Question

The Athletic Footwear

The Athletic Footwear Manufacturing Company makes athletic footwear. Processing of the production orders is as follows: at the end of each week, the production planning department prepares a master production schedule (MPS) that lists which shoe styles and quantities are to be produced during the next week. A production order preparation program accesses the MPS and the operations list (stored on a permanent disk file) to prepare a production order for each shoe style that is to be manufactured. Each new production order is added to the open production order master file stored on disk. Each day, part department clerks review the open production order and the MPS to determine which materials need to be released to production. All materials are barcoded. Factory workers work individually at specially designed U-shaped work areas equipped with several machines to assist them in completely making a pair of shoes. Factory workers scan the bar codes as they use the materials. Once a pair of shoes is finished, it is placed in a box. The last machine in each work cell prints a bar-code label that the worker affixes to the box. The completed shoes are then sent to the warehouse.

Required:

a) Describe a comprehensive set of control procedures that should be included in each system. (20 m)

b) Describe opportunities to use information technology to further improve efficiency of operations. (20 m)

Answer 1

Set of Control procedures that should be included in each system	Opportunities to be use Information Technology to further improve efficiency of operations
There are subsystems which can be elaborated further here viz. Inventory System , Production Order system , Master Production Plan system , Sales Orders system , Despatch system	Now a days , every company is using an ERP or a Software to handle the business transactions. It seems that this company has no software to handle the movements.
A ) Inventory System
An Inventory system is a system where Inventory of the Raw Material , Packing Material, Consumables , Stores and Spares is kept by a designated person called Store Manager	We would recommend an ERP or Software in which the material is recorded in Stores , after checking the Purchase order description with the Invoice etc.
This Store Manager keeps track of the Inventory received , checks with Purchase Orders and description and physical verification with the Invoice / Challan of the Supplier.	When an ERP is used , the GRN or Good Receipt Note cannot be made if the price is different than the Purchase Order. It provides a check on the wrong pricing . Moreover, the quantity check is also there , with a tolerance level.
His role is to store the Inventory safe , counted and properly tagged with all basic ingredients of the material. He should see that each material is having identification on its face ( bag / carton / packing etc.)	ERP has the packing type and Unit of Measurement for each product so as to have clarity among the team member. Each material should bear an Identification as per PO description and should be matching at the time of receipt of the material.
Material storage should be done in such a way so that there is clear bifurcation for each sub material required in Production process	Use of Fork lifts is suggested for fast and better material movement , making use of the restricted space available now a days.
All the Physical stocks should tally with the Stock Registers	Warehouse should be maintained with proper location for each material defined in ERP or Software. It should be stored at the designated place only.
Physical stock taking should be done on regular Intervals. We can follow ABC Analysis format , where material is grouped into Costly , Average and low cost material .	ERP has the facility to provide the difference between physical stock and book stock . You can put Physical stock into the ERP and it can provide you the deviations . The reasons for the same could be found out by the concerned team members.
Material received should be duly recorded into Stock Registers and should be should be available when the Production Orders are issued.	Stock records are having access to the Store , Production and the Top Management so that at any point of time the material movement is done , it is shown into ERP.
Store department should check the availability of material as per the Production order program. He should immediately inform the seniors , if he is short of any material .	MRP – Material Resource Planning is a tool used to check by system the availability of material and the shortfall as per the production plan. MRP runs tells about the shortages, enables the concerned person to raise the requisition so as to see that the material is made available to production before scheduled date.
He should see that for every shoe style , he has no shortages as per Production Plan.
In the given case, the store manager should circulate his stock daily and then every week so as to enable the Production Planning Department to know the stocks availability based on which Master Production Plan could be made.	MRP run automatically tells about the shortages and there is no manual error possible now. Production Planning team immediately comes to know about the shortfall etc
B) Production Order System
Production Planning team should be in constant touch with Store as well the Marketing team so that they get to know the demand to be converted into Production orders. The Communication should be clear and wide to Stores, Production, Finance department also.	Production Order can be checked at any movement and it can be altered at any time , if any alternate material is to be used. In case of any sudden change in the Production plan , it tells us very fast and what could be possible to produce. Manually it is not possible to work with 100% accuracy.
The Master Production schedule ( MPS ) should not be stored at one PC only but circulated by email to all concerned so that everybody concerned has access to the Plan and if any query or issue , could be discussed at a common forum.	There is no need to store MPS in any pc , it is available in the ERP and no one can alter it as any unauthorized access is disallowed and secondly if any change is there, it will show as change.
Any shortfall in the weekly production plan should be immediately addressed to Top Management and any shortfall should be removed out of the Production Plan.	Use of Bar code is a good practice and it can be linked with the ERP so that it reads the same language and particulars as defined in ERP.
Production team should get the material issued from Stores and keep on the Shop Floor so that it could be used as and when required.
Factory workers should work in a group or team , rather than individually. They should be formed into various processes of Shoe making viz preparing the soul, preparing the cover , fixing the accessories and then finishing team.	Department wise functioning is advisable and it can be monitored by proper management. We can have different sections defined in the ERP like Soul, Cover , assembly etc , which will give a better picture for the Management to understand.
The design of the shop floor should be such that it is maintained as per process and on completion of shoe , it is stored , nearby FG Warehouse.	Section wise monitoring explains about the shortcomings by any section and whether the deadlines could be met or not with respect to the dispatch commitments.
Bar code scanning is a useful tool and should be used while storing the completed shoe into the Warehouse and again at the time of dispatch so that the same barcode is used and the remaining is the stock	ERP can show the respective Inventory lying with section so that it is considered into WIP for next order.
C ) Sales team
Sales team should always produce the perfect requirement , considering the production process , without pressurizing the Production and Store department	Any standard wastages are compared with the shortfall in stock and it is within the permissible limits it may be recorded and the deviation could be adjusted in the books.
They should be clear in their orders and should only proceed with confirmed orders.
Sales team should also see that the advance from customers is duly received, as per the company policy , if it is there.
Sales team should ensure that the credit period as allowed by the company is honored by the Customer and Company gets the money , in time.
D) Despatch Team
Despatch team should see that putting of bar code manually is avoided and a bar code sticker is used.
It is advisable that when the shoe box is packed into the box , at the same time , it should be affixed the on the Box and scanning should be done by machine only. Avoiding manual handling