You have recently joined BCC Consulting group as a senior partner (the highest role to which a professional can advance within the organisation). You have been informed that this role requires dedication, experience and passion and will provide you with many opportunities for growth and specialisation. As part of your responsibilities, you have been given several clients in which you are expected to provide solutions to their highlighted problems. You have been given a brief containing a description of the issues that you need to address.
QUESTION 1: WHEELED COACH (40 MARKS)
Controlling inventory is one of Wheeled Coach’s toughest problems. Operating according to a strategy of mass customization and responsiveness, management knows that success is dependent on tight inventory control. Anything else results in an inability to deliver promptly, chaos on the assembly line, and a huge inventory investment. Wheeled Coach finds that almost 50% of the cost of every ambulance it manufactures is purchased materials. A large proportion of that 50% is in chassis (purchased from Ford), aluminium (from Reynolds Metal), and plywood used for flooring and cabinetry construction (from local suppliers). Wheeled Coach tracks these inventory items quite carefully, maintaining tight security/control and ordering carefully to maximize quantity discounts while minimizing on-hand stock. Because of long lead times and scheduling needs at Reynolds, aluminium must be ordered as much as 8 months in advance. In a crowded ambulance industry in which it is the only giant, its 45 competitors do not have the purchasing power to draw the same discounts as Wheeled Coach. But this competitive cost advantage cannot be taken lightly, according to President Bob Collins, “cycle counting in our stockrooms is critical. No part can leave the locked stockrooms without appearing on a bill of materials.” Accurate bills of material (BOM) are a requirement if products are going to be built on time. Additionally, because of the custom nature of each vehicle, most orders are won only after a bidding process. Accurate BOMs are critical to cost estimation and the resulting bid. For these reasons, Collins was emphatic that Wheeled Coach maintain outstanding inventory control.
If you were to provide advice to the inventory control manager at Wheeled Coach about the inventory management policies and techniques that need to be initiated to ensure accurate inventory records, critically discuss the contents of your report and explain on how these should be implemented. (20)
One of the challenges that the organisation must constantly address is to ensure that there is a balance between demand and supply and that fluctuations are closely monitored and controlled. As a seasoned consultant, examine the various approaches that can be adopted by the organisation in managing and controlling these fluctuations. (20)
QUESTION 2: WHERE TO PLACE ROCO MAMA’S (60 MARKS)
Some people would say that Oliver Munday, Rocko Mama’s vice president for cafe development, has the best job in the world. Travel the world to pick a country for Rocko Mama’s next cafe, select a city, and find the ideal site. It’s true that selecting a site involves lots of incognito walking around, visiting nice restaurants, and drinking in bars. But that is not where Mr. Munday’s work begins, nor where it ends. At the front end, selecting the country and city first involves a great deal of research. At the back end, Munday not only picks the final site and negotiates the deal but then works with architects and planners and stays with the project through the opening and first year’s sales. Munday is currently looking heavily into global expansion in Europe, Latin America, and Asia. “We’ve got to look at political risk, currency, and social norms—how does our brand fit into the country,” he says. Once the country is selected, Munday focuses on the region and city. His research checklist is extensive, as seen in the Table 1.1.
Site location now tends to focus on the tremendous resurgence of “city centers,” where nightlife tends to concentrate. That’s what Munday selected in Moscow and Bogota, although in both locations he chose to find a local partner and franchise the operation. In these two political environments, “Rocko Mama’s wouldn’t dream of operating by ourselves,” says Munday. The location decision also is at least a 10- to 15-year commitment by Rocko Mama’s, which employs tools such as locational cost–volume analysis to help decide whether to purchase land and build, or to remodel an existing facility. Currently, Munday is considering four European cities for Rocko Mama’s next expansion. Although he could not provide the names, for competitive reasons, the following is known:
From the Table 1.1 provided rate the four European cities under consideration and determine which one should be selected by Oliver Munday. (10)
Of the three sites being considered by Rocko Mama’s, A, B and C at which to build its latest state of the art café. The goal is to locate at a minimum cost site, where cost is measured by the annual fixed plus variable costs of production. The fixed annualised costs per site are the following A: $10,000,000, B: $20,000,000 and C: $25,000,000. The variable cost per output produced are A: $2,500, B: $2,000 and C: $1,000. Rocko Mama’s has estimated that it will serve between 0 and 60 000 clients in the new facility per year. For what values of volume if any would site C be recommended? In addition, what volume indicates site A is optimal? Lastly, over what range of volume is site B optimal? (10)
Using relevant secondary data, examine the challenges that Rocko Mama’s can be exposed to because of expanding to international markets. Make use of relevant examples. (20)
Oliver Munday has developed the following supply, demand, cost and inventory data (provided below). He has requested you to allocate production capacity to meet demand at minimum cost using the transportation method. Determine the cost of the plan. Assuming the initial inventory has no holding cost in the first period and backorders are not permitted. Use the provided information to answer the questions. (20)
Regular-time cost per unit
Overtime cost per unit
Subcontract cost per unit
Carrying cost per month
Answers to Above Questions on Operations Management
Answer 1: Inventory management is a technical and complex process that requires specific knowledge and understanding about the inventory management process. There are different inventory management policies and techniques that need to be applied by an operation manager in managing the inventory in an efficient way. In the given case scenario of Wheeled Coach, it is evaluated that the inventory management has been a complex process for the management. To ensure effective management of inventory, the following techniques and policies are recommended to the management.
Get completed answers on the above questions on operations management as offered by the Student Life Saviour South Africa experts.
Content Removal Request
If you believe that the content above belongs to you, and you don’t want it to be published anymore, then request for its removal by filling the details below. It will only be removed if you can provide sufficient evidence of its ownership.