Problems Faced by and Strategies Adopted by Sunshine Shirts - Assignment Example

?Running Head: case study Sunshine Shirts of the of the of the Introduction Sunshine Shirts is currently undergoing tough times as its financial health is deteriorating and numerous issues are on the table to be tackled. Whilst market is demanding and budgeting proper, the company is reporting losses and future prospects seeming blurred. As such, internal analysis of operations and processes is imperative. The paper addresses the problems faced by the company and sources of the problems. Later to follow are the recommendations to overcome the stated problems and improve company’s performance. Problems faced Primary problems faced by Sunshine Shirts come under the category of delivery delays and bottlenecks in quality. Delays are attributed to factors like large number of inspections, inventory and warehousing issues and lengthy production cycle of shirts. Also, type and volume of orders in the three categories also contribute to delays in deliveries. For quality concerns, even large number of inspections is not proving beneficial since printing is not getting appreciated by the customers. Faulty shirts are also getting in the orders which are resulting in increased number of complaints and reduced customer loyalty. Delays in deliveries and quality pitfalls cumulate to rising costs but no increased profit margins. Thus, an indirect offshoot of the above mentioned problems is an urgent need for cost-cutting campaign which can not be realized unless careful and meticulous strategic planning is undertaken. Following next are specific instances which have led to the above mentioned problems of faulty planning, delays and quality concerns. Sources of problems Superficially, problems seem to be very generic, trivial and operations based. However, upon careful observation and deep analysis, the sources of these problems vary from strategic planning to inventory management, quality management and even setting up of performance measures. Detailed breakdown of sources of problems is given below: Strategic planning Strategic planning is a wide concept covering numerous operations within a specific business. From human resources to operations, production to management and even after sales, strategic planning entails setting up of standards, crafting plans according to those standards and measuring actual outputs to find out deviations. At Sunshine Shirts, planning has not taken a serious form. Various loopholes exist in different functions and domains. Opening sentences where it is mentioned that the company budgeted for but still reported losses is a clear example of poor planning. Next for example, the problem of delivery delays can primarily be attributed to planning glitch. Before actual inventory management, it is the work of planning to ascertain the flow of raw materials, work-in-progress and finished goods. Faulty planning has led to faulty warehousing and chaos at factory space. Secondly, customer complaints have increased at Sunshine Shirts due to printing issues as ink on shirts peels off. This might be due to wrong supplier selection of printing inks which is again a function of strategic planning in a company. Further, regarding costs, company officials and heads of various departments are suggesting different solutions- reducing number of inspections, outsourcing, and charging premium price for better quality and even enter women shirts market. However, consensus cannot be achieved in finalizing a solution. This is because the company does not know whether its competitive advantage lies in low cost or better quality. As such, direction of its strategic planning is not focused on one of these dimensions, leading to disadvantages and losses in both. To cut costs, managers are recommending outsourcing some of the activities to nations where production costs are lower. However, they do not see that expenses incurred on its three types of customer segments outweigh the returns yielded by these. Thus, even customer profitability analysis is not proper, leading to unnecessary expenses on sales, marketing, administrations and other internal processes. Quality management: Coming to quality management at Sunshine Shirts, peeling off ink is the prime issue. Though final products pass through a number of inspections, yet quality is not up to the standards. Further, because of different customer segments, sizes of shirts, variety in customization and different marketing approaches to different customer segments, factory operations cannot be synchronized. If we talk of inspection, assuming that it is done only after the shirts are complete, it reflects that the company relies on final inspection. Thus, there is no provision of monitoring shirts at every single level of manufacturing. If this was the case, defective shirts can be repaired or segregated immediately after each level, thereby reducing number of final defects and costs incurred in repeating the entire manufacturing process. Because this is not the case, inspection costs and even repair costs are high at Sunshine Shirts. Final result is loss of goodwill and increased external failure cost. Inventory management: Basic inventory and storage problem at Sunshine Shirts stems from the fact that all kinds of products- work in progress or finished and even raw materials are stored at single location. Further, there is no tracking procedure to maintain the flow of raw materials and final products. Inventory management at the company is thus also adding enormous burden to the cost in terms of tracking lost or misplaced items and shipping the consignments. Recommendations Having looked at the problems faced by Sunshine Shirts, their respective sources and implications in terms of intensity and variety, recommendations are now being given to handle the situation. Though recommendations pertain to every single function and domain as discussed above, their implementation and feasibility depends on how quick and sure the relief received is. Recommendations to the problem of strategic planning To better the condition at Sunshine Shirts, it is recommended that first and foremost, the top management selects either cost or quality as its competitive focus. Seeing the external environment and market pattern, quality defeats cost in this case. Thus, solutions falling under strategic planning head will pertain to quality improvement. It is given in the case that there are around 100 employees at Sunshine Shirts, most of which are machine workers paid on an hourly basis. This suggests that there is lack of departmental planning and team work in the company. Thus, first step is to form departmental teams to look after specific processes and activities like marketing, quality management, inventory management, et cetera. To solve the problem of peeling ink and printing glitch, first of all the quality team should see who the supplier of printing inks is. The supplier has to be assessed in terms of cost, quality, conformance to standards and even delivery time. Alternatively, printing activity can be outsourced. To justify this action, table 2 is referred to. Given in the table, 2,309,000 units were printed at $0.40 per unit, amounting to $923, 600. Even after this huge cost expenditure, serious printing defects are found. Outsourcing to professional and expert printers will not only decrease the cost, but also improve upon the quality. Upon careful analysis of type of customer segments and expenses incurred on each, it is observed that during the year 2010/11, orders received for shop category were 57,909 while shipments made were just 49,286. Thus, 8,623 orders were either lost or misplaced. On the contrary, table 5 states that marketing and promotion undertakes 80% shop customers as its cost driver. Thus in a nutshell, total marketing expenses and advertising costs for shop category are much more than actual revenue realized. To combat it, tracking system has to be implemented instead of telephonic order placement. Also, giving away sample shirts for 824 shop customers is not a feasible marketing strategy. Recommendations to the problem of quality management To ensure high quality at Sunshine Shirts, quality checks have to be implemented at each level of manufacture. Till now, it is presumed and evident from the case details that inspection of completely manufactured shirts is done. It is now recommended that there should be a quality check made mandatory after each manufacturing activity. For example, basic stitching, adding on pockets, sleeves embroidered, double stitching on neck, et cetera. This step is imperative to ensure that not a single piece goes through the entire process of repairs once again after being found defective, thereby doubling the manufacturing time, labor cost and delaying delivery schedules. All this adds on to the prevention costs, appraisal costs and even external failure costs for the company (Shank & Govindarajan 1994). Making it more detailed, quality standards should be set for each level of manufacture and workers trained for that. Only standard setting will not help since workforce in the absence of training will not be able to understand the importance of standards and will keep on committing quality errors. Standards coupled with trained workforce will lead to lesser quality defects and inspections. This will ultimately result in increased production capacity, low complaints and timely deliveries. Once quality is high-class, premium pricing strategy can be adopted as customers would be willing to spare a few extra bucks for quality shirts made in their own country. Recommendations to the problem of inventory management Solving the problem of lesser space at Sunshine Shirts factories, primary help will be provided by order tracking system as suggested under strategic planning head. If orders are received in sequence and through some methodology, flow of goods will be sequential. Next would be to hire personnel to look after the flow of material and goods at manufacturing facility. Leasing a warehouse is not a feasible option right now as it is capital intensive. Once orders are properly labeled and personnel assigned to take care of orders by their delivery dates and customer type, problem of delays can be minimized. Recommendation for long term sustenance and expansion Solutions given above were specific in nature and were directed towards solving particular problems faced by Sunshine Shirts. For long term sustenance and increased revenues, the company should try to diversify into women shirts market. This will prove beneficial and profitable because sizes in this market do not vary much; mostly small or medium size. Thus, existing production capabilities can be utilized optimally to gain foothold in this market. Next solution for different marketing approaches to different customer segments is to go for unconventional marketing and promotion tactics. Till now, Sunshine Shirts relies in sales team, licensing agents and professionals. It should now try for sporting event sponsorships, partnerships with sports clubs and similar activities. This will not only be a mode of advertising for company’s products, but will also help in cutting extra sales and marketing costs. Reference Shank, J.K. & Govindarajan, V. (1994) “Measuring the “cost of quality”: a strategic cost management perspective”, Journal of Cost Management Summer: 5-17. Read More