SCM 540 Operations and Supply Chain Management Assignment - Abu Dhabi University, UAE
Project - "Improving Operations and Supply Chain in Production/Service Systems"
Objective - The objective of this project is to identify a business problem related with operations and supply chain management and to suggest and explain a beneficial idea to solve that problem.
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Answer - "Improving Operations and Supply Chain in Production/Service Systems"
A. Problem Title
Minimizing the wastage of products
F. Organization where the problem is observed
Government
G. Problem Description
In recently published report, it has been observed that despite the fact that in peak season the need of products are enormous, a large quantity of products still were wasted. The amount of wastage and expired products even become higher at those seasons when the demands of products are particularly low. Several reasons are associated with the reason of the product wastage. After analyzing the annual report and some inventory calculations, it can be described that lack of proper cold storage spaces is the key reason behind this problem. Moreover, since they are unable at saving the products from being wasted even at seasons when the demand is very high, it clearly shows that the management does not have an effective sales strategy.
The overall wastage of different products is negatively affecting the organization. This situation is causing losses in the overall revenue generation as the company is spending more at the disposal system. Moreover, their cost per revenue structure has also been conflicted due to the high wastages. They also lose their valuable time while wasting their products. They need to take approvals from different governmental departments such as Administrative Department, Quality Department and many others, which generally take long time to process.
H. Your Solution to the Problem
After analyzing the stated problem in a brief and concise manner, it can be suggested for the governmental organization to follow 5 different steps that might help them to get rid of product wastage at certain level. They need to search for good and effective cold storage by issuing tenders so that they can store a huge amount of products at their peak season. Additionally, their operational manager can also use FIFO (First In First Out) method for boosting their overall plan regarding effective selling process.
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Step 1- FIFO system is needed to be implemented that might be extremely helpful towards picking up the right products at the time of transferring at the cold storage. The Managers are responsible for implementing FIFO.
Step 2- Code numbers are needed to be attached with product list in order to assess which products are needed to be send at the cold storage at the first stage. The warehouse Workers are genuinely responsible for labeling the entire products with different identifiable code numbers.
Step 3- The next step is to link the consumer orders with product codes so that they can easily arrange products that are needed to be transferred at the cold storage. The Warehouse manager administrator is responsible for this for transference in the cold storage process.
Step 4- A separate department is needed to be implemented by the government organization for observing the overall incidents that are causing the wastage and product expiry problem, which will also examine the overall system of FIFO that will be extremely valuable for transferring products towards the cold storage. The operations manager of the organization is responsible for the particular step.
Step 5- Two different tenders are needed to be issued for solving the problem that is related with storing different products. The first tender be provide appropriate cold storage for storing products and he second tender will provide the transportation system. Bids will be conducted for selecting the two vendors. The operations manager is responsible for conducting the bid.
Step 6- After signing the contract with vendors, the government organization is need maintain a set of different plans. The objective is to maximize the usage of the newly rented cold storage and transportation facility and operation managers specifies the quantity of product and the actual date of product transfer towards both the transportation provider and the cold storage providers. The operations manager of the organization will be responsible for this.
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Date
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Start Time
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Arrival time
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Total required time
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Quantity/vehicle
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Overall status
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25th May, 2019
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8.00 AM
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1.00 PM
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5 hours
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5ton
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Good
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Starting Location
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Warehouse
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Destination
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Production department
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Step 7- Transport manager need to execute some tracking process for the vehicles that transport in order to specify the time of picking products from the warehouse or production unit of the government organization and to analyze how much time is required for transferring the products towards the cold storage.
Step 8- After successfully transferring the extra products towards the warehouse for saving them from being expired or wasted, the specialized committee members of that government organization need to visit the cold storage for control the product recall functions so that they can detect any kind of defect at the time of transporting products.
Step 9- In the last step, they need to make such a system that is helpful at identifying the old products in effective ways. In order to do so, they need to place older products in front of newer products so that they can minimize the number of wastage at certain extension. The specialized team of managers will be responsible for this step.
I. Performance Metrics
1. To decrease the overall wasted product by at least 30 %
J. Amount of Improvement
The overall improvement plan is going to reduce the overall cost of wastage products by AED 3000.
In addition to that, I am also expecting some other areas of improvement also. As an instance, I think that the overall control regarding finished products can also be improved radically. Moreover, the organization will also be able to make a good relationship with warehouse and transportation provider. In addition to that, the wastage of time can also be minimized through the help of this improvement method. Lastly, the overall sales might also be increased.
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K. Justification for the Estimate
Since the main objective of the study is to maximize revenue generation by minimizing the number of overall waste, it is essential for the governmental organization to make an estimation calculation so that they can remain relevant at their current market sector.
Before the overall improv30ement
Total cost of wasted product- AED/year= 720,000 (20,000 kg waste/year * 30 AED/kg)
After the overall improvement plan
After the improvement plan, similar amount of improvement can be observed:
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Steps
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% of benefit
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Step 1
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2
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Step 2
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4
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Step 3
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3
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Step 4
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2
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Step 5
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9
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Step 6
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3
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Step 7
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1
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Step 8
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2
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Step 9
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4
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Total= 30%
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Since the total number cost of minimized products can be minimized up to 65%, the total amount of waste will be:
0.35*20,000 kg= 7,000 kg.
Total cost of wasted product- AED/year= 140,000 (7,000 kg waste/year*10 AED/kg)
As per the calculation, the overall cost of wasted products can be minimized up to 65%, which is enormous. However, the transportation cost is also needed to be taken into consideration at the time of calculating the cost of wasted product. The rental cost is also needed to be justified.
Total transportation cost
AED 300/trip and 2 trips every day, which means 2*10= AED 200/day. Total of 15 days are required to transfer the products. Therefore, the cost will be AED 200*15= AED 3000
Total rental cost
It requires AED 3000/day and 60 days worth of rent. Therefore, the overall cost of renting is 18000.
Consequently, it can be described that after the improvement plan the overall cost is (252,000+90,000+9,000)= 351,000
Therefore, the overall improvement is
((720,000-239,000)/720,000)= 65%
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Before improvement
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After Improvement
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Improvement %
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(720,000)
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(140,000+90,000+9,000)= 239,000
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65%
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Therefore, it can be easily described that this project is being successful at mitigating the overall and actual performance matrices.
Therefore, the overall improvement will be 65%.
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