CASE ANALYSIS

Farmers Restaurant

Sarah Lubbers and Chris Rusche

Farmers Restaurant is a full service restaurant offering a variety of breakfast, lunch, and dinner

items. Currently, Kristin Davis is the general manager for the Farmers Restaurant located in the Grand

Rapids/Wyoming metro area of Michigan. Since becoming manager, Kristin has faced some difficulties

with ordering the amounts of food items for the restaurant. Because of this, there are some weeks the

restaurant has a surplus of menu items that are no longer fresh, and must be discarded. At other times, the

restaurant has experienced shortages of some items. The fact that inventory accounts for an average cost

of 26% of the restaurant‘s total revenues underscores the importance of managing inventory. Kristin

would like to find a way to ensure that she is maintaining the proper amount of inventory. Customer

counts at Kristin‘s greatest focuses are to current customers and attract new customers. She believes that a

key aspect of this is having all of the items on the menu in stock.

The restaurant industry is competitive. In the Grand Rapids/Wyoming metro area alone there are

over 1,600 restaurants. Some of Farmers Restaurant‘s most serious competitors are IHOP, Applebee‘s,

and Big Boy, all of which are located within 20 miles of the Farmers Restaurant, so customers have many

alternatives from which to choose.

Online inventory systems are used to assist restaurant managers in determining on-hand inventory

and gauging how well the restaurant is controlling food costs. The fiscal week for Farmers Restaurant

starts on Thursday and ends on the Wednesday of the following week. Each Wednesday, the manager

physically counts the inventory on hand and enters the data into the online inventory system. The

computer software system then compares the on-hand inventory for that week, the amount of food

ordered, and the inventory on hand for the end of the previous week with the sales for the current week.

By doing so, it is able to determine a total food cost. The manager compares this cost with the benchmark

cost to see how well the restaurant has been managing inventory. This is one of the most important
CASE ANALYSIS
numbers to managers at the Farmers Restaurant for approximately 30% of total cost in terms of a store‘s

cost structure.

The computer software system also compares the total cost of food on hand with the total amount

of sales for that week and computes a percentage of on-hand inventories. As a guideline, the company has

set a standard of having 29% and 36% for its on-hand inventory level. The company feels that this level of

inventory is an appropriate average to ensure quality food that is fresh and within expiration. Lastly, it is

better to keep the inventory at a minimum level to ensure the accuracy and ease of inventory counts.

The Farmers Restaurant Kristin manages has been running above average in terms of food costs.

For this reason, her boss has become concerned with the performance of the ordering system she is using

at her restaurant. Kristin has been using her intuition to decide how much product to order despite the fact

that the product order sheets provides a moving average usage of each product. Kristin bases her

inventory management on her intuition because she does not understand how to utilize the moving

average forecasting technique when placing orders. An additional complication with ordering inventory is

that each item is packed in multiple quantities, so she cannot order the exact amount that she needs. Her

boss requested that she create a more accurate way of ordering food and to report back to him in one

month. Kristin is worried that if she cuts inventory levels too low she will run out of products which may

result in a decrease in customer counts.

After Kristin met with her boss, she began to think about what changes she could make. She

knows that inventory has been a weak point for her, but she remembers one of her employees talking

about inventory management from one of his college courses. Kristin decides to ask the employee if he

would be willing to help her try and come up with a better way for her to order products. Kristin tells him

how the ordering system works, shows him the ordering form, and relates the above information.

Suppose you have been asked to work with Kristin to improve inventory ordering.
CASE ANALYSIS
Questions:

1. Describe the importance of inventory management as it relates to the Farmers Restaurant.

2. What ordering system would be best for this situation?

3. Given the following information, provide an example of how much of Farmers Sausage Gravy

Mix should be ordered. You are doing the order for Thursday. Also, Kristen would like a service

level of 95%, and you have found that there is a standard deviation of 3.5 units per week, and a

moving average weekly demand of 35 servings. The gravy mix comes in packs of two servings.

There are currently three packs in inventory.

4. Given the above information and an on-hand inventory of 12, determine the risk of stock out at the

end of the second lead time.

5. The supplier Kristen uses is located in Ohio. Why might Kristen consider dealing with a nearby

supplier instead of the one in Ohio? What reasons might there be for not switching suppliers?

CHAPTER I

Time Context

Farmers Restaurant is a full service restaurant which means they must have an effective

management with their inventories in order to serve their customers right. The ordering process is reliant

on the stocks needed by the restaurant in order to cook the food in their menus.

In this case, the problem occurs when Kirsten Davis, the manager, encounters problems in

ordering their inventories. She does not enough experience in inventory management such as forecasting,

ordering process, etc. that leads to problems. It affected a lot of aspects in the business. It affected their

servings to their customers because when they experience shortage they will not able to give the orders
CASE ANALYSIS
while there are times they experience surplus that is why they have lots of excess. It also has a bearing on

their revenue since ordering inventories involve expenses.

In this line of business, the manager must be good in forecasting and must monitor the stocks they

needed to maximize the order costs and carrying costs as well as maintain that they have always enough

goods to serve the dishes on their menus. The must control the variations of demands and know how to

adjust with it.

Chapter II

Viewpoint (Manager)

Just like any investment in business, inventory needs to serve the purpose of maximizing profit.

However, in many cases inventory has turned into a major cash flow constraint thus making it necessary

to optimize inventory using analytical and statistical methods in an integrated approach. One of the

biggest challenges in optimizing inventory is the fact that it is merely an output of many inter-

organizational processes. All too often organizations attempt to lower inventory using non-analytical

approaches which lower service levels.

Farmers Restaurant is one of the restaurants in Grand Rapids/Wyoming metro area. The business

is involved in food services. In this case, they must ensure that the foods are fresh, avoid left-overs and

spoilage. Therefore they must use an effective system for the inventory management. Also, since there are

so many competitors, the restaurant must make sure that they are satisfying the customers so that their

regulars will increase and still patronize the restaurant.

The restaurant is facing problems regarding with the inventories and it affected a lot the business

in terms of maximizing the profit, increasing the number of customers and the improvement of the

business.
CASE ANALYSIS
As a manager, Kirsten must do perform her duties since she is in the one in charge with this. She

must know how to deal with problems such as forecasting the amount to be ordered, the right time

intervals, adjustments when there are unexpected problems and lastly maintain that everything is properly

and simultaneously working.

CHAPTER III

Statement of Problem

Running a food service operation is not that easy compared to other business. Since it involves food,

they must maintain an effective management in order to maintain a good service. In this case study,

Farmers Restaurant is facing the following problems:

1. the main causes why they are encountering difficulties regarding the ordering of inventory of the

restaurant from its suppliers

2. the utmost solution for Farmer‘s Restaurant in order to uphold accurate stocks of inventory and

avoid the occurrence of surplus or shortage

3. the consequences to the restaurant as a whole of the problems mentioned

4. how would the restaurant implement its alternative plan of action in inventory management to

make sure of its attainment

Further analysis, these are other problems that Farmers Restaurant must resolve:

 The manager does not have enough knowledge in the system used by the business.

 In relation to second problem states, ordering of products is not well-managed. There are times

their stocks are in surplus at other times they are short. In result, when there‘s surplus there‘s a

problem in storing the food and when they have shortage, there is a decrease in their customers.

 The supplier is in Ohio, which means they have larger ordering costs. (in relation to Problem #5)
CASE ANALYSIS
CHAPTER IV

Objectives

Inadequate control of inventories can result in both under- and overstocking. To resolve the

complications in the business here are the intents to be met:

 Implementation of appropriate inventory management models to minimize cost given various real

world conditions in the supply chain

 Determination of inventory levels using economic and statistical methods in an integrated

approach.

 Revision of the planning process to support the order fulfilment process

 Training of manager to determine the appropriateness of forecast models

 To achieve satisfactory levels of customer service while keeping inventory costs within reasonable

bounds. (Includes increasing service level, reduce carrying and order costs, increasing sales &

profit, etc.)

 To maximize the profit of the company by fixing their inventory systems.

 To implement new strategies that could help to increase the number of customers.

CHAPTER V

Areas of Consideration / Analysis

In this case analysis, it involves significant details that show the problems faced by the restaurant.

These are the ensuing facts in the case study:

“Since becoming manager, Kristin has faced some difficulties with ordering the amounts of food

items for the restaurant. Because of this, there are some weeks the restaurant has a surplus of menu items
CASE ANALYSIS
that are no longer fresh, and must be discarded. At other times, the restaurant has experienced shortages

of some items.‖

This summarizes the main problem of this case. This is the origin why the restaurant is facing

difficulties in the business. Stevenson said, ―Poor inventory management hampers operations, diminishes

customer satisfaction and increases operating costs.‖ Since the restaurant is a food service, they must

have an effective inventory management so that they could maintain freshness of their food as well as

sustain that they have stocks for them to serve all the orders in their menu. They must have a good plan in

order to upkeep the completion procedure in ordering their goods. They must consider a lot of factors

such inventory levels, costs, etc. that has a bearing on the business operation.

“Kristin has been using her intuition to decide how much product to order despite the fact that the

product order sheets provides a moving average usage of each product. Kristin bases her inventory

management on her intuition because she does not understand how to utilize the moving average

forecasting technique when placing orders. An additional complication with ordering inventory is that

each item is packed in multiple quantities, so she cannot order the exact amount that she needs.”

The manager does not have enough knowledge in managing the inventories. Instead of using the

proper system of making orders, she is using her intuitions. Because of these, the restaurant is having

surplus that causes spoilage of food and at other times, shortage that decreases their customers. Since the

manager does not enough knowledge in inventory management, forecasting of how much and what to

order becomes a problem. A forecast must be based on facts in order to meet the objectives. If the

manager will not make a good forecast, they will encounter problems regarding their inventory that could

lead to excess or unavailability of goods that could result to waste, shortage etc. and this could affect the

cost that will decrease the restaurant‘s revenue.

“Online inventory systems are used to assist restaurant managers in determining on-hand

inventory and gauging how well the restaurant is controlling food costs. The fiscal week for Farmers
CASE ANALYSIS
Restaurant starts on Thursday and ends on the Wednesday of the following week. Each Wednesday, the

manager physically counts the inventory on hand and enters the data into the online inventory system.”

This stated the lead time used by the company. Intervals are important in making an order

especially in this type of business. This is one point to be considered in improving the inventory system to

be used. Also, they are using periodic system in order to reconcile what is recorded on the files and the

actual number of the stocks. This must be monitor properly because this will help on controlling supplies

to be ordered and meets the demands needed.

“The fact that inventory accounts for an average cost of 26% of the restaurant‟s total revenues

underscores the importance of managing inventory.”

Costs are also important in making orders. They must minimize these costs so that i will maximize

the profits. In connection to this, the restaurant must look for a system that is appropriate for this type

of business.

CHAPTER VI

Alternative Course of Action

In order to have an effective management, a) there must be a system to keep of the inventory on

hand and on order, b) a reliable forecast of demand that includes an indication of possible forecast error,

c) knowledge of lead times and lead time variability, d) reasonable estimates of inventory holding costs,

ordering costs, and shortage cost and e) a classification system for inventory items. To meet these factors

to be considered these are some alternative solutions.

There are two types of ordering system (how much to order): Single-Period Model and Fixed-

Order-Interval Model (Stevenson 2007).

Solution A: Single Period Model

CASE ANALYSIS
The single-period model is used in ordering perishables, such as food and flowers, and items with

a limited life, such as newspapers. Unsold or unused goods are not typically carried over from one period

to another and there may even be some disposal costs involved. This model tries to balance the cost of

lost customer goodwill and opportunity cost that is incurred from not having enough inventories, with the

cost of having excess inventory left at the end of a period.

Solution B: Fixed-Order-Interval Model

The fixed-order-interval model is used when orders have to be placed at fixed time intervals such

as weekly, biweekly, or monthly. The lot size is dependent upon how much inventory is needed from the

time of order until the next order must be placed (order cycle). This system requires periodic checks of

inventory levels and is used by many retail firms such as drug stores and small grocery stores.

Moreover, aside from choosing alternative systems, they must also consider the understanding of

the manager and other employees to undergo trainings for them to manage and understand well the

business operation and be always ready for whatever unexpected problems that may come.

CHAPTERVII

Recommendation

Inventory management, or inventory control, is an attempt to balance inventory needs and

requirements with the need to minimize costs resulting from obtaining and holding inventory. So, among

the alternative solutions given, Solution A: Single Period Model is the best solution for Farmers

Restaurant. Evaluating the advantages and disadvantages of the given solutions, single period model is
CASE ANALYSIS
appropriate since the business is involved in food services. The nature of goods is also considered. If the

company uses the Fixed-order-interval (FOI) method, it cannot checked dependably for spoilages and

stock outs, since the nature of the model does not correct constantly on the totalling of inventory of the

goods. Contrasting with the single-period model, there is a proper distribution for shortage costs which

happened as a problem in the case due to a high demand, and for spoilage costs which happened when a

large number of goods are left unused and as a result, becomes expired.

Aside from the fact that this model is suitable for business with perishable goods, its goal is to

ascertain the order quantity or stocking level that will reduce the long-run excess and shortage costs.

Analysis on this model generally focuses on shortage costs and excess. Shortage cost may include a

charge for loss of customer goodwill as well as the opportunity cost of lost sales. It is simply unrealized

profit per unit. On the other hand, excess costs pertain to items left over at the end of the period. This

model tries to balance the cost of lost customer goodwill and opportunity cost that is incurred from not

having enough inventories, with the cost of having excess inventory left at the end of a period.

CHAPTER VIII

Conclusion / Detailed Action

Based on the given facts in the problems and having analysis about the situation of the business,

Farmers Restaurant must implement the Single Period Model. Kirsten as well as her subordinates must

undergo training regarding the model, for them to be able to know the procedures in using this kind of

model. The business must improve the system they are using in order to solve problems they are facing.

PROCESS IMPROVEMENTS:

 Single Period Model must be implemented in ordering inventories of the restaurants.

CASE ANALYSIS
 Employees must still regularly reconcile physical and book stocks using the periodic

inventory system.

 Good forecasting of the inventories needed based on the product order sheets which

provide a moving average usage of each product. Computing the forecast using

consolidated orders.

 Using statistical method under Single Period Model such as Continuous stocking level and

discrete stocking levels.

 Demand planning is made periodically.

CASE ANALYSIS
Hi-Ho Yo Yo, Inc.

It was a little 9:00 on a Monday morning when Jeff Baker walked into your office with a box of donuts.

―I‘ve been talking with Anne about a problem we have with short-term capacity in our pad printing

operations. You know, that‘s where we print our logo on the Custom lines of yo-yos. We have received

more orders to pad printing in a way that will enable us to meet out due date commitments in the best way

possible. Would you have time to look on the order list (attached) and see what kind of schedule we

should follow to do that? By the way, you have established quite a reputation in your short stay here. You

have a talent for really explaining why your recommendations are the best approach in a way that all of us

―over-the-hill‖ managers can understand. Please be sure to do that for me too. I want to understand why

your recommendation is the best schedule and what the trade-offs are for other possible schedules – and

none of that philosophical college mumbo-jumbo. Remember, I came up through the ranks. I don‘t have

one of those sheepskins on my wall,‖ he says with a laugh.

Since the schedule was back to normal after that MRP (Material requirements planning) report you did

for Anne, you agreed to look at the information. After that compliment, how could you say no? ―Try to

get back to me within a couple of days,‖ Jeff said as he left your office.

After a few minutes with your old operations management text, you call the production control office to

confirm the pad printing schedule. They confirm that pad printing runs one eight-hour shift per day. They

tell you that due to a make-up day for flooding in June, pad printing will be running 23 days in July,

beginning Friday, July 1 (they will work three Saturdays on July 9, 16, and 23, and take a one-day holiday

for July 4). You thank them for the information and then you begin to develop your plan.

Even though Jeff lacks a college degree, from what you have seen, he is very sharp. And obviously he

knows good work when he sees it since he liked, and apparently understood, your past work. You resolve

to cover all the bases but in a way that it as clear as possible.

CASE ANALYSIS
PAD PRINTING ORDER LIST

Job Date Order Set-up Time Production Time Due Date

Received

A 6/4 2 hrs 6 days 11 July

B 6/7 4 hrs 2 days 8 July

C 6/12 2 hrs 8 days 25 July

D 6/14 4 hrs 3 days 19 July

E 6/15 4 hrs 9 days 29 July

Note: Setup time is to set up the pad printer at the start of the job. Setup includes thoroughly cleaning the

printing heads and ink reservoirs, installing the new pad(s) and ink supply, and carefully aligning the

machine. Setup at the beginning of a new day with the same job is insignificant.

Examine the following rules and write a report to Jeff Baker summarizing your findings and advise him

on which rule to use. Rules: FCFS, SPT, DD and CR.

CASE ANALYSIS
CHAPTER I

Time Context

Hi-Ho YoYo, Incorporation is an organization that customizes logos for yoyos. Currently they are

beginning to see an issue with rising orders and they wish to continue to meet there order process

deadlines. These are ordered on June but then they will only start on July due to a make-up day for

flooding. So Mr. Jeff asked for what is the scheduling to be followed in order to meet the constraints.

Several rules will be evaluated in order to determine the best method of inventory scheduling. The four

rules to evaluate are: First Come, First Serve (FCFS), Shortest Processing Time (SPT), Earliest Due Date

(DD), and Critical Ratio (CR) methods.

CHAPTER II

Viewpoint

Job sequencing is an important task to determine, because it is either going to slow down the

production process or speed it up. An Operations Manager should determine the best method based off the

needs of the organization, which in this case will require that all jobs are completed prior to their due

dates. In this sense, having a job done before the due date is a priority rule of the organization. According

to the book, Operations Management, ―Priority rules are simple heuristics used to select the order in

which the jobs will be processed.‖ (Stevenson) Job processing times and due dates are very important

pieces of information when applying these rules. If the sequencing rule takes in account when applying

theses similar setups to other jobs, then this setup will lead to reduced setup times, which will save the

organization time and money. Being able to control time, as far as controlling overtime within the

production plant, will go far in enabling an organization to save by eliminating overtime paid to

employees. Not to mention the customers will be satisfied to receive a product on schedule as well.
CASE ANALYSIS
CHAPTER III

Statement of the Problem

Sequencing is concerned with determining the order in which jobs are processed. Not only must

the order be determined for processing jobs at work centres but also for work processed at individual

work stations. When work centres are heavily loaded and lengthy jobs are involved, the situation can

become complicated. In this case study, the main problem needed to address is how to meet the

constraints such as due dates, delays, etc. and to satisfy the clients‘ wants despite of the increasing orders.

The company experienced a delay due to a make-up day for flooding in the month of June which moves

the production date of the order to July. In the month of July, it is stated in the given case that there are 3

Saturdays (July 9, 16 and 23) that the labours will continue working and they will have a holiday (July 4)

aside from the weekends. So given the constraints, how will be the operation manager will choose the best

scheduling on the given methods (First Come, First Serve (FCFS), Shortest Processing Time (SPT),

Earliest Due Date (DD), and Critical Ratio (CR) methods). In addition, Mr Jeff also wants to have an

understanding about the scheduling methods to be used in order for him to understand the process.

CHAPTER IV

Objectives

Job sequencing rules are used to determine the priority for processing jobs. They are applied to

tackle scheduling problems that generally lead to inefficient performance in processing job orders. Of

central importance is job flow time, which is the amount of time a job spends in a shop from order

placement to its completion and release. The average turnaround time on job orders is its mean job flow

time, which is one way of measuring a job shop's performance. The main objective in this case study is to

find the best rule to be followed in order to solve the existing problem. The following are the other

objectives to be met:

 Defining the order in which jobs at a work centre will be administered.

CASE ANALYSIS
 Sequencing decision to be made in order to meet all the due dates and satisfy the needs of the

clients.

 Educating staff in order to give then understanding about choosing the best schedule to be made.

 Meeting due dates of customers or downstream operations.

 Minimalizing the flow time (the time a job spends in the process).

 Reducing work-in-process inventory.

 Lessening idle time of machines or workers.

CHAPTER V

Areas of Consideration/Analysis

Scheduling relates to establishing both the timing and use of resources within an organization.

Under the operations function, scheduling relates to use of equipment and facilities, the scheduling of

human activities, and receipt of materials. In this case, there are facts given that will help in order to end

up into a decision of what method to be used.

“I‟ve been talking with Anne about a problem we have with short-term capacity in our pad

printing operations. You know, that‟s where we print our logo on the Custom lines of yo-yos. We have

received more orders to pad printing in a way that will enable us to meet out due date commitments in the

best way possible. Would you have time to look on the order list (attached) and see what kind of schedule

we should follow to do that?”

In the paragraph above, it was clearly stated the problem of the Hi-ho Yoyo Incorporation. Their

orders are increasing and they must find a way in order to meet due dates.

“After a few minutes with your old operations management text, you call the production control

office to confirm the pad printing schedule. They confirm that pad printing runs one eight-hour shift per

day. They tell you that due to a make-up day for flooding in June, pad printing will be running 23 days in
CASE ANALYSIS
July, beginning Friday, July 1 (they will work three Saturdays on July 9, 16, and 23, and take a one-day

holiday for July 4). You thank them for the information and then you begin to develop your plan.”

Moreover, this information was given by production call office in order to create a plan and find a

solution for the problem. The company needs to meet the orders within twenty-three (23) days in the

month of July; twenty three days only because it was stated that the workers will have one holiday in

addition to their weekends. But then, there are three Saturday that they will work. Each day the labourers

will work for 8 hours. Given below is the illustration of the working calendar of the company:

JULY

Sunday Monday Tuesday Wednesday Thursday Friday Saturday

1 2

3 4 5 6 7 8 9

10 11 12 13 14 15 16

17 18 19 20 21 22 23

24 25 26 27 28 29 30

31

Yellow Working Days

Pink Weekends

Red Holiday

“Note: Setup time is to set up the pad printer at the start of the job. Setup includes thoroughly cleaning

the printing heads and ink reservoirs, installing the new pad(s) and ink supply, and carefully aligning the

machine. Setup at the beginning of a new day with the same job is insignificant.”
CASE ANALYSIS
In addition to the given table, the setup time is noted and the information about it is given.

Because of this, this will be added to the processing time.

CHAPTER VI

Alternative Course of action

According to Stevenson, priority rules are simple heuristics used to select the order in which jobs will

be processed. In this case study, there are four rules given to be analysed in order to resolve the current

problem. The following are the rules:

1. First Come First Serve (FCFS):

This is a service policy that is based on attaining the customers or clients, in order to their onset or

demand. It means that, the one who comes earlier would be given priority in the sequence of their arrival.

FCFS discipline of service delivery does not take any other parameter into consideration like quantity,

monetary value of the order, etc. If we select this method of delivery to our clients, we are bound to

release the order in the sequence of date.

2. Shortest Processing Time (SPT):

This process of scheduling is used for completion of work within the due date. This method emphasizes

on processing with the job which takes the least time. The division of the work is done on the basis of

input, processing time and the due date for the completion of assignment. The flow time is calculated for

the each part of the job, using the processing time, which helps in determination of the overall time for the

completion of work. This method is useful in single machine environment.

3. Due Date Scheduling Technique (DD):

This technique of scheduling can be used with the reference of time either forward or backward. When

forward scheduling is used, it started with the date from which job order starts. It calculates the period of

time, from the day on which first operation was performed to all the subsequent operation till the

completion of the work. It determines the earliest time on which the work can be completed. When the
CASE ANALYSIS
technique of back scheduling is used for calculating the period of time of the completion of work, the

resources are allocated in reverse order keeping in mind the deadline of the completion of work and come

to the date on which must start the operation, so that the work can be completed within the due date.

4. Critical Ratio:

Critical Ratio is an index number computed by dividing the time remaining until due date by the work

time remaining. As opposed to priority rules, critical ratio is dynamic and easily updated. It tends to

perform better than FCFS, EDD, and SPT on the average job lateness (delays) criterion. The critical ratio

gives priority to jobs that must be done to keep shipping on schedule. It is used in conjunction with MRP

systems and has broad industrial application. The critical ratio is measure of urgency of any order

compared to the other orders for the same facility. The ratio is based on when the completed order is

required and how much time is required to complete.

These rules assume that setup time and setup costs are independent of the processing sequence.

However, this is not always the case. Jobs that require similar setups can reduce setup times if sequenced

back to back. In addition to this assumption, the priority rules also assume that setup time and processing

times are deterministic and not variable, there will be no interruptions in processing, the set of jobs is

known, no new jobs arrive after processing begins, and no jobs are cancelled.

CHAPTER VII

Recommendation

Comparing the four methods, SPT is recommended to be used by the company because it reduces

average flow time for jobs. Since there are constraints such as they have to meet all the orders within 23

days and the working hours is eight (8) hours per day, using this method they will finished all the orders

at the shortest period of time. Also, the flow time is calculated for the every part of the job, using the

processing time, which helps in getting whole time for the completion of work.
CASE ANALYSIS
In First come/first served method (FC/FS) it could not be applied because in this rule, jobs are

processed in the order in which they arrive. The orders must be finished in a shortest period of time and

not on how when the order arrived since they did not started the production on June (arrival of orders) due

to a problem. They started on July and this will not follow the rule.

Next, under Earliest due date method (EDD), it places the highest priority on processing jobs with

the earliest due dates. Job shop quality performance can be measured by the number of late jobs, the

average tardiness across late jobs or the average tardiness across all jobs. This seems to work well if the

firm performance is judged by job lateness. If this will be used, the process will follow a track based on

due dates of the orders and maybe it will not meet the time constraints given.

Lastly the critical ratio method (CR), in this rule one must calculate a priority index using the

formula (due date–now)/ (lead time remaining). This rule is widely used in practice. However in this rule,

the sequencing of the jobs is done first by getting the critical ratio of each job then selecting the lowest

among them. Then it is repeated eliminating the job with the lowest CR point until one job is left.

By choosing Shortest processing time (SPT), the job with the shortest processing time requirement

goes first. This rule tends to reduce work-in-process inventory, average throughput time, and average job

lateness. So this is the most appropriate rule to be used in order to meet the limitations.

CHAPTER VIII

Conclusion/Detailed action Plan

A report about the choosing the Short Processing Time method must be made and this will be used

for the production. It must in detailed information so that the schedule will be followed. Other points to

implement:

 Align demand and delivery;

 Increase flexibility and reduce response/lead times at key points in the supply chain;
CASE ANALYSIS
 Enable lean operations: reduce inventories and costs while meeting delivery commitments.

 Cost reduction can be achieved by a schedule that considers all rules and constraints.

Ignoring a rule/constraint usually results in increased cost due to reduced productivity,

higher inventory, increased offline work, overtime etc.

 Customer Relationship Management

 Dealer Order Management

 Material planning

 Scheduling of feeder lines

 Vendor supply chain management

Job Date Order Set-up Time Production Time Due Date

Received
A 6/4 2 hrs 6 days 11 July
B 6/7 4 hrs 2 days 8 July
C 6/12 2 hrs 8 days 25 July
D 6/14 4 hrs 3 days 19 July
E 6/15 4 hrs 9 days 29 July
Processing Time
Job Flow time Days to Due date
(days)
A 6 6 7
B 2 8 5
C 8 16 19
D 3 19 14
E 9 28 23
Total 28 days 58 days 68 days

Based on the given information and initial table above, each method will be used for the

computation the criteria to be considered in choosing the best technique.

 Sequence

 Average Flow Time / Average completion time

CASE ANALYSIS
 Average Tardiness / delays

 Utilization / Average # of Jobs at Work Center

 Make span
 CASE ANALYSIS
Solution using FCFS Method:
In HOURS:

FCFS Sequencing
Total
Set-up Production Processing Flow
Time Time Time Time Date Days Hours Hours
Job (hours) (hours) (hours) (hours) Due Due Due Tardy
A 2 48 50 50 11-Jul 7 56 0
B 4 16 20 70 8-Jul 5 40 30
C 2 64 66 136 25-Jul 19 152 0
D 4 24 28 164 19-Jul 14 112 52
E 4 72 76 240 29-Jul 23 184 56
Total 240 660 68 544 138
Sequence A, B, C, D, E
Average Flow Time / Average completion time (sum of total flow / no. of
jobs)
(660 hours / 5 jobs) 132.00
Average Tardiness / delays (total delays / no. of jobs)
(138 hours / 5 jobs) 27.6
Utilization / Average # of Jobs at Work Center (total flow time / total
processing time)
(660 hours / 240 hours) 240.00
Make span 2.75

Set-up Processing
Total Flow Hours Due
Time Time Time Time Date Days (8 hours per Converted Hours
Job (days) (days) (days) (days) Due Due day only) into Days Tardy
A 0.0833 2 2.0833 2.0833 11-Jul 7 56 2.333333333 0
B 0.1667 3 3.1667 5.2500 8-Jul 5 40 1.666666667 4
C 0.0833 6 6.0833 11.3333 25-Jul 19 152 6.333333333 5
D 0.1667 8 8.1667 19.5000 19-Jul 14 112 4.666666667 15
E 0.1667 9 9.1667 28.6667 29-Jul 23 184 7.666666667 21
Total 28.6667 66.8333 68 544 22.66666667 44
Sequence A, B, C, D, E
Average Flow Time 13.37
Average Tardiness 8.833333333
Make span 28.67
Average # of Jobs at Work
Centre 2.33

Solution using SPT Method:

CASE ANALYSIS
SPT Sequencing
Total
Set-up Production Processing Flow
Time Time Time Time Date Days Hours Hours
Job (hours) (hours) (hours) (hours) Due Due Due Tardy
B 4 16 20 20 8-Jul 5 40 0
D 4 24 28 48 19-Jul 14 112 0
A 2 48 50 98 11-Jul 7 56 42
C 2 64 66 164 25-Jul 19 152 12
E 4 72 76 240 29-Jul 23 184 56
Total 240 570 68 544 110

Sequence B, D, A, C, E
Average Flow Time / Average completion time (sum of total flow / no. of
jobs)
(570 hours / 5 jobs) 114.00
Average Tardiness / delays (total delays / no. of jobs)
(110 hours / 5 jobs) 22
Utilization / Average # of Jobs at Work Center (total flow time / total
processing time) 2.38
(570 hours / 240 hours)
Make span 240

Solution using EDD Method:

EDD SEQUENCE
Total
Set-up Production Processing Flow
Time Time Time Time Date Days Hours Hours
Job (hours) (hours) (hours) (hours) Due Due Due Tardy
B 4 16 20 20 8-Jul 5 40 0
A 2 48 50 70 11-Jul 7 56 14
D 4 24 28 98 19-Jul 14 112 0
C 2 64 66 164 25-Jul 19 152 12
E 4 72 76 240 29-Jul 23 184 56
Total 240 592 68 82

B, D, A, C,
E
Sequence
Average Flow Time / Average completion time (sum of total flow / no. of 118.40
jobs)
(592 hours / 5 jobs)
16.4
Average Tardiness / delays (total delays / no. of jobs)
CASE ANALYSIS
(82 hours / 5 jobs)
Utilization / Average # of Jobs at Work Center (total flow time / total 2.47
processing time)
(592 hours / 240 hours)
240
Make span

Another approach:

Job JOB TIME (Set up and Date Order Due Days to SPT EDD
Run Time) (in hours) Received Date Due date Sequence Sequence

A 6 days + .083 days (2 6/4 11 July 36 days B B

hours) = 6.083 days
B 2 days + .17 = 2.17 days 6/7 8 July 30 days D D
C 8 days + .083 = 8.083 6/12 25 July 42 days A A
days
D 3 days + .17 = 3.17 days 6/14 19 July 34 days C C
E 9 days + .17 = 9.17 days 6/15 29 July 43 days E E

CR Sequencing
TABLE 1
Total
Set-up Production Processing
Time Time Time Date Days Hours CR
Job (hours) (hours) (hours) Due Due Due Ratio
A 2 48 50 11-Jul 7 56 1.12 Lowest
B 4 16 20 8-Jul 5 40 2.00
C 2 64 66 25-Jul 19 152 2.30
D 4 24 28 19-Jul 14 112 4.00
E 4 72 76 29-Jul 23 184 2.42
Job CR Ratio Computation
A (56 – 0) / 50
B (40 – 0) / 20
C (152 – 0) / 66
D (112 – 0) / 28
E (184 – 0) / 76
CR Sequencing
TABLE 2 (Hour 48)
A FINISHED (1st)
B 4 16 20 8-Jul 5 40 -0.50 Lowest
C 2 64 66 25-Jul 19 152 1.55
D 4 24 28 19-Jul 14 112 2.21
E 4 72 76 29-Jul 23 184 1.76
CASE ANALYSIS
Job CR Ratio Computation
B (40 – 50) / 20
C (152 – 50) / 66
D (112 – 50) / 28
E (184 – 50) / 76
JOB B = The job is on schedule. JOB D = The job is ahead of schedule
JOB C & E = The job is falling behind the schedule. And have some slack.
CR Sequencing
TABLE 3 (Hour 64)
A FINISHED (1st)
B FINISHED (2nd)
C 2 64 66 25-Jul 19 152 1.24 Lowest
D 4 24 28 19-Jul 14 112 1.50
E 4 72 76 29-Jul 23 184 1.50
Job CR Ratio Computation
C (152 – 70) / 66
D (112 – 70) / 28
E (184 – 70) / 76
JOB C = The job is on schedule.
JOB D & E = The job is falling behind the schedule.
CR Sequencing
TABLE 4 (Hour 88)
A FINISHED(1st)
B FINISHED(2nd)
C FINISHED (3rd)
D 4 24 28 19-Jul 14 112 -0.86 lowest
E 4 72 76 29-Jul 23 184 0.63

Job CR Ratio Computation

D (112 – 136) / 28
E (184 – 136) / 76
JOB D= The job is on schedule.
JOB E = The job is falling behind the schedule.
CR Sequencing
Set-up Processing Total Flow
Time Time Time Time Date Days Hours Hours
Job (hours) (hours) (hours) (hours) Due Due Due Tardy
A 2 48 50 50 11-Jul 7 56 0
B 4 16 20 70 8-Jul 5 40 30
C 2 64 66 136 25-Jul 19 152 0
D 4 24 28 164 19-Jul 14 112 52
E 4 72 76 240 29-Jul 23 184 56
Total 240 660 68 138
 CASE ANALYSIS
Sequence B, D, A, C, E
Average Flow Time / Average completion time (sum of total flow / no. of jobs)
(660 hours / 5 jobs) 132.00
Average Tardiness / delays (total delays / no. of jobs)
(138 hours / 5 jobs) 27.6
Utilization / Average # of Jobs at Work Center (total flow time / total processing
time)
(660 hours / 240 hours) 2.75
Make span 240

Comparison of Sequencing Rules

Average Utilization/ Average

Flow Jobs at Work Average
Rules Time Centre Tardiness
FCFS 132.00 2.75 27.60 Worst
SPT 114.00 2.38 22.00 Best
EDD 118.40 2.47 16.40 Good
CR 132.00 2.75 27.60 Worst

In the table above, it is clearly shown what method to be used. Based on the average
tardiness column, it clearly presented that SPT got the lowest point followed by EDD and the
methods that gain bigger average tardiness is under FCFS and CR method.
Shortest processing time is generally the best technique for minimising job flow and
minimising the average number of jobs in the system. Its chief disadvantage is that long-duration
jobs may be continuously pushed back in priority in favour of short-duration jobs. Customers may
view this dimly, and a periodic adjustment for longer jobs has been made.
CASE ANALYSIS

FAST HOMES – COURTESY OF PREFABRICATION

In a muddy building site in the flat Cambridgeshire coutryside, a crane swings a prefabricated

concrete stab over a half-finished house and a team of workers slot it in to the form part of the ground

floor ceiling. A three-storey house built using prefabricated methods employed by Bovis Homes in the

new village of Cambourne can be weather tight within 10 days compared with the 5 ½ weeks required by

conventional techniques. ―This allows electricians and plumbers to get to work sooner and means the

house can be completed in less than half the 22 weeks normally needed,‖ says David Lowther, Bovis‘s

research and development director.

Bovis and a handful of other house builders see prefabrication as the way forward while the

government is keen for the building industry to modernize its production techniques. But, despite years of

trials and the use of timber frame construction methods in Scotland, Scandinavia and the US,

prefabrication remains controversial. The home-buying public associates it with the post-war austerity and

with the draughty, condensation-prone, system-built high-rise of the 1960s and 1970s. The verdict in the

City is that prefabrication is a useful way of speeding up production and improving house-builders‘ return

on capital. But the industry has yet to show that faster build times justify high costs, and prefabrication is

not a reason for giving a company a higher rating.

Malcolm Harris, Bovis chief executive, believes ―factory finished components‖ – a term he prefers

to prefabrication – is essential to overcome the skill shortages among trades such as bricklayers and to

boost quality. Units made in advance in a factory can be built with too much tolerance than are possible

on a muddy, windy building site. This results in fewer complaints. After trials Bovis is using its modern

techniques at Cambourne, a development that will grow to 3300 homes over the next 10 years. Houses are
CASE ANALYSIS
being built with inner walls made of ―aircrete‖ blocks that are stuck together with glue. The blocks made

from relatively light aerated concrete, are the size of about 10 bricks, allowing malls to be built more

quickly. Unlike traditional mortar, the glue can be used in freezing conditions, which means constructions

can continue throughout winter. The selling points of concrete over timber are that it feels more solid and

is fire-proof, rot-proof, and provides better insulation.

Once the walls and floors are up, the roof trusses can be fixed and covered with waterproof felt,

allowing work on installing the electrics, plumbing and internal finishes to be carried out. Bovis‘s plan is

to build complete roof units on the ground – where work can go ahead faster and more safely than on the

top of a house – and lift them into place. If the tiling-industry can develop a lightweight roof tiles, Bovis‘s

aim is to fix the tiles as well before lifting the roof into position. With the roof in place, factory-made one-

piece dormer windows are lifted by crane into position. Underneath, completed door and window units

are fitted in the gaps left in the walls.

Once the inner wall is up and work is going on inside, the bricklayer can be brought In to build a brick

outer ‗skin‘ so the home looks just like a traditional counterparts. ―The beauty of this method is that it

removes the bricklayer from the critical path of building the house,‖ says Mr.Harris.

Bovis is not alone in shifting to prefabrication, although it buys the components rather than

making them itself. Two other large house-builders, Westbury and Wilson Connoily, have in-house

operations making timber frame units. But while Westbury is increasing production, Wilson Connoily is

cutting back because it has not achieved savings. The problem with prefabrication is that it is more

expensive than traditional methods – though cost should come down as more experience is gained and

volumes increase. Faster build times means higher return on capital invested but, for companies with

manufacturing arms, moving to factory production requires the house builders to forecast demand in a

notoriously cyclical market, analysts warn.

CASE ANALYSIS
―Bovis is a good way of investing in new production techniques without absorbing all of the risks

involved in manufacturing,‖ said Mr. Howson, analyst at ABN Amro. Bovis shares rose 12 ½ p to 329 ½

p after it unveiled its prefabrication plans to analyst last week, it has since risen to 336p, but there are no

signs that a commitment to prefabrication is a guarantee of a premium over conventional house builders.

1. Discuss the strategies used in this case to reduce the project completion time of new homes.
CASE ANALYSIS
CHAPTER I

TIME CONTEXT

Prefabricated housing was popular during World War II due to the need for mass accommodation for

military personnel; (Source: Wikipedia.org). Probably, the time when Bovis Homes operate is the period

during World War II or time after the war because the demand for rapid building of houses, hospitals, or

even other kinds of facilities increased.

CHAPTER II

VIEWPOINT

In this case, the point of view of an analyst is being asked. To justify this, facts are listed in later

discussion.

CHAPTER III

STATEMENT OF THE PROBLEM

How does prefabricated building shorten the project completion time of new homes through Bovis‘s

case?

CHAPTER IV

OBJECTIVES

 Show the differences between the strategies being used by traditional building and

prefabricated building by observing the following:

 Advantages that both the contractor and the customer get by using

prefabricated building.
CASE ANALYSIS
CHAPTER V

AREAS OF CONSIDERATION/ ANALYSIS

 Facts were collected through the problem itself and through thea website:

http://wikipedia.org:

 FACT 1: A three-storey house built using prefabricated methods employed by

Bovis Homes in the new village of Cambourne can be donet within 10 days

compared with the 5 ½ weeks required by conventional techniques

 FACT 2: Units are made in advance in a factory, therefore can be built with too

much tolerance than are possible on a muddy, windy building site.

 FACT 3: McDonalds use prefabricated structures for their buildings, and set a

record of constructing a building and opening for business within 13 hours (on

pre-prepared ground works). Source: Wikipedia.org. This fact is considered as

an evidence of the minimal time that it takes to build a facility by using

prefabricated building. It is not only beneficial for residential building but also

for commercial ones such as McDonalds.

 FACT 4: Prefab classrooms were popular with UK schools increasing their

rolls during the baby boom of the 1950s and 1960s. Source: Wikipedia.org. As

we all know, baby boom was the period in UK when there was a sudden and
CASE ANALYSIS
large increase in their population. To cover up this increase and continuously

provide education for every child, prefab was used as a solution.

 FACT 5: The problem with prefabrication is that it is more expensive than

traditional methods – though cost should come down as more experience is

gained and volumes increase.

 FACT 6: Prefabrication building shortens the time being consumed to build

homes or other buildings in Bovis Homes case through:

 Being independent from factors such as weather which is a very crucial

factor to determine or predict because manufacturing of the components that

shall be used to build a home is being done inside a factory or indoor.

 Having an organized plan as to how and when shall a component be put into

place so that the flow of production can be done simultaneously by the

workers. For example is when the workers assigned in assembling the roof

into its place, they are required to cover it with a water-proof material so

that the electrics can be simultaneously installed without the worry

regarding the safety of the workers when it rain.

CASE ANALYSIS
 The quality of materials that are used with this method are reliable enough

as to being durable and not time consuming to give its benefit such as the

glue being used to stick the bricks together that can withstand up to freezing

point. Quality of the materials is being observed so that Bovis Homes can

work smoothly without the need for any rework with defective materials

being needed in the construction.

CHAPTER VI

RECOMMENDATION

As to recommendation, comparison between the traditional method of building homes

shall be compared with Prefabricated method of building.

Factors Traditional Method Prefabrication

1. Time-consuming Yes No

2. Weather-dependent Yes No

3. Costly Not much Too Much

4. As to being feasible Not much Absolutely

5. Reliability as to quality of Doubtful Assured

materials used

CHAPTER VII

CONCLUSION

Costs are not only dependent as to monetary factors, because costs are also dependent as to the

period and quality it takes to complete a job or an end-product. But then, in most cases, products having
CASE ANALYSIS
good quality are costly, which also existed in Bovis‘s case. Though it is more expensive due to the high

quality materials being used, assurance as to the reliability of the job is a guarantee because prefabrication

not only finish building homes in shorter period of time through having more workers but then it is more

on the quality that they are relying into to avoid rework which would consume more time. Good planning

is also a big factor that contributes to the beauty of prefabrication‘s concept. Workers can work

simultaneously without worrying for their safety because specialized materials and processes are being

applied in the site that traditional method of building doesn‘t offer.

CASE ANALYSIS
IMPLEMENTING ERP

Despite the snail‘s pace at which some industries cottoned on to e-business, even the most

conservative sectors eventually to see some potential benefit. Take the chemical industry. On the surface,

the sector seems untouched by the new-fangled ways of the Internet. To a large extent, it is. But within

that, there are pockets of progress. For Oxford Chemicals, a manufacturer of aroma chemicals for the

niche food and fragrance industry, the decision to collaborate more closely with customers and agents was

cemented 2 years ago, after its IT contractor at the time threatened to withdraw support for the

manufacturer's ERP systems.

With Nestle and ICI-owned Quest among its customers, Oxford Chemicals wanted to use

technology literally to forge stronger links with its client base, and also to snatch a competitive advantage

from rivals who didn't. For a company producing up to 450 products a year, with the capacity to produce

200 more, the existing ERP system had gone as far as it could. It would never be in a position to give the

company the computing power it would need to win more international business, and had started to

threaten the Teesside firm's growth.

"The ERP system was difficult to interrogate, making it impossible to identify the root

causes of problems," explains Oxford Chemicals' managing director, Dr. Richard Smith. "Basically, we

were never 100% sure that our figures were accurate. And when we looked at our future plans, we knew

the old system didn't have the collaborative features, like e-business with external partners, nor would it

allow us to integrate other IT systems on the site," he adds. So the decision to upgrade was made, but it

was never going to be straightforward.

"Being a smaller company, we needed a system we could implement quickly and which

would allow us to continue work as we implemented it," recalls Smith. The company opted for the SAP
CASE ANALYSIS
R3 system, after the vendor introduced a scaled down version of its ERP systems for SMEs. Implemented

by SAP systems integrator Plaut Consulting, the system took 3 months to fully integrate into Oxford

Chemicals' existing network, but it took orders, issued invoices and dispatched goods on the system the

day it went live. The manufacturer had limited resources, and was able to negotiate with Plaut for an off-

the-shelf SAP system pre-configured to the standard business processes of the chemical industry and

around 70% pre-configured for Oxford Chemicals' specific requirements, at a cost of £200 000. The

system now links the customer services department to inventory and manufacturing elements of the

enterprise. "We now have a much clearer picture of what our customers require and how quickly we can

meet those requirements," claims Smith.

"Now, when a customer places an order by fax, phone or email, customer service staff can

immediately give them a lead time for delivery, whether or not the material to produce the goods is in

stock. In the latter case, the SAP can calculate the additional time needed by us to order materials and

produce the goods. In short, it drives the placing and manufacture, and leads the scheduling of production

in the company."

Smith is loath to put any of the benefits of the new ERP system in financial terms. "One

main improvement at Oxford Chemicals since we introduced the new system is that we've been able to

lower the number of admin staff and increase numbers in the doing and making areas. In other words, we

have more customer-facing staff and less who have to process admin. The system has made the tasks less

arduous, allowing to improve customer service and make more products."

He added that inventory had been cut, stock turns had been improved and the monthly

reporting burden reduced by 50% in terms of the days required producing reports and accounts. The next

phase of Oxford Chemicals' systems development will include linking directly into the SAP systems of

customers and agents, here and abroad. So far, this has been successful with one client, the Duckworth

Group, one of Britain's largest flavouring and fruit compound manufacturers. Duckworth now places
CASE ANALYSIS
orders from its purchasing system, which are electronically transferred directly to the sales order system at

Oxford Chemicals using a tool from SAP called Business Connector. On receipt of the order, the sales

order system automatically sends an acknowledgment back to the purchasing department.

But other link-ups will be delayed until it is possible to integrate even more closely - right

into the manufacturing process - by adding new SAP application modules to the ERP system. "When

material is in stock to produce the requested goods, it automatically sends an invoice. But when it is not in

stock, and it has to be manufactured, that information cannot as yet be sent back. The second half of next

year should see other linkages," says Smith. Oxford Chemicals is also a member of Elemica, an online

trading exchange for the chemical industry, and plans to integrate its ERP system first with the exchange

itself, then with individual members. In a bid to offer more than the ability to place orders over the

Internet, Oxford Chemicals is also trying out a Web-based link with an agent who has access to the

manufacturer's customer and orders databases from its web site. Linked to the back office, the agent can

pull up the histories and status of recent sales. "We'll roll this out to all our agents next year, and then

offer it to our major customers, eventually allowing every customer to place orders directly over the

Web," says Smith.

Required: Discuss the incremental approach to ERP described in the case study.

Source: Operations Management by Andrew Greasly (2006 edition)

Case Analysis

CHAPTER I

TIME CONTEXT

The situation usually happens in present times, where e-commerce and online

transaction systems are now much evident than before. As technology improves over a period of

time, it is not unusual to see the information technology systems used in the industry.

This trend is very evidential for large-scale businesses that have an extensive

experience with the changes of the system, specifically the enterprise resource planning (ERP)

phase. However, for Oxford Chemicals, it has been stated that they wanted to use the technology

to communicate with its clients through online systems, and at the same time to grasp an edge

over its competitors. It means only that they are still inexperienced of the technology in the field

of business, although there are already existing systems to shorten the burden in recording

transactions in the business.

It could been shown also that it happened when the company discovered that their

existing systems do not conform with the needs of the business itself, like e-business with

external partners of the company, and integration with other IT systems on the site. The company

itself wanted a change by upgrading its IT facilities. It is based on an assumption that more and

more clients are going to the company to order, and it has the need to connect and link with

especially large-scale businesses like Nestle and Quest.

39
Case Analysis

CHAPTER II

VIEWPOINT

It could be seen that improving the enterprise resource planning (ERP) aspect of

the company tend to be costly for the management itself. Implementation costs rise as time

increases, and it depends on business size, number of modules, customization, the scope of

process changes, and the readiness of the customer to take ownership for the project. 1 ERP can

cost more than less integrated and/or less comprehensive solutions, and since, Oxford Chemicals

will switch its existing systems, it can also increase the ERP vendor's negotiating power which

can result in higher support, maintenance, and upgrade expenses. Of course, the objective of the

management in the business is to gain profit by increasing sales and reducing costs. It would tend

to be more costly than in a traditional way and assuming there are also other factors that can

affect the profitability of the business, it would lead to regrets that they have chosen to adopt the

ERP systems and assume that the company would not continue anymore in a going concern

basis.

However, adopting changes and its possible consequences is only one of the

concerns of the management in case the upgrade is implemented. Implementation of the ERP

system can also benefit them, if adopted properly.

1
As stated by Wikipedia (Enterprise Resource Planning, Implementation section),
http://en.wikipedia.org/wiki/Enterprise_resource_planning#Implementation

40
Case Analysis

CHAPTER III

STATEMENT OF THE PROBLEM

Judging from the concern of the management on whether the ERP systems should

be upgraded or not in the viewpoint section of the case, problems have been left to be solved in

this case: 1) what could be the advantages and disadvantages of Oxford Chemicals in adopting

the better technology with their operations using ERP; 2) what could be the best decision of the

company in implementation of the ERP– to upgrade its facilities to gain more access to its

clients, or to stick to the existing, traditional way; and 3) if the answer in the second problem is

to upgrade its facilities, what are the steps in ensuring that the implementation of the ERP is

carefully done.

The first problem discusses the possible consequences if the company has adopted

the upgrading of the ERP systems in their company, and how it will affect the Oxford Chemicals

as a whole. It also seeks to clear out the notions that the adaption of the system can lead to a huge

effect on the chemical company, whether positive or negative. The second problem is based on

the first problem wherein the consequences are weighed in order to come up with a best decision,

while the third one discusses what will be the planned actions of the company in order to carry

out its decision of upgrading the facilities of the ERP systems of Oxford Chemicals, if ever the

decision to upgrade will be chosen as a best alternative.

41
Case Analysis

CHAPTER IV

OBJECTIVES

The main objective of the company in order to come up with the implementation

of the ERP as stated in the case is based on the required problem stated, to discuss the

incremental approach to ERP described in the case study. It should be assumed that the

approach of the implementation of the ERP is incremental because it seeks to upgrade the

existing facilities of the system of Oxford Chemicals. The basis of the improvement is based on

the statement in the case that in the case the old system is used, it won‘t have the collaborative

features, like e-business with external partners, nor would it allow us to integrate other IT

systems on the site.

In summation of the facts given, it should be assumed that the objective is to

develop, maintain, and enhance the system of the Oxford Chemicals by any means. It is for the

own company‘s good: if the system is uplifted to a new level, the chemical company will have a

much clearer picture of what our customers require and how quickly they can meet those

requirements.

42
Case Analysis

CHAPTER V

AREAS OF CONSIDERATION

The facts presented shall be considered in solving the case for the Oxford

Chemicals. One of those comes from the following statement: “For Oxford Chemicals, a

manufacturer of aroma chemicals for the niche food and fragrance industry, the decision to

collaborate more closely with customers and agents was cemented 2 years ago, after its IT

contractor at the time threatened to withdraw support for the manufacturer's ERP systems.” It

has been shown that in the past, the company has tried to have its own computerized and

information-based system for different transactions such as ordering, scheduling, and sales;

however, they may have conflicts with the past IT contractor. It could be due to the low

satisfaction rating of the company in using the system designed and provided by the prior IT

contractor, i.e. the system is not anymore applicable to the growing needs of its clients and the

system cannot improve anymore to meet its ends.

Another consideration would come from the statement: “With Nestle and ICI-

owned Quest among its customers, Oxford Chemicals wanted to use technology literally to forge

stronger links with its client base, and also to snatch a competitive advantage from rivals who

didn't. For a company producing up to 450 products a year, with the capacity to produce 200

more, the existing ERP system had gone as far as it could. It would never be in a position to give

the company the computing power it would need to win more international business, and had

started to threaten the Teesside firm's growth.” It is shown at there could be more potential for

the company to produce more than 450 products if only the company would adopt an

improvement with the ERP systems such as upgrading the hardware used, updating the program

43
Case Analysis

definitions of the system, rewriting of the code to adopt in changes in the needs of the customers,

among other things. Updating the ERP systems of the company can help minimize the

occurrence of threat of not growing of the business, and maximize the probability that it could

attract more large-scale clients.

However, as stated in the viewpoint section of the case, it could cost a lot. This is

also evidenced by the statement that: “The decision to upgrade was made, but it was never going

to be straightforward.” Upgrading ERP system is complicated and costly. It could also hurt its

operating costs since there would be more overhead costs as compared in the traditional system.

However, it can be remedied if the direct labor costs would decline. It has been stated that the

total manufacturing wages would have fallen and its drop is most dramatic for unskilled workers

which form part of the chemical company due to technological change.2 If the effect is mutual, it

could even benefit the company in reducing its costs.

The statement: “The company opted for the SAP R3 system, after the vendor

introduced a scaled down version of its ERP systems for SMEs… the manufacturer had limited

resources, and was able to negotiate with Plaut for an off-the-shelf SAP system pre-configured to

the standard business processes of the chemical industry and around 70% pre-configured for

Oxford Chemicals' specific requirements, at a cost of £200 000.” explains the details of the

contract made by Oxford Chemicals and Plaut Consulting, a Systems Applications and Products

(SAP)3 systems integrator. Since Oxford Chemicals is considered a small and medium enterprise

(SME) company, it is right to maintain a scaled-down ERP system for them. Maintaining,

2
As stated by David Popp in his lecture on Technology and Labor (2003),
http://classes.maxwell.syr.edu/ppa730-05/lectures/scilct26.html
3
As defined by the website SearchSAP at: http://searchsap.techtarget.com/definition/SAP

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Case Analysis

designing and improving a large ERP system is too costly for them, and it would lead to an

increase in the costs of the company just for IT aspects and not on operations.

CHAPTER VI

ALTERNATIVE PLAN OF ACTION

Before deciding on which alternative plan of action to take, it is the opportunity to

discuss first what is ERP and what are its benefits and disadvantages.

A. Enterprise Resource Planning (ERP) Defined

ERP (enterprise resource planning) is an term used by the industry for activities

that helps a business to manage the important parts of its business. 4The information made

available through an ERP system provides visibility for key performance indicators (KPIs)

required for meeting corporate objectives. ERP software applications can be used to manage

product planning, parts purchasing, inventories, interacting with suppliers, providing customer

service, and tracking orders. ERP can also include application modules for the finance and

human resources aspects of a business. Typically, an ERP system uses or is integrated with a

relational database system. The deployment of an ERP system can involve considerable business

process analysis, employee retraining, and new work procedures.

B. Advantages of ERP

The important advantage of ERP is that assimilating the uncountable processes by

which businesses work saves time and expense. With ERP, decisions can be made more quickly

4
As defined by the website SearchSAP at: http://searchsap.techtarget.com/definition/ERP

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Case Analysis

and with fewer errors, data becomes visible across the organization. The asks that benefit from

this integration include: 1) sales forecasting, which permits inventory optimization; 2)

chronological history of every transaction through relevant data compilation in every area of

operation; 3) order tracking, from acceptance through fulfillment; 4) revenue tracking, from

invoices through cash receipts; and 5) matching purchase orders (what was ordered), inventory

receipts (what arrived), and costing (what the vendor invoiced) which is important in the field of

auditing.

ERP systems consolidate business figures, bringing the following benefits: 1) they

eliminate the need to synchronize changes between multiple systems—consolidation of finance,

marketing and sales, human resource, and manufacturing applications, bringing down into one

system; 2) they bring legitimacy and transparency in each bit of statistical data; 3) they enable

standard product naming/coding; 4) they provide a comprehensive enterprise view; 4) they make

real–time information available to management anywhere, any time to make proper decisions;

and 5) they protect sensitive data by consolidating multiple security systems into a single

structure.

C. Disadvantages of ERP

There could be also setbacks in implementing the ERP. These include the

following: 1) the customization for the different types of business is difficult; 2) re–engineering

business procedures to fit the ERP system may damage competitiveness and/or sidetrack focus

from other critical activities; 3) ERP can cost more than less integrated and/or less

comprehensive solutions; 4) high switching costs associated with ERP can increase the ERP

vendor's negotiating power which can result in higher support, maintenance, and upgrade

expenses; 5) overcoming resistance to sharing sensitive information between departments can

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Case Analysis

deter management attention; 6) integration of independent businesses can form excessive

dependencies; and 7) extensive training requirements take resources from daily operations.

Another main weakness of the ERP is that due to its architecture called On-Line

Transaction Processing (OLTP), ERP systems are not well suited for production planning and

supply chain management (SCM).

CHAPTER VII

RECOMMENDATION

Based on the given strengths and weaknesses of the ERP system, it is being

recommended that their decision to upgrade is just right for Oxford Company. After all, though

there are weaknesses that can cause for ERP to fail, the following factors stated in the case itself

can support the effectiveness of the improved ERP systems: 1) the company would have a

stronger linkage with other large companies which can result to an increase in production and

eventually profit, and it would have an edge over its competitors; 2) it would allow them to

integrate with the other IT systems of the site, bringing an organized system in the company, and

it would eliminate or at least lessen the cost of wastage due to unorganized ways of doing the

business; 3) it would took orders, issued invoices and dispatched goods on the system more

quickly than in a traditional system, which would improve the turnover rate of inventory of the

company; 4) it determines the placing and manufacture, and leads the scheduling of production

in the company; 5) it will lessen the costs of administrative personnel due to the technology,

because the costs are more designed on the technological costs of the company; and 6) it would

benefit the company in a sense that due to the technology, it will increase the demand of the

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Case Analysis

clients to their company, and although the technology costs are big, it would be compensated by

the savings in labor and clerical costs.

CHAPTER VIII

CONCLUSION & DETAILED PLAN OF ACTION

ERP implementations can take a long time to complete and its development can

be delayed by faulty planning and application. The ERP technology might work, but as for the

ERP systems is concerned, the analysis of incomplete data always results in understated costs of

ERP implementations. Infrastructure and integration requirements, if inadequate, can also result

in hidden costs, and as said before, the management of time, scope and money is truly a

challenge.

For the ERP implementation to be successful, there are some suggestions as

referenced by the website ZDNet UK:5

1. When ERP projects go wrong, the results can be disastrous. Doing it right can be

rewarding; but failing can be devastating. Two best examples would be: Company A

went millions into the red as a result of technical problems with the rollout of a supply

chain system, leading to inventory shortages and incomplete orders filled; while

Company B took a several million dollar hit on profits as a result of a product oversupply

related to problems with an ERP system.

5
As stated by ZDNet UK in the article, “10 essential tips for implementing an ERP system”,
http://www.zdnet.co.uk/news/desktop-apps/2006/09/28/10-essential-tips-for-implementing-an-erp-system-
39283716/2/

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Case Analysis

2. Understand the value proposal and the business case for your ERP system. Determine

also the key deliverables and objectives in the business systems of ERP.

3. Make sure you have a strong sponsor for the ERP system. Your sponsor's level of

commitment and support can have the greatest impact on the delivery of an ERP system.

Issues and risks are likely to be escalated to the sponsor if they aren't resolved earlier.

Your sponsor can also serve as the champion for the project when conducting status

briefings and training across the enterprise.

4. Identify the functional and nonfunctional gaps between the existing and planned systems.

There, the gap analysis can be reviewed and approved by the executive sponsor.

5. Use the standard off-the-shelf package with as little customization as is feasible. Once the

enterprise has implemented the core modules (general ledger, accounts payable, accounts

receivable, payroll, etc.), it can phase in new features and build things around the edges.

6. Socialize change across the organization with key stakeholders and those most affected

by change. Organizations that focus on technology and ignore the human element of

implementations often fail. ERP by definition is about people, not just technology and

organizations.

7. Create a center of excellence — an oversight team in addition to the project management

office (PMO). A key to the success of an ERP implementation is a strong tactical team

that can manage change and drive toward stability.

8. Invest in business intelligence. Common data enables ERP software to support more

detailed analysis and reporting. Business intelligence is the engine — the database of

business rules that need to be defined for the benefits to be achieved

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Case Analysis

9. Manage risks. Many risks can be mitigated via thorough testing. Be certain to have a

fallback plan for each implementation milestone where there are risks to mitigate.

10. Consider compliance. Because ERP systems are accounting-based, there are a number of

areas to consider for audits and compliance. Specific IT controls affect ERP systems

implementations as well as the ongoing management of those systems.

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Case Analysis

CHAPTER I

Time Context

From a single classified directory in Brighton in 1966, Yell has grown to become a

leading international directories business operating in the classified advertising market in the

United Kingdom, United States, Spain and Latin America. In the UK, the Group's products and

services include Yell.com, Yellow Pages and 118 24 7 directory enquiries service. Yell employs

a team of 3,250 in the UK, 5,750 in the US and 3,000 in Spain and Latin America. Strong and

consistent revenue growth has been achieved through organic growth in existing markets, the

development and launch of new products and services, and, internationally, through the

acquisition of other directory companies. Being the number one medium of information between

the sellers and the consumers is the goal of this organization. The organization doesn‘t mind

whether how, where and when they can transmit information just as long as they disseminate it

clearly and correctly to the prospective users. The company is actually one of the best

organizations that offer information dissemination. It gathers many prestigious awards that praise

their undeniable great service to their customers and the public. The problem actually arose and

observed during the operating days of the company as they identify the Areas for Improvement

(AFIs). The company focuses on improving their services or initiative rather than introducing

new trends to offer to the public. This is the approach used by the company.

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Case Analysis

CHAPTER II

Viewpoint

Yell Company, as one of the best information disseminating operating business is

establishing an approach that they are using in order to perfectly render the services they offer to

the public. The viewpoint of the manager (management) in operating the business is to use an

approach where they will be focusing on producing the best service that they can in order to

become the best bridge of information between buyers and sellers, regardless of what is the

medium, when and where it will be executed. In addition, the approach used by the company

only tends to improve the weak parts or weak service of the company rather than developing new

initiatives to the customers.

CHAPTER III

Statement of the Problem

The term quality management has a specific meaning within many business sectors. This

specific definition, which does not aim to assure 'good quality' by the more general definition,

but rather to ensure that an organization or product is consistent. In this case, the company uses

an approach in their operations which suddenly give rise to the problem that is faced by the

company currently. These are the following problems encountered by the company:

 The company wants to improve the typical operation using techniques and strategies of

Quality Management.

 The challenge that the company is facing right now is that they are having a difficulties

because of the proliferation of the Areas for Improvement (AFI‘s) which results to

overwhelming number of the said AFI‘s.

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Case Analysis

 The company chooses to focus more on improving the weak areas of the firm rather than

innovating new trends to offer in the market.

 And because of overwhelming number of AFI‘s, the company bears the difficulty in

dealing with all of these and that‘s where the problem is observed.

CHAPTER IV

Objectives

Quality management is focused not only on product or service quality, but also the means

to achieve it. Quality management therefore uses quality assurance and control of processes as

well as products to achieve more consistent quality. It can be considered to have four main

components: quality planning, quality control, quality assurance and quality improvement. This

case deals more with the quality improvement component of quality management. And the main

objective of this study is to determine the best approach that the company can apply to their

operations in order to assure the continuity of the firm. The following are the other objectives to

be met:

 Determine the significant effects in the operations of the application of the current

approach on quality management.

 Identify the other approaches that can be use by the company.

 Make sure that the continuity and the achievements of the firm will be at least reasonably

assured.

 Pin point those activities that contributes to the success of the company and don‘t try to

put it out in your operations.

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Case Analysis

CHAPTER V

Areas of Consideration/Analysis

Yell wants to create value by putting buyers in touch with sellers through an integrated

portfolio of simple to use, cost effective advertising solutions. And they want improvement that

could help the operation to be easier, more effective and meets the needs of the valuable

customers. These are some facts in the case study that explained problems and possible solutions

to be applied.

“Its vision is to be the best business information bridge between buyers and sellers, regardless of

channel, time, or location in the markets which they operate.”

Yell wants further upgrading and renovation in their transactions with their customers.

But then, they will make sure that they will not change the usual process in improving their

services. They want to satisfy the needs of their customer in a more convenient way.

“Yell started introducing quality management in the late 1980‟s by adopting TQM

approach and this approach became integrated into the way Yell manages its business. “

The company used Total Quality Management (TQM) approach in 1980‘s. TQM can be

defined as business management strategy that has been created to increase the quality of products

and services from the company to provide and maintain customer satisfaction. It has been

introduced since 1950s and this business management strategy becomes more known and famous

to be adopted in large companies since late of 1980s. This strategy was made and provided to

maximize customer‘s satisfaction regarding the services and products of the company. Thus, it

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Case Analysis

can be defined as a continuous improvement strategy to achieve and maintain objectives from the

company. So, in connection with the vision of the company, this type of approach is appropriate

for continuous improvement and not engaging to new trends.

“The company has used tools such as the EFQM Excellence Model, Six Sigma, ISO

9001: 2000, ISO 14001: 1996, OHSAS 18001: 1999 and investors in People (IiP) to review and

refine its overall management approach.”

Yell began a company-wide quality improvement programme in the mid-1980s with the

aim of improving customer satisfaction by reducing errors, improving levels of service and

delivering greater value for money. This has led to Yell winning the European Quality Award on

2 occasions, the only company in Europe to have achieved this. These are the approaches used

by Yell for them to establish the improvement they want for the operation.

“Yell sets the scope and direction for its system of management through its vision and

business purpose. It also defines the way this will be achieved through strong and clear values.

Together, these provide the frame work for all their activities. Yell brings this alive for people,

through a structured approach that focuses on both the process and the people:

- Alignment of goals and objectives through a systematic planning process

- Integration of policies and processes through a key process framework;

- Enablement of activity through effective leadership, involvement and

communication”

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Case Analysis

The company put their focus on the said areas in these statements. They set a range that

will meet the objectives of the company. They decide to focus more on improving the weak

zones of the firm rather than remodelling new trends to deal in the market.

“In 1996 the Investors in People Standard was chosen by the senior team as a means of

reviewing and further improving links between the desired quality culture and the leadership and

people management practices. They also saw an opportunity to more closely align people

management and development with business strategy and ensure that training and development

activities clearly supported business, team and individual objectives.”

Based on the research, Investors in People Standard was the chosen approach. In Chapter

5, further explanation about this technique is explained and why the management chose this over

the other methods.

“One of the challenges the company has faced was the proliferation of Areas for

Improvement (AFIs).”

In the corporate world, improvement is important to compete as well as to change for

betterment. However, in these changes it could affect the operation of the business. It could help

for improvement, other times it could degrade. Proliferation means to increase or spread at a

rapid rate. Given the scopes for improvement, they encountered a problem that could lead to

great changes in the operation. In this case, it was said that the company does not want to engage

to new trends but rather for improvement only.

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Case Analysis

“The company has also been very careful not to establish a “flavour of the month”. The focus of

the approach was placed upon improvement and not introducing „another‟ initiative”.

Engaging to new trends open the company for a lot of changes. The company does not

like to be currently but temporarily popular. They want to make these changes for better service

to their valuable customers and also to attract new customers. Their goal is to lead these changes

for a longer effect and not for a short term period only.

CHAPTER VI

Alternative Course of action

These are the following approaches to be used:

1. EFQM Excellence Model

The EFQM Excellence Model is a non-prescriptive framework for organizational management

systems, promoted by EFQM (formerly known as the European Foundation for Quality

Management) and designed for helping organizations in their drive towards being more

competitive. Regardless of sector, size, structure or maturity, organizations need to establish

appropriate management systems in order to be successful. The EFQM Excellence Model is a

practical tool to help organizations do this by measuring where they are on the path to

excellence; helping them understand the gaps; and then stimulating solutions.

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Case Analysis

2. Six Sigma

Six Sigma simply means a measure of quality that strives for near perfection. It is a

disciplined, data-driven approach and methodology for eliminating defects (driving toward six

standard deviations between the mean and the nearest specification limit) in any process – from

manufacturing to transactional and from product to service. The statistical representation of Six

Sigma describes quantitatively how a process is performing. To achieve Six Sigma, a process

must not produce more than 3.4 defects per million opportunities. A Six Sigma defect is defined

as anything outside of customer specifications. A Six Sigma opportunity is then the total quantity

of chances for a defect.

3. ISO 9001: 2000

ISO 9000 is a family of standards related to quality management systems and designed to

help organizations ensure that they meet the needs of customers and other stakeholders

(Poksinska et al, 2002). The standards are published by ISO, the International Organization for

Standardization, and available through National standards bodies. ISO 9000 deals with the

fundamentals of quality management systems, including the eight management principles on

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Case Analysis

which the family of standards is based. (Beattie and Sohal, 1999; Tsim et al, 2002) ISO 9001

deals with the requirements that organizations wishing to meet the standard have to fulfil. Third

party certification bodies provide independent confirmation that organizations meet the

requirements of ISO 9001. Over a million organizations worldwide are independently certified,

making ISO 9001 one of the most widely used management tools in the world today. Despite

widespread use, however, the ISO certification process has been criticized as being wasteful and

not being useful for all organizations.

4. ISO 14001: 1996

ISO 14000 is a family of standards related to environmental management that exists to

help organizations (a) minimize how their operations negatively affect the environment; (b)

comply with applicable laws, regulations, and other environmentally oriented requirements, and

(c) continually improve in the above. It is similar to ISO 9000 quality management in that both

pertain to the process of how a product is produced, rather than to the product itself. As with ISO

9000, certification is performed by third-party organizations rather than being awarded by ISO

directly. The ISO 19011 audit standard applies when auditing for both 9000 and 14000

compliance at once.

5. OHSAS 18001: 1999

OHSAS 18001:2007 is the International Occupational Health and Safety Management

Standard. It was published in July 2007, superseding OHSAS 18001:1999, and is intended to

address occupational health and safety (OH&S) rather than product safety. It provides a

framework to the effective management of OH&S including compliance with the legislation that

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Case Analysis

applies to your activities and identified hazards. The standard is applicable to any organisation

that wishes to eliminate or minimize risk to employees and other stakeholders who may be

exposed to OH&S risks associated with its activities. Many organizations will have elements

required by OHSAS 18001 already in place which can be supplemented to provide a more

cohesive management system to meet the requirements of the standard. Organisations that

implement OHSAS 18001 have a clear management structure with defined authority and

responsibility, clear objectives for improvement, with measurable results and a structured

approach to risk assessment. This includes the monitoring of health and safety management

failures, auditing of performance and review of policies and objectives.

6. Investors in People (IiP)

Investors in People UK was founded in 1993. Today, more than 30,000 UK organisations

are recognised as Investors in People, covering a wide spectrum of UK industries. The Investors

in People standard provides a framework to ensure that organisations improve the way they

work. They have to meet the same criteria, or indicators, as other organisations, but the standard

recognises that each one will meet them in its own way. Investors in People recognise that

organisations use different means to achieve success through their people. It does not prescribe

any one method but provides a framework to help them find the most suitable means for

achieving success through their people.

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Case Analysis

CHAPTER VII

Recommendation

Continuous process improvement takes place in incremental steps. It is a persistent effort.

These are the following steps:

1. Quality development is for employees to look at their work and effort in terms of being

part of a continuous business process.

2. To enhance the quality improvement process select an improvement project with a

specific target. Selecting project with specific plan helps in improving the total quality

management.

3. Assign an appropriate project team to improve it. Define the project steps using a flow

chart, and define variability and problems in the project.

4. Locate the root causes of the problems and recommend improvements, and implement.

5. Measure the results and proceed to a final implementation. Then start the new project.

The continuous quality improvement process should be driven from the top management,

but implemented from the core team member and other staff. The selection of improvement

projects needs a pointed focus. The problem areas should be prioritized, serious processes

selected for improvement, and improvement goals set for the projects team members.

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Case Analysis

CHPATER VIII

Conclusion/Detailed action Plan

In connection, quality management has core concepts. These core concepts will be

applicable on the plans of the company.

- Continuous process improvement

- Customer focus

- Defect prevention

- Universal responsibility

Everyone is a customer - External and Internal customer. The external customer is someone who

purchases the product or service. Internal customers are those who make use of what another

group providers. This has fairly profound implications. It means that every work group has to

think about providing value to the people who utilize their product. This involves finding out

exactly what the user requirements, and ensuring that the process provides it. The initial point for

quality improvement is to determine the customer requirements. When the requirements are

fairly simple, this can be done merely by talking to them.

When dealing with an external customer and the product is extremely complex, the

determination of the customer requirements can be quite time consuming and requires a detailed

analysis. A useful tool for determining the customer requirements and ensuring that these needs

are incorporated into the product design is the Quality Function Deployment Matrix.

Determining customer requirements accurately is an important aspect of quality control.

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Case Analysis

Obviously, it is less expensive to rectify a mistake in defining customer requirements before a

product is produced then it is afterwards. So spending the time and effort to figure out the needs

correctly at the start is time well spent.

Defect prevention or avoidance saves money. Process for manufacturing a product begins with a

specification. Drawings are created, parts are made and assembled, and the product is delivered

to the customer. The cost of rectifying a fault increases by at least a factor of ten as the product

moves through each of these stages. Defect prevention or avoidance is concerned with catching

the errors as early in the game as possible or preventing them from happening at all.

Universal responsibility deals with the fact that total quality is not only the responsibility of the

inspection department but is everyone‘s responsibility in the organization. Quality improvement

should be totally pervasive. Every work group in the business should be concerned with seeking

ways to improve the quality process.

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