Production and Operations Management

Production and Operations ManagementOrder Description1. DO NOT TRY TO ?SOLVE? THE CASE2. This essay should be an ?argumentativeessayObjectivesThis assessment task relates to course learning outcomes numbers 1 to 3.Before starting this assessment read the marking criteria (below) and information about academicessay writing on the Academic Learning Centre (ALC) website: (Choose the ?Academic Communication?door.)The course website also provides useful information in regard to the development of this assessmentitem. In particular, you must read the Assignment Writing Requirements document at: document outlines course specific assignment requirements in some detail.PurposeThe primary purpose of this assessment task is to help students develop skills in the use of OperationsManagement principles, theories and models in the analysis of the current operations of amanufacturing enterprise. The assignment requires you to analyse the current situation. The objectiveis to identify and specify the problems that exist ? DO NOT TRY TO ?SOLVE? THE CASE.The secondary purpose of this assignment is to give students the opportunity further develop analysisand problem identification skills, as well as generic academic research and writing skills within theframework of a formal essay.DescriptionAssessment task 1 requires the writing of an academic essay. This essay should be an ?argumentativeessay?, and must therefore contain an argument that is used as the structuring element of the paper.The assignment is based on a short case study that describes a manufacturing organisation that is goingthrough a process of growth and change. The purpose of the essay is to identify the operational issueswithin the case, and to identify root causes of the problems that are evident. Students are expected toengage in extensive research within the academic literature relating to operations management. Someresearch into the industry of interest would also be beneficial.DetailsThe assessment item is based on the case study titled Engineered Extraction Systems Australia PtyLtd (a fictitious company). The case itself, and assignment requirements should be accessed throughthe course website. You should read, and carefully analyse, the case and respond to the issuespresented at the end of the case study within the context of an academic essay.MGMT19126 2 Term 1, 2015Case study: Engineered Extraction Systems AustraliaEngineered Extraction Systems Australia Pty Ltd designs and manufactures custom-made highperformance automotive exhaust extraction systems for the Australian motor racing industry and theautomotive after-market. The business was established in Adelaide by two part-time motor-racingdrivers in 1997. Silvio De Luca was an automotive mechanic by trade and Andy Hamilton was amechanical engineer. The business operated originally in Port Adelaide, but relocated to Elizabeth in2010. Whilst the move created some marketing issues, the new premises were much larger than the oldfactory in Port Adelaide, and the rent was a lot cheaper. The new premises gave the firm much neededroom to grow. The relocation put the company in the heart of the Adelaide automotive industry.The company was originally a part-time venture created to supply specialty exhaust extraction systemsto the motor racing industry, specifically, the Supercar V8 circuit. But as Engineered Extraction?sreputation grew, more and more demand came from other sectors of motor racing as well as privatemotorists seeking to improve the performance of their street cars. Whilst originally specialising incustom V8 exhaust systems for Holdens and Fords for V8 Supercars racing, Engineered Extractionquickly developed the expertise to design and manufacture systems for several of the more popularmakes and models of car common to motor racing in Australia. This ability to meet a diverse range ofmarket demands helped to create a solid company that quickly became a full-time operation. Nowdays, Engineered Extraction is a well-respected supplier to the motor racing industry, as well as asupplier to the performance street car sections of the automotive after-market.Traditionally, the company had focussed entirely on custom-built systems; each being specificallytailored to the engine in question. This process involved fitting, calibration and tuning of the systemindividually to each engine. But as the company?s reputation grew, more and more requests werereceived for high performance systems that could be bought off the shelf. Individual fitting and tuningwas an expensive process and many potential customers were put off by the cost. Customers knew thatthey could buy off-the-shelf systems from other manufacturers, but the Engineered Extraction brandwas very attractive to many performance motoring enthusiasts.Seeing an opportunity for expansion, in 2008 Silvio and Andy started manufacturing a few systems tostock to meet this small but growing demand. Initially, this production was limited to the two mainsystems (Holden and Ford), and only occurred when the work schedule permitted. The move into offthe-shelf products resulted in Engineered Extraction producing a more standardised line ofperformance extractors and exhaust systems. These systems were not specifically tuned to the enginein question, and were designed to fit standard production cars. Whilst they were still high performancesystems, their performance was slightly inferior to that of the custom-made extractors that werecarefully tuned to the engine in question. Customers were more than happy to trade-off a small drop inperformance for a substantial saving in the purchase price. These customers appreciated the brandvalue offered by Engineered Extraction but expected good value for money. Silvio and Andy felthowever that the off-the-shelf products should reflect the same quality of engineering as the customsystems that sold for a great deal more, and attracted a much healthier profit margin. Notwithstandingthe increasing demand for off-the-shelf product, the custom-designed and made systems continued todominate the company?s sales.Engineered Extraction operates a single manufacturing facility in Elizabeth, where both custom-madeand off-the-shelf systems are manufactured. The high-tech engineering equipment used to manufacturethe systems is mainly general purpose in nature in order to provide the flexibility needed for producingcustom systems. The factory layout grouped tube cutters together in one section of the facility, tubebenders in another, a swaging and flaring section, a separate welding section, and so on. The machineshop that produced header and exhaust flanges and other machined components was housed in its owninternal section, well away from the hustle and bustle of the assembly areas. The facility also has threedyno-equipped service bays that facilitate the tuning and fitting of custom systems. The majority ofthe staff are highly skilled tradespeople who take pride in the quality of design and the quality ofmanufacture of their products. Both the custom and the off-the-shelf systems compete for processingtime on the same equipment by the same tradespeople using the same processes and procedures.A few months ago the firm was approached by Hotrod Performance; a national car parts distributorspecialising in the supply of high performance automotive components to both motor racingMGMT19126 3 Term 1, 2015enthusiasts and the general public. Hotrod Performance was seeking supply of a limited range of highperformance exhaust systems for the 5.0L Ford ?Boss 302? SVO and the 5.0L Chevrolet small blockracing engines (the same basic engines used in the V8 Supercars). After due consideration and carefulanalysis, Engineered Extraction entered into an agreement with Hotrod Performance that required aninitial stocking of the supply chain, and regular replenishment of stocks in line with sales. The HotrodPerformance estimated demand to be regular but of low volume. The initial stock requirement of 200units of each system was met by scheduling overtime production across several weekends. Retailpricing was expected to be the same as the off-the-shelf systems sold by Engineered Extraction, butwith a small premium to cover distribution costs. Even though the wholesale price received fromHotrod Performance was substantially less than their own retail price, the gross profit margin on theproducts was still quite viable, and represented not only an increase in revenue, but also an increase innet profit.The Hotrod Performance sales forecasts suggested that the day-to-day demands for stockreplenishment could be met during normal production time augmented with some occasional overtime.Overtime costs were factored into the modelling based on Hotrod Performance demand forecasts. Inan effort to increase efficiency, it was decided to produce the standardised systems in small batches oftwo to five systems. This would reduce machine setup time and allow for faster assembly. Silvio andAndy were confident that these arrangements would ensure that the new contract would not disruptoperations whilst providing a useful new income stream.During the past few months however, sales of performance systems through Hotrod Performancesteadily increased, leading to more regular scheduling of this line of products. To achieve someeconomy of scale, off-the-shelf systems were often produced in small batches of two to five systems.However, when scheduling trade-offs had to be made, the custom-made systems were always givenpriority because of the higher profit margins these products attracted or because of the urgency of thejob. Thus scheduled lots of components for the Hotrod Performance systems were often left sittingaround the factory in various stages of completion. Occasional stock-outs were also occurring withEngineered Extraction?s own over-the-counter systems but as a rule, the Hotrod Performancerequirements were always met on time. The overall increase in demand had however, created anincrease in the level of raw material stocks as well as purchased components such as catalyticconverters and mufflers.As the owners reviewed the progress of Engineered Extraction, both Silvio and Andy were pleased tonote that the company was growing. Sales of custom-made systems remain strong, and sales of madeto stock systems were steadily increasing. Currently the custom systems were accounting for 60percent of the production volume and 75 percent of the revenue. However, Amanda Singh, thecompany accountant, had recently indicated that profits were not what had been forecast. Amanda?slatest financial report recommended that manufacturing costs be reviewed as gross profit was slipping.Costs associated with the off-the-shelf and Hotrod Performance systems were rising. Money was beingtied up in increased inventory; raw materials, components, work in process and finished product.Expensive nearby warehouse space has been rented to accommodate the growing inventory volume.Silvio was also concerned with increased lead times for both custom and Hotrod Performance orders.It was becoming more and more difficult to meet promised delivery times. Stock-outs had alsooccurred with their own off-the-shelf retail products. Capacity was being pushed, and with the currentlayout, no space was available in the plant for expansion. Andy was worried that it was gettingincreasingly difficult to meet the demand created by their new contract with Hotrod Performance anddecided that the time had come to take a careful look at the overall impact this increased demand forexhaust systems was having on operations.MGMT19126 4 Term 1, 2015TaskWrite an essay Discuss (check for the help you need)ing the operational issues facing Engineered Extraction Systems Australia. Theessay should identify and Discuss (check for the help you need) the operational aspects that are affecting the organisation, payingattention where appropriate to any strategic implications. The essay should Discuss (check for the help you need) the followingissues with responses integrated within the essay.? Current production processes used by Engineered Extraction Systems Australia (technicalanalysis).? The effect of the new contract with Hotrod Performance on Engineered Extraction SystemsAustralia?s operations (problem identification and specification).? The daily operational decisions required under current operating conditions for the company?soperations to run effectively (day-to-day operational issues).? The effect that the move to producing off-the-shelf systems may have had on the company?sfinancial structure1 (broader organisational issues caused by operational problems).It should be noted that the situation at Engineered Extraction Systems Australia is typical of growingbusinesses, and it is not a major disaster situation. The company is sound, but there are issues thatneed to be addressed fairly quickly. The purpose of this analysis is to work out what those operationalissues are.Your essay should be a properly constructed academic essay. It should contain an effectiveintroduction, body, and conclusion. The introduction should introduce the essay and include yourargument (based on your root cause analysis). The body should present the evidence you havecollected to support your argument, and the conclusion should restate your argument, summarisethe evidence and make a conclusion regarding your argument.The essay should contain a coherent, but necessarily restricted review of the academic literature on theProduction and Operations Management topic in question. The literature review should be integratedinto the essay, not a separate section. Advice regarding formatting of the essay can be found on theAcademic Learning Centre website. Do not use headings or include an abstract. A reference list iscompulsory. Do not include a bibliography.This assessment item involves researching your assigned topic to enhance your understanding ofProduction and Operations Management (POM) concepts and utilisation of academic literature.AVOID using only textbooks, but the prescribed textbook for the course must be cited in regard tobroad operations management principles highlighted by the case. You are expected to presentinformation and evidence from, and cite, at LEAST eight (8) relevant peer-reviewed, academicjournal articles (eight relevant and well applied academic articles will gain a pass mark for thiscriterion ? 8/15). Refer to the recommended readings for examples of academic journals. While youcan cite these you must find eight (8) journal articles not listed in the course materials. Yourcitations will show the breadth of the literature used to answer the questions. Your marker isinterested in the analysis that you have developed from YOUR review of the literature and how wellyou use the literature to respond to the topic.1 ?Financial Structure? is a specific term relating mainly to balance sheet items in a company?s finances, particularly the way thefirm is financed. If you do not understand this term, you will need to research its meaning.MGMT19126 5 Term 1, 2015Category: essay

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