Process design for Riordan Manufacturing - Essay Example

? Process design for Riordan Manufacturing Manuel Goni Christina Gunn Mike Hatley Connie Johnson Keanu Niko Saeedi Rose Shelton OPS/571 February 27, 2011 Terry Norris Process design for Riordan Manufacturing A new process design for the production of Riordan electric fans will need designs associated with material requirements planning (MRP), supply chain processes, production forecasts, and implementation plans. The MRP helps in specifying when production and purchase orders must be placed for each part and subassembly to complete the product on schedule (Chase, Jacobs, & Aquilano, 2006). Effective planning and controls associated with the supply chain process and demand can help in inventory management. Demand variations are the norm in the business environment; therefore, supply chain processes, forecasts, and implementation plans have to include the flexibility necessary to cope with demand variations. Material Requirements Planning The reason companies use an MRP system is to “approach problems, determine the number of parts, components, and materials needed to produce each end item. MRP also provides the schedule specifying when each of these materials, parts, and components should be ordered or produced” (Chase, Jacobs, & Aquilano, 2006, p. 630). Riordan’s facilities for parts and facilities for production are in different locations. In order to keep up with everything that Riordan is doing and desires to do they must implement an MRP system that will allow them to manage inventory and production schedules. It will also allow them to keep up with production output and will make sure they are utilizing and operating at maximum capacity without overloading the production process by monitoring all aspects and all locations involved in production. An MRP system will further improve Riordan’s level of customer service and track billing, inventory and all other areas of production and delivery in one system in which all locations are on the same page. The system will allow triggers for ordering, slowing and speeding up production, parts, etc maintaining a consistent level of operation and low inventory based on need. New Process Design Changes in three areas of process design can have a tremendous impact on Riordan’s China plants efficiency and in turn allow Riordan to achieve higher profits through higher on-time delivery of their products. Electric Motor delivery issues In the current process Riordan has outsourced its electric motors for their fans. The company they use is a local Chinese company that only has a 93% on-time delivery average. Riordan may realize greater on-time delivery if this process was not outsourced but moved in-house. This would ensure a higher on-time delivery of a much needed part for the fans they produce. Orders and shipping/delivery The current forecasting method for fan production is based on the last three year sales average sales. The shipping method for local orders is that they can be picked up at the plant, which is good because there is no show room or warehouse cost associated with storing the unsold fans. Fans to be delivered within China, Riordan use a local company, much like UPS or FedEx. For international deliveries Riordan uses FedEx. 31.6% of the population in China has Internet access (Internet World Stats, 2010). The use of the Internet as an ordering tool to allow potential customers, both individuals and businesses, to place orders would both stream line the ordering process as well as allow Riordan to forecast better the number of fans to produce. Special Order Fans Riordan also produces a certain number of fans for special orders that would be produced with special specifications. Riordan designs the new fan according to customer’s specification. Once the fan is approved, a small number of the fans are created under a separate contract. There are no forecast numbers for special orders. Riordan would benefit here from a website aimed at past business customers to allow them order or reorder past products. Supply Chain Process Strategic capacity planning is an important element in ensuring the efficiency of an operation. Developing the correct capacity in an organization is important in building an effective strategic plan. According to Chase, Jacobs, and Aquilano (2006) “If capacity is inadequate, a company may lose customers through slow service or by allowing competitors to enter the market” (p. 431). Riordan Manufacturing could reduce this risk by relocating operations from Hangzhou to Shanghai. The current product shipment is a bottleneck and poses significant problems financially and operationally. The products produced from Hangzhou have to travel 180 kilometers to Shanghai. This process is time-consuming and complicated. Through relocation Riordan can reach its optimum capacity utilization rate. According to Chase, Jacobs, and Aquilano (2006) “An important measure is the capacity utilization rate, which reveals how close a firm is to its best operating point” (p. 432). Relocating will eliminate the travel expenses associated by the 180 kilometer travel from Hangzhou to Shanghai. Riordan can produce more products by the savings incurred through relocation. Riordan can also benefit through the process of lean production. According to Chase, Jacobs, and Aquilano (2006) “Lean production is based on the logic that nothing will be produced until it is needed” (p. 471). Lean production ensures that Riordan is operating at the best level possible. If the inventory capacity is too excessive, this can decrease profits. According to Chase, Jacobs, and Aquilano (2006) “If capacity is excessive, a company may have to reduce prices to stimulate demand; underutilize its workforce; carry excess inventory; or seek additional, less profitable products to stay in business” (p. 431). Lean production allows Riordan to operate at a capacity that will produce optimum results. Lean production is intimately connected to technology. The current company's website is woefully out of date: Copyrighted 2004, it seems like a 1999-era site with no Web presence. They need to create a supplier portal that allows suppliers to upload their slated needs months in advance. Doing so, they can have constantly up-to-date information on what their production needs are and thus become leaner and more strategic in capacity management. Production forecast Currently Riordan fans production forecasts are based on a three year sales average. The demand for Riordan Chinese fans is derived from the average number of fans sold over the previous three years, this average is the raw number used for the coming years production forecast. Riordan’s Chinese plant also produces customized fan orders that are produced in on a much smaller and singular basis. The production forecast for these fans is much different than the production forecast of the mainstream fans produced in the plant. All components that go into production of the specialized fans are based on yearly orders and not a three year average. By moving to the entire production forecasting system to a time series analysis type system Riordan could become a more efficient and realize economic savings. Implementation plan Creating an effective implementation plan is a necessary component for businesses to achieve its goals. Riordan Manufacturing has set many objectives and goals to achieve the level of success it has reached thus far. Many of the goals set by Riordan Manufacturing are attainable by an effective implementation plan. One of the goals set in place by Riordan Manufacturing is reducing carrier costs by 5% (University of Phoenix, 2010). Through relocation from Hangzhou to Shangai Riordan Manufacturing will reduce its carrier costs by 5% within three months. The travels expenses saved by relocation can help contribute to the reduced carrier costs. Riordan Manufacturing has also set a goal to reduce its cycle time by 15% and costs by 10% (University of Phoenix, 2010). Through lean production and JIT manufacturing Riordan Manufacturing can reduce its cycle time by 15% within six months and costs within eight months. According to Chase, Jacobs, and Aquilano (2006) “lean production is designed to achieve high-volume production using minimal inventories of raw materials, work-in-process, and finished goods” (p. 471). Lean production is a necessary component in ensuring that time wasting activities are reduced. Operating at maximum level is necessary in reducing costs and increasing output. JIT manufacturing is also a necessary component in reducing costs and reducing cycle time. JIT manufacturing works on the notion of producing what is needed when needed. According to Chase, Jacobs, and Aquilano (2006) “Anything over the minimum amount necessary is viewed as waste, because effort and material expended for something not needed now cannot be utilized now” (p. 474). Strategic capacity planning is important in ensuring that the customers are receiving their electric fans on time. Currently Riordan Manufacturing is delivering its products on time 93% of the time. Riordan Manufacturing has to strive to deliver its products a 100% of the time. This will ensure that the clients continue to use the services of Riordan Manufacturing. Through capacity planning Riordan Manufacturing can reach the goal of delivering its products 100% on time delivery within a year. Figure 1 shows the implementation plan for the Riordan electric fans. Figure 1: Implementation plan for the Riordan electric fans Cover Letter Conclusion References Chase, R. B., Jacobs, F. R., & Aquilano, N. J. (2006). Operations management for competitive advantage. Retrieved from University of Phoenix eBook Collection database. Internet World Stats. (2010). Usage and population statistics. Retrieved from http://www.internetworldstats.com/asia/cn.htm University of Phoenix. (2010). Riordan Manufacturing. Retrieved from University of Phoenix, OPS571 - Operations Management website. Read More