Question

CASE 2

AFG is a leading manufacturer of Branded Consumer Food. It has a total of 200 brand and maintains around 600 SKU (stock-keeping-unit). The company has a total of 10 plants thus it maintains also the same number of Inbound Warehouses. It also operates 15 Distribution Centers/Outbound Warehouse nationwide. The head of the plant organization is the Production and Operation Manager and under his control includes the Production Personnel, Maintenance and Engineering Department, Quality Control, Production Planning, Supply Chain Group and Plant Human Resources.

AFG Co. bases for Production

The production department of AFG Co. uses the sales forecast as basis for production output and scheduling. The sales forecast is reduced by actual stock-on-hand so as not to produce more than what was forecasted and to prevent surplus products.

The product has only three (3) months shelf-life meaning it will expire after 3 months. Thus, the company must not produce more than the forecast. Key Accounts customer are so particular with product shelf-life that you cannot deliver to them more than one month old products. This customer requirements has to be complied by AFG Company because if not the key accounts will reject deliveries and this will result to sales deduction as return.

Performance Appraisal: Part of the performance appraisal of the Production Department is how they were able to produce or meet production quota based on forecast. They must also schedule with maintenance and engineering department regarding preventive maintenance because this requires production stoppage.

Forecasting. The marketing department is the sole party in creating a sales forecast for the company. They usually take into account raw material availability and promotional and marketing activities both has an effect on demand. They also gather a three (3) month average sales as a component in creating a sales forecast.

Warehouse Congestion

On the third (3) week the company experiences warehouse congestion because of too many stocks sitting idly in the warehouse. Sales is not yet picking because it is the lean month as far as the product of AFG is concern. Production personnel were complaining because of non-pull-out of stocks by Finished Goods Warehouse personnel who in return argued that no more enough warehouse space, which by the way during lean month the warehouse is only in half-capacity. Approved deliveries is still few because of the quarantine. Basis for deliveries of Logistics or Inbound is the approved actual order not based on an estimate like a sales forecast.

Production Personnel threatens to stop producing because of congestion in the production floor because of non pullout by Supply Chain specifically logistics group.

This is an operational issue, if you were the Operations Manager how will you solve this impasse between production and Logistics.

What are AFG’s problems regarding production? Use the template below for your guide in making suggestions or solutions to the problem.

I. Statement of the Problem - State the problems facing the manager/key person

II. Causes of the Problem – Provide a detailed analysis of the problems identified in the Statement of the Problem

III. Alternative Solutions - Include two to three possible alternative solution; evaluate the pros and cons of each alternative against the criteria listed.

IV. Recommendation and Justification - Identify who, what, when, and how in your recommended plan of action; Solution and implementation should address the problems and causes identified in the previous section; The recommended plan should include a contingency plan(s) to back up the “ideal” course of action.

Answer 1

Answer:

Statement of the problem:

Congestion in the warehouse as a result of non selling of the products and threatening of production personnel to stop production as a result of failure of the logistics department to pull the piled up stock of the production department. Manager also faces a problem of shelf life of the product.

Causes of the problem:

1. Congestion in the ware house is due to non selling of the product as a result of quarantining of the customers who are seldom coming in the market to purchase the product.

2. Production personnel are threatening to stop the production process as because of production there is a large amount of stock that has been piled up in the production department.

3. Because of non selling of the product and pilling up of the products in the warehouses, manager faces a threat that product should not get degraded as the shelf life of the product is 3 months. Moreover, customers do not purchase the product that has exceeded one month period of production time.

Alternative solutions:

1. AFG should start delivering the food directly to the places of the customer so as to clear its warehouses and to mitigate the risk of degradation of the product. However, the disadvantage of this solution is that, company would be required to bear extra cost of home delivery.

2. AFG should start vacuum packing the food product in such a way that it would increase the shelf life of the product. Under this situation it would be difficult for company to convince the consumer about the increased shelf life of the product.

3. AFG should start selling the products at the discounted rate so as to attract the orders from the customer. Since, there is quarantining period, AFG should provide telephone numbers to the customers by publishing it in the print media and other marketing media so as to make the customers about the discounted prices and the facility of home delivery. Discounted prices would lower the revenue of the company.

Recommendation and justification:

AFG should start selling the products at the discounted rates. At the same time it should deliver the products to the home of the customers. Home delivery should be carried out through those employees who are remaining idle such as the production personnel who are being idle as a result of inability to further keep on manufacturing of the products. Selling of the product at the discounted rate would help the company in generating some of the revenues which is altogether better than losing all of the revenues as a result of loss of the life of the product.