company has two production lines, such as pharmaceuticals and retail, each of which is important. The pharmaceuticals line is characterized by two sizes of smart tags and acquired 30 percent of the corresponding market in 2010. The paramount goal of using the specified tags in the pharmaceuticals industry is to make patient experience safer by preventing the spread of counterfeit drugs. 85 percent of sales are associated with the smaller version of tags, HP chips, that are regarded as rather valuable and customized products. In its turn, the retail product line initially attracted fewer customers, and a smaller amount of tags was produced.
The market of retail products is much more competitive compared to that of the pharmaceuticals industry. Another difference between these two lines is their target customers. While the first line focuses on corporations that are more dependent on standards and regulations, retail is required by smaller companies that perform as multi-unit retailers in liquor, footwear, and home furnishing.
The sizes and revenues of these lines are also distinguished: the first takes only two sizes and 66 percent annual profit, while the second is personalized and provides 33 percent of annual revenue. The tags that are used by both lines are controlled differently: pharmaceuticals should be under the Drug Enforcement Administration (DEA) regulations, and retail faces only several small standards.
Speaking of the competitive priorities, one should note that both lines possess some priorities. As stated by Jitpaiboon (2014), there are several priorities, each of them is important for production processes. Cost, time, and innovations may be assigned to the pharmaceutical line that ensures control and monitoring of tags for drugs. Accordingly, quality, flexibility, and innovation are inherent to the retail line that is diversified to meet the customers’ needs. One may note that the costs spent to produce tags of different lines vary. The Cost of Goods Sold (COGS) was $13,5 million for the retail line and $21,9 million for the pharmaceutical one, while the latter managed to obtain the profit that increased its COGS.
The characteristics of the products manufactured by Morrison are consistent with the processes of the company. In particular, both lines have a separate machine that is responsible for inlays based on RFID technology. It should be stressed that the production processes of both lines should be precisely accurate since even the minor errors may violate the norms and make the tag non-functional. This attention paid to quality allows controlling customer satisfaction, which is expressed in a low level of returns – about three percent of total shipments.
Recommendations
Based on the analysis provided on the previous sections of this paper, it is critical to assume several recommendations so that Morrison would improve its operations management. The first suggestion refers to floor space shortage and challenges in production and storage it presents. The limited space for production and the associated challenges demonstrate that Morrison should consider expanding its floor space, which is infrastructural change.
One of the options is the purchase of an additional facility to utilize it for adjusting the production (Krajewski, Malhorta & Ritzman 2016). Another option is renting a new building so that the company may pay the lease and use it for similar purposes. However, this solution may turn to be disadvantageous in case of financial difficulties such as crises. If the company owns a facility, there is no need to care about rent costs, which allows paying more attention to other aspects of problems. In addition, one may recommend introducing the second shift in order to empower employees to work better by being more attentive and responsible with regard to their job.
The second recommendation aims at addressing the inefficiency in production controls through adjusting the structural organization. At the initial stage of the proposed change, the company should introduce a transparent system of scheduling for managers and employees. Instead of the current day-to-day planning and task dissemination, it is better to develop a flexible schedule and plan tasks for one month (Krajewski, Malhorta & Ritzman 2016).
For example, the products that do not require personalization may be planned with a low uncertainty level, which is likely to increase the rapidity of processes. In order to achieve this, managers should conduct internal research and specify the most suitable schedule. What is also important, the opportunity of introducing the second shift should also be considered by Breen and managers. In this case, planning will be required to determine the tasks to be performed by both shifts.
As for the third recommendation, supply delays should be prevented by means of the creation of relevant policies. By developing specific policies, the company would avoid additional costs and returns from customers (Mahadevan 2015). For example, Breen may suggest including some additional time and making the deadline set for workers shorter. In case if a delay occurs, the company will have more time to handle difficulties and provide products on time. If the delay appears due to the reasons that cannot be controlled by Morrison, the policy should state that it is not the company’s responsibility.
Ultimately, it is critical to note some insights regarding communication issues. Even though this point does not directly refer to operations management, the relationships between managers, supervisors, and employees should be clear and comprehensive. The properly formulated task leads to the timely and accurately performed job and vice versa (Mahadevan 2015). Since some delays occur due to a lack of the competence of supervisors to recognize and explain tasks, the company should train them. Namely, education should include the basics of production, its stages, description of potential challenges and their solutions, as well as communication skills.
Conclusion
In conclusion, the Morrison Company is an effective producer of smart tags, yet it should consider operational changes to remain successful. The purchase or rent of a new building, delay policy, as well as production planning and scheduling were recommended as valuable options to accomplish production growth and elimination of delays. While the company’s utilization is high, its capacity needs to be increased to meet the increasing needs of customers.
Reference List
Borio, C, Disyatat, P & Juselius, M 2016, ‘Rethinking potential output: embedding information about the financial cycle’, Oxford Economic Papers, vol. 69, no. 3, pp. 655-677.
Jitpaiboon, T 2014, ‘The study of competitive priorities and information technology selection: exploring buyer and supplier performance’, Journal of International Technology and Information Management, vol. 23, no. 3, pp. 91-124.
Krajewski, LJ, Malhorta, MK & Ritzman, LP 2016, Operations management: processes and supply chains, 11th edn, Pearson, London.
Mahadevan, B 2015, ‘Operations management: theory and practice, 3rd edn, Pearson Education India, Delhi.
Wheelwright, SC & Myers, P 2011, The Morrison Company. Web.