Operations Management Business Plan - Improvement of Business Operations - Term Paper Example

or Operations Management Business Plan Improvement of Business Operations 15 Jul 11 Contents Contents 2 Introduction 3 Operation Analysis and Evaluation 4 Warehousing 4 Storage 5 Records and Documentation 6 Material Handling Techniques 7 Pickers 7 Material Handling Equipment 8 Operations Improvements Proposed 9 Warehousing 10 Storage 10 Records and Documentation 10 Material Handling Techniques 11 Pickers 11 Material Handling Equipment 12 Operations Improvement Plan 13 Conclusion 14 Bibliography 14 Figure 1 - Floor Structure for Each Shift 8 Figure 2 - Incoming Material Documentation 9 Figure 3 - Outgoing Material Documentation 9 Figure 4 - Advantages offered by WMS 11 Figure 5 – Operating time and operational costs 13 Introduction The U.S. Department of Education defines operations management as a field concerned with the management and direction of both physical and technical functions within an organisation. This is particularly true for organisations involved in production, development and manufacturing operations. (National Center for Education Statistics) Operations management is essentially overseeing processes that turn inputs into outputs. The goal is to achieve organisational objectives at the lowest cost in order to maximise profits. I work for General Trading which is a grocery and dairy supplier. The portfolio includes distribution, wholesale as well as export operations. The company trades in approximately 10,000 grocery items and 2,000 products and sports its own brands Parade and Better Valu. The export markets range from Europe, South America, Africa, Caribbean and the Middle East. (General Trading) The largest branch of operations exists for food items delivery to supermarkets within the metropolitan area. General Trading acts as the middle man between the wholesalers and the larger grocery stores. Myriad physical resources including warehouses, offices, transport equipment, support services are required to support operations. On the human side, hundreds of workers are required each day by General Trading to ensure prompt delivery of food items. The business philosophy is rather archaic and well set in and the management is not highly committed to change (in terms of modernisation). Business operations demand investment in physical and human resources in order to maximise efficiency and production. At General Trading the, top management has been relentlessly unwilling to invest money in company operations in the short-term to prosper in the long-run. The company’s operations suffer due to lack of training, archaic physical resources, inefficient warehouse operations (stacking and retrieval), lack of employee metrics as well as the lack of a coherent quality management scheme. Operation Analysis and Evaluation General Trading being a logistics operator has to deal with warehousing and transportation. These two operations form the bulk of the company’s operations management. Goods flow both into and out of the warehouse. The material needs to be stacked in order of certain preferences so that it can be readily deployed as required. These preferences include delivery dates, nature of food materials (preserved or fresh), room for fire fighting and escape etc. Food orders are created to record all transactions of incoming and outgoing food materials. Experienced personnel are required to create food orders so that the right amount of detail is entered flawlessly intro records. Similarly, experienced store handlers are required to locate the food materials both when they arrive and when they are about to leave. Investments in the physical equipment have also been lacking which have promoted inefficient operations. A description of the operations is provided below for areas where improvements are desired. Relevant weaknesses are listed alongside the process evaluation so that continuity and relevance can be maintained. Warehousing Warehousing refers to the storage of materials for further processing. In terms of business value addition, warehousing represents a significant portion because of the flexibility it provides the business. (Hansen and Gibson) Warehousing is essential to General Trading’s business for two primary reasons. First, items delivered in bulk need to be sorted out for distribution in smaller batches to grocery stores. The warehouses are essentially the only platform where this activity can be carried out. Secondly, items need to be stored safely in controlled conditions before they are delivered or most food products (especially fresh ones) would rot. Furthermore, warehousing is important because it helps General Trading keep a buffer stock ready hand that can be used to deal with variations in consumption. In the food business, it is hard to calculate exact demand levels and to stock items accordingly. Instead, a buffer stock is kept at hand to deal with fluctuations in demand. Storage The food materials arrive in different shapes and sizes. Most are packed in cartons. However, the cartons are not manufactured according to any standard sizes. Therefore, cartons of various sizes exist that need to be placed and shipped. Furthermore, the lowest carton in any storage area needs to be placed on a wooden or metal pallet so that air can keep circulating. Although cartons are manufactured free size but pallets follow GMA (Grocery Manufacturers’ Association) standards which are recognised by ISO (International Standards Organisation) so their sizes are known before placement. Food stuffs that are not packed in cartons are placed in boxes made out of wood or plastics. These boxes are generally ventilated and store fresh farm produce as well as fruits. The placement of these boxes needs to be well controlled in order to ensure that they do not rot or collapse as a result of overlying weight. Currently the storage of materials inside the warehouse follows an outdated manually figured out scheme. Certain areas have been earmarked for certain goods in the warehouse. However, when an excessive quantity arrives then the goods are placed inside other demarcated areas. The only record generated are verbal warnings from shift to shift as well as scribbled notes that one supervisor passes to the other as shifts change. At times, this creates the need to search for areas where certain goods have been placed due to miscommunication. Moreover, the less experienced staff is vulnerable to placing fresh food items towards the rear of the warehouse if excessive quantities arrive. This causes certain food items to rot at a rapid pace causing the company fiscal loss. Another problem that is significant is the application of obsolete principles to move products into and out of the warehouses. While more modern logistics establishments are using methods such as FIFO (First In First Out) and LIFO (Last In First Out), General Trading relies on the supervisor’s skill alone to store and retrieve products inside the warehouse. Records and Documentation General Trading handles thousands of different products each day. Effective documentation and record keeping is essential to ensure traceability of stored, incoming and outgoing products. Currently, the documentation and record keeping is done through the use of primitive software architectures. At the forefront is Microsoft Excel that is utilised to create daily statements of incoming and outgoing goods. A worksheet of stored products is constantly updated. During any planning manoeuvre the only strategy available is to print large worksheets to plan out storage and shipping activities. Furthermore, when certain records are entered they are left incomplete due to the shortage of time. Information such as barcodes, manufacturing dates etc. are often left out. During mix ups of goods information such as bar codes are essential to identifying lost and mixed up items. However, the dearth of such information causes untold misery as well as lost time and effort. Incoming and outgoing goods are documented through food orders. As with many processes, a learning curve exists in the preparation of food orders. Experienced workers are generally more productive than the novices although experienced workers demand higher wages. Companies looking to increase efficiency in any given time frame need to have an experienced workforce base. The lack of an experienced and trained workforce exacerbates matters. Most operations are turning to professional software to answer these problems. The class of software used is better known as WMS (Warehouse Management System). WMS promoted efficient storage, handling and optimisation routines. The net result is increased efficiency and lowered costs in the longer run. Another flexible option provided by WMS is integration capability with automated retrieval and storage systems and automated material handling equipment. (Supply Chain Operations) This option can be pursued in the future as the business grows and needs more automation to respond to business needs. As yet General Trading is utilising obsolete techniques to handle materials although the large volumes handled justify the implementation of WMS. Material Handling Techniques Materials are handled at General Trading using two primary methods – pickers and material handling equipment. Pickers Pickers are labourers who handle small cartons that are loaded into and out of the warehouse. The piece picking method is applied that is a picker collects products required for one order and then loads them. Zone picking is applied in peak seasons only that is pickers are assigned to certain zones and they pick from these zones only. Pickers are assigned by a supervisor who designates the zone and the cartons that need to be moved for an order. Once the boxes and cartons are brought to the offloading or loading platforms, they are registered using mobile barcode scanners. The Stock Taker is given the job of registering the barcodes because the pickers are often not educated enough to handle barcode scanners. This data is then downloaded to a computer where it is exported to Microsoft Excel worksheets. Human resource training is an essential aspect that is often overlooked at General Trading. Most pickers have no idea on how materials are laid out and need constant input from the supervisor to perform their jobs. The supervisor also needs to constantly supervise labour to ensure that stacking is as high as desired and that vulnerable food items are not overloaded and squished by the weight of the boxes above. Moreover, the barcode scanners are not integrated with any WMS. Material Handling Equipment The other method is using material handling equipment. This equipment includes cranes and forklifts. The cranes are used to move cartons and boxes in bulk for the larger grocery stores. Gantry cranes are installed lengthwise inside the warehouses to allow mobility. The gantry crane is operated by an operator using remote control and has full access to the loading platforms. The forklifts are used to lift and load most kinds of cartons and boxes on pallets. Moreover, the forklifts are used to handle auxiliary and support items such as engine oil for the trucks, empty cartons and boxes and other bulky materials. The material handling equipment is optimal to the needs of the company and its needs. However, the equipment has seen its effective life and demands rigorous maintenance now. For example, the forklifts required constant overhauling of the hydraulic jacks while the gantry cranes require constant preventive maintenance of the brake shoes, motor, the support chains and hook. Capital investment in these critical pieces of equipment is required so that long term maintenance costs can be offset. Figure 1 - Floor Structure for Each Shift Figure 2 - Incoming Material Documentation Figure 3 - Outgoing Material Documentation Operations Improvements Proposed Various changes are required when it comes to upgrading General Trading’s facilities. Major deficiencies were pointed out before. Proposed solutions for these deficiencies are discussed below. Warehousing Storage The use of cartons, boxes and pallets is in line with contemporary practices. However, the placement scheme of materials needs to be worked upon. For one thing, the demarcation is rather ambiguous which needs to be articulate. The use of adjacent storage spaces to store excess material arrivals causes problems. This situation can be resolved by creating a distinct excess storage area where only those materials ought to be stored that arrives in excess. Moreover, this area should be located somewhere near the front of the warehouse which is well ventilated so that fresh food products do not rot if placed here. Another advantage of locating the excess storage area in the front would be ease of accessibility so that these excess materials can be easily handled as well as counted. Another major area of concern is the use of modern storage techniques such as FIFO and LIFO. Food stuffs that are susceptible to rotting should be dealt with through FIFO while food stuffs that may release fumes (for example bananas during ripening) should be dealt with through LIFO. It would be best if some kind of operations management software could be utilized to determine storage locations as well as material handling routines. Records and Documentation Currently the records for materials are handled using Microsoft Excel which needs a lot of manual updating. This promotes the chances for errors to be introduced. Moreover, because Microsoft Excel is not geared to handle warehouse operations, a lot of functions need to be carried out tenuously. For example, whenever compliance audits have to be carried out, long lists must be printed from Microsoft Excel before they are manually checked. The lack of training for employees only makes matters worse. The best way to deal with these problems is to utilize a professional WMS package. Currently, the software market offers many solutions for warehousing businesses of all sizes. Using a WMS package would simplify the work of the supervisors as well as that of stock takers. They would not have to use lengthy and complicated formulas in Microsoft Excel to determine basic things such as the date of the oldest stock material. Moreover, the practice of using a barcode scanner in seclusion would also be replaced by a WMS that could easily integrate with a barcode scanner. This would have multiple advantages. The repetitive nature of functions required to commute barcode data from barcode scanners would be eliminated. The barcode integration into the WMS would help the WMS identify optimal storage and material handling routines. This would lower and simplify the decision making process for supervisors and stock takers. The ready availability of WMS based decisions would ensure that chances for human errors decrease all the more. Moreover, the optimization of operations offered by the WMS would ensure that profits are maximized in the short and long term. Figure 4 - Advantages offered by WMS Material Handling Techniques Pickers The pickers need to be trained better so that the supervisor is not needed all the time. This would simplify the supervisor’s job too and he would find more time to follow up on documentation. Moreover, the loss encountered in terms of improperly placed boxes and cartons also needs to be addressed. This can only be made possible by educating the pickers on what cartons and boxes should be placed on top of each other and how high is acceptable. The integration of barcode scanners with WMS would simplify the stock taker’s job too as he would not have to download data and sort it manually. Material Handling Equipment Serious investment is required in updating the crane and forklifts in use. Though maintenance is satisfactory but the costs of maintenance cannot be justified in the longer run. The only real option is to buy and install new equipment that would not demand such stringent maintenance for the next five years or so. Another option would be to use an automated warehousing system such as that offered by Kiva Systems. This system is capable of locating material independently, retrieving material and storing materials. Though it would be more convenient but such an option would be too costly for an operation the size of General Trading. The breakeven point could not be reached with such an option. Moreover, the rate of return would be too low due to the large initial cost. (Scanlon) The company can easily cover the cost of these pieces of equipment by leasing them. This would ensure a minimal capital cost as well as a reasonable operating cost. If the current equipment is used as such, the costs of maintenance will only increase with time (see figure below). (Relia Soft) Replacement of equipment would be required at one point in time or the other no matter how much maintenance is performed. The best strategy therefore is to go for a leased replacement plan. Figure 5 – Operating time and operational costs Operations Improvement Plan The operations improvement plan should be divided into short term, medium term and long term objectives. Short term objectives should include warehouse storage scheme reassessment, employee training and the use of operations management software such as QM-POM. (Pearson Higher Education) Short term objectives could be implemented in three months time after which they would be approved upon. A WMS package could be implemented within the medium term objectives as well as extending training to all levels of employees. The use of employee metrics as well as PADP (Personnel Appraisal and Development Proposal) could help to boost training in the medium term. Medium term objectives could be implemented in three to six months with ease. In the longer run, the equipment in use should be used by leasing a new crane and forklifts. This idea may be extended to the delivery trucks as well. Long term objectives would take from twelve to eighteen months because of the background technical and banking workup required. Conclusion Based on the evidence presented above, it is obvious that General Trading needs to improve their operations management to drive profitability up. Given the challenges facing General Trading, it is best to introduce employee training, warehouse storage and material handling techniques reassessment, WMS implementation and replacement of crane and forklifts. Though the proposal seems lofty but it is based on measurable and achievable objectives. The performance of these measures can be gauged by developing baselines for the current scenario which can be compared to future assessments. As far as training is concerned, the state of training can be judged through appropriate examination. The results of training can be checked by giving employees surveys regarding job satisfaction and simplicity. As far as measuring improvements in warehouse storage and material handling techniques is concerned, positive results will be indicated by lowered losses and improved process efficiency. Lowered losses would be reflected fiscally while improved process efficiency would be indicated by increased job satisfaction. Similarly the implementation of WMS would show up as process improvements. Notably, the fuel cost of the forklifts and the utility bills for the crane would go down as operations would be far better planned. The changeover of the crane and forklifts would be easily measured through lease payment per month for new equipment versus maintenance cost for older equipment. Although, the costs of change would be initially high but there advantages outweigh costs by a fair margin. Bibliography General Trading. General Trading Home Page. 2011. 12 July 2011 . Hansen, Paul and Kelvin Gibson. Effectively Slotting a Warehouse or Distribution Center . 2011. 12 July 2011 . National Center for Education Statistics. CIP 2000 - CIP Lookup to Occupational Crosswalks . 2011. 10 July 2011 . Pearson Higher Education. POM-QM for Windows Excel OM/QM. 2011. 15 July 2011 . Relia Soft. Optimum Preventive Maintenance Replacement Time for a Single Component. 2000. 15 July 2011 . Scanlon, Jessie. How Kiva Robots Help Zappos and Walgreens. 15 April 2009. 15 July 2011 . Supply Chain Operations. WMS Software Guide . 2011. 12 July 2011 . Read More