Mt435 Operations Management Case Study Samples

Introduction

Let us speak about the Albatros Anchor company. The production of this company includes two types of product: the snag hook anchor and the bell anchor. This case dedicates to the analysis of the activity of this company, its weak and strong points, ways of improvement.

Question 1

Based on the information presented in the scenario/case study discuss Albatross Anchor’s competitiveness in relation to (please address all items in the below list and provide support for your conclusions):
1. Cost
a) Cost of Production:
It is said, that cost of the bell anchor and snag hook anchor are 8 and 11 dollars respectively. In addition, it is mentioned, that products’ price is ‘the same per unit as their competitors’. Therefore, it is clear, that Albatross Anchor’s competitiveness in relation to the cost of production is high or, at least, not lower than others have. However, there is one serious remark, which we cannot ignore: high level of ‘operations inefficiencies that reduce the profit up to 35%’. This fact influences the company’s competitiveness in a negative way.
b) Economies of Scale:
While speaking on this point, I think that Albatross Anchor’s does not gain much on the economy of scale. It’s products are not those of the mass-market. It means, that the amount of sales is not so high to be able to influence costs.
c) Cost of Raw Materials Sitting Idle in the Warehouse:
The main raw material used both in the production of bell anchors and snag hook anchors is iron. Iron has no expiration date so it can be stored in warehouse for a long period without losing its characteristics. But “warehousing space for raw materials and finished product is limited”. It means low competitiveness in this field.
d) Cost of Finished Goods Sitting Idle in the Warehouse:
The situation with finished goods is almost the same as with raw materials. The anchors do not have expiration date either. The only difference is that increase in stocks of finished goods can occur. In turn, this leads to company’s losses as according to one of the market’s laws: no distribution-no profit.
2. Speed of manufacturing process from order to finished product
The situation in this field is deplorable. There is only one manufacturing line for two types of products. The needed time only for changing the manufacturing process is 36 hours. Moreover, the plant does not suite for the production of large orders. As a result, large orders are produced from 3 to 4 weeks.
3. Flexibility in filling order(s)
There is no flexibility in our company. The reasons were mentioned in question 2.
4. Technology”
As it is said in the text : the plant is antiquated, worn, dirty, and technology-deprived”. All these factors have negative impact on company’s competitiveness.
5. Capacity and facilities

All the facilities are situated in one building. The plant with all the departments and offices share

the territory of 12 acres.
6. Service to customers (what types of services would an anchor company provide to marine wholesalers?
The company is a wholesale organization. Therefore, it has two ways of sale: one is through distributors and the other is OEM customers. Thus, the company does not receive profit in one of the most profitable section – the retail. What concerns shipping facilities, the only way to ship goods is by trail.

Question 2

There are many ways that mushroom/bell anchors may be manufactured. Albatross Anchor is considering two new manufacturing processes (Process A and Process B) to reduce costs. Analysis of the information below will help determine which process has the lowest break-even point (this validates the process is more cost effective).

For each process the following fixed costs and variable costs are identified below:

Based on the information in the table above complete the chart below:
Process A 45-36=9$ - margin
Process B 45-29, 99 = 15, 01$ - margin
b) Process A 650,000 / 9= 72,222 units
Process B 950,000 / 15, 01 = 63, 291 units
(c) Based on your calculations, which Process (A or B) would you recommend for adoption (you can select only one)? Please make sure to explain how you arrived at your conclusion.
First, I would like to identify a break-even point as a situation, when expenses equal revenues. In our case, we calculated the necessary number of goods to meet this requirement. As a result, we have two process with different number of necessary finished goods. To my mind, Process B is more preferable then Process A, because the number of anchors to attain break-even point is 63,000 that is 9,000 less than 72,000 required in Process A. It means, that we will use less raw materials, less work time and will need less space to store goods (what is very important in our case, where the sizes of warehouses are limited).

Conclusion

In conclusion, I would like to point out what may be done to improve company’s productivity and competitiveness:
Building one more product line in order to have each line for each type of anchor;
Reducing operations inefficiencies by improving technology and staff;
Increasing the possible ways of shipping finished goods;
Opening brand store to start earn money in retail.

References

Proctor, R., (2009). Managerial accounting for business decisions. ( 3rd ed.). Prentice Hall: Financial Times.
Davis, G., ( 2003). Corporate reputation and competitiveness. R. Chun, R. Da Silva, S. Roper (ed.). London, New Fetter Lane.
Tsorakidis, N., (2008). Break-even analysis .London Business School.
Chanry, B., (2014, May). How to be competitive today: companies under pressure. Time, 112, 32-36.