23rd November, 2014
Operations Management to assist Albatross Anchor
Albatross Anchor has had exponential growth since its inception. It has grown from a family based business that had four members to employing one hundred and thirty people. The successive quick growth of Albatross Anchor’s business has given rise to operational shortcomings that are at present hindering Albatross from achieving its revenue perspective. The principle of this essay is to scrutinize Albatross Anchor’s operational shortcomings and recommend operational amendments that will smooth the progress of Albatross to stay viable both in terms of their product and the earnings in relation to their competitors. Furthermore, improving competencies will improve the essential economic resources that Albatross Anchors will require to sustain potential growth. We review the changes that the company needs to implement to achieve efficiency and meet the company’s needs as well as those of their customers.
Challenge one: Cost Management
Although Albatross are currently at par with their competitors in terms of product quality and pricing, its revenue scope can vary to the degree that it is 35% less than its rivals. The divergence in income limitations is ascribed to inefficiencies in functions. So as to stay at a competitive level, Albatross Anchors should focus on lowering production costs that would enable them to achieve larger profit margins. They would be able to decrease fixed costs by increasing production since this would spread the costs across more units and hence decreasing the price per unit they are needed to pay in return. As the production levels increases the production costs decrease accordingly. As Russell & Taylor (2011) noted, increase in production levels decrease production costs which in turn will enable them to regain profit margins lost to shortcomings in production hence make them healthier competitors in the market.
Challenge two: Time management
Albatross is incurring losses due to the time lost in the production facility where there is a delay of 36 hours while switching from the production of one product to the next. Also, a delay is experienced in the receipt of raw materials and the shipment of products. It is mainly attributed to the idle sitting of raw materials and products in the warehouse. I would recommend that they combine the receiving and shipping departments and move them to one area. Another recommendation is that they install a second production so that they can simultaneously manufacture both products.
Challenge three: Performance management
The delay in the production reduces the performance of the business in a great way. To further ensure that the performance is improved, Albatross should update and organize their administrative offices in a manner that would increase their efficiency.
Challenge four: Technology adoption
Lastly, I would recommend that they review their accounting department’s software to ensure that it will benefit them with accounts payable, receivable and the payroll system. In addition to this, it is important that they update their obsolete and outdated machinery that is not only a health hazard to the workers, but also a great disadvantage compared to their competitors. Upgrading the systems would help lower manufacturing and administrative costs thus maintain an edge in profit margins according to Hill & Jones, 2009. Whereas upgrading the technology would enable Albatross be in compliance with the US safety and environmental standards.
Proposed changes and / or alterations
Update and organize the administrative offices. The administrative offices are presently unorganized, dilapidated and incompetent. With an upgrade in technology, e.g. computers, faxes, emails, accounting software, etc., Albatross would function more competently thus running the business more lucratively. A disorganized office can lead to missed payments, improper billings, poor communications, mismanagement, and worst of all poor customer service (Harvard, 2004).
Install new state-of-the-art and modern technology production lines. Modern technology will allow for a safer and a quicker fabrication of the anchors. The updated production technology will enable Albatross to manufacture bulk batch orders with a reduction of lead time thus serving the customers better compared to the competitors. Furthermore, with improved efficiencies, the company can look at price cuts to achieve added competitive advantage.
Another change would be the division of the production areas of the two products. It would increase productivity since there would be a loss of downtime given that at present Albatross experiences a 36 hours downtime in the change of manufacturing process. With this alteration, the company would produce more products in less time hence building customer satisfaction that in turn ensures improved gains.
Relocate the shipping area to the west end of the building. The current location of shipping is on the east as it has been since inception of the company because shipments are done by truck. Now that Albatross has expanded to include shipment by rail, it is more convenient to relocate the shipment to the west end since the rail access is only on the west of the building. This will let the consolidation of dispatch into one area and will in turn free up receiving for the reception of raw materials exclusively. With the alterations, receiving will not do double work and this will lead to a lower overall cost since more work will get done in less time.
Implications and complications
One implication would be that Albatross can put goals for a fresh administrative function including customer response, communication, and billing thus providing a distinctive consumer service advantage over the competitors. Another implication would be the improved working conditions and enhanced safety measures thus creating a good working environment. A complication that would arise is that with the proposed relocation of the shipping area to the west end, is the lack of a road on that end that cause great limitations. Also, there would be complications in the installation of new production lines since it would require clearance of some of the space already in use by the current line.
Proposed changes Gantt chart
The administration office organization will require at least two weeks and this implies that other changes could not be effected without first accomplishing a greater percentage of this task as shown in the gnat chart above. As the office organization nears completion, division of production areas to have the two products in distinct areas will start. As the two products get different areas then the installation of new production lines should begin to go concurrently with the division. The new lines will be installed mainly at night and during non-manufacturing hours to minimize the interference with the production. Lastly there will be the relocation of the shipping area that will take effect with the products from the new lines that will enable a smooth transition of events and processes in Albatross Anchor.
- Harvard business essentials: Managing projects large and small. (2004). Boston: Harvard Business School Press.
- Hill, C., & Jones, G. (2009). Theory of strategic management (9th ed., International ed.). Mason, Ohio: South-Western.
- Russell, R., & Taylor, B. (2011).Operations management: Creating value along the supply chain (7th ed.). Hoboken, NJ: John Wiley & Sons.