Capacity is attributed as a system’s capability of producing goods dropping services in a particular time period. Capacity calculates the ratio of operations.
Capacity planning basically is the function of evaluating and putting the adequate capacity of the operations result to which it can acknowledge the demands settled upon it. In short, determining the way in which operations would respond to the inconsistency in demand. The importance of capacity planning is that it determines best usage of the resources. Also it takes care of crucial decision-making process which involves development of the operations, launching new products, alteration of existing products. Planning makes sure that costs are preserved at minimum level without any change in the quality (Wisner, 2016).
The three factors of effective capacity management and design in Call-Us Plumbing Company are:
The products and system design is a very important factor that affects capacity management. If the company produces similar types of plumbing tools rather than different varieties of tools they will be able to supply the tools at a faster pace. There will be more chances of good output if likeness of the products will be maintained.
Facilities factors include location, labour supply, and transportation costs of the plumbing items. If these factors are efficient the work would be smooth and output will be more. The design characteristics are important for the workers, if the environment is good they will work more effectively.
Process factors comprises of quantity and quality with time capability. Along with the quantity of the plumbing items their quality should be good. Because if the quantity is good and the quality are bad then the items will be re-examined and hence efficiency will be decreased. The time to change the plumbing items or their services should be minimum then only it will result into effective capacity management.
Capacity utilization rate also known as operating rate is measurement by which the rate at which apparent output levels are being met can be computed. The output is given as a percentage and it describes the accurate data which tells the inattention that the company is at a point of time. Capacity utilization rate also helps in verifying the level at which piece costs will rise (Wisner, 2016).
Capacity utilization rate= Actual Output / Potential Output * 100
Here,
Actual output=300000 plumbing items per year
Potential output=5500000
Therefore, capacity utilization rate=300000/5500000*100
=5.45%
The three basic capacity or production planning strategies are:
In this, the company raises its production capacity in prospect to the increase in demand. It is called as an aggressive strategy as the motive of this strategy is to attract customers away from the challengers. One of the drawbacks of lead strategy is that if the demands do not increase than the company get left with excess inventory which is waste and is costly too.
The concept of lag strategy is that the capacity is increased after the operation is energized and the increase in demand is being detailed. It is also known as a reactive approach as it adapts its capacity in return to the demands. This strategy results in less wastage but at the same time there is loss of customers.
Also referred as tracking strategy, this strategy highlights on little and additional alterations to capacity which depends on dynamic situations of the market. The chances of risk is least in this strategy but it needs more attempts and is difficult to attain in comparison to led and lag strategy (Wisner, 2016).
The three capacities or production planning strategies which can be used by Call-Us Plumbing company are:
As the technology keeps on changing, adaptation to those technologies will make the business more efficient and successful. It will help the company to make profitable outputs.
The Company produces the plumbing items before it is demanded by the customer and hence the delivery is early and work flow is good.
With this strategy, the company accomplishes the occasional order prior to the real order and hence there is no wastage of products.
The two reasons why firms keep a supply of inventory are,
Companies prefer to buy materials in bulk as they avail huge discounts. The suppliers captivate companies by giving them such discounts. Most of the times the savings on the discounts is extensively greater than inventory carrying costs.
Mostly the production plan varies according to the stocks and it gets difficult to know the exact demand. Therefore, the companies decide to maintain extra stock to meet these demands and hence stability is attained (Muller, 2011).
Calculation of present total annual stocking cost
D= 10,000
Q= 400
H= 0.40
S= 5.50
Total Annual Stock Cost= D* S + Q * H
Calculation of Total amount of stocking cost
Total amount of stocking cost= $112.10
The estimate savings in stocking costs
Total annual cost- Total amount of stocking costs at EOQ
=217.5-112.10
=$105.4
= √2 * 10000* 5.50
0.40 1- 40
120
= √110000
0.266
= √423077
= 650.44units
The estimated savings in total annual stocking cost as compared to the EOQ and total annual stocking cost when valves are all delivered at once.
At EOQ= 112.10
Cost when valves are delivered at once (POQ) = 130.08
Savings = POQ-EOQ
= 130.08- 112.10
= $17.98
In a fixed inventory management system the placement of order is continuous i.e. from time to time. This leads to an endless monitoring of the inventory levels. But always this continuous ordering is of different type of quantities. The various quantities are order in a fixed time interval.
In a variable period inventory system, the placement of order is regular as well as variable. No monitoring of the inventory level is possible. The quantity level keeps on changing and is not ordered in a fixed time interval (Muller, 2011).
The idea of Just-in-Time was emerged from Japan. Just-in-Time is a way of administering the manufacturing systems and hence costs are reduced and profits are increased. The production and delivery of products is done in few hours before they are used. Advantage of JIT is the storage is reduced and hence wastage is minimised. The production is for specified customers and the whole process is done in one cycle.
Kanban was developed by Toyota. This concept makes use of visual signals. It is a type of inventory management system in which the company stocks the essentials for the processes to enhance the producing productivity. It is also used in Six Sigma as it improves the efficiency.
The inventory management tools are categorized into four parts described as,
The software tool is required to maintain a documentation of quantities, the resupply order along with the inventory transactions. Different businesses use different types of software’s according to their use. Some companies also have their own internal development teams which use their own made software.
Software and hardware are linked with each other. If the company is using software it has to use hardware like servers, devices, bar codes, printers, desktops etc. A right hardware is necessary to use software so that the software can be supported by the hardware.
Audit systems are a system which calculates the success rate. This is a necessary tool as the process needs to be evaluated regularly to see that the organisational goals are met. The audit system calculates the profits and loss made by the company. A proper audit is being conducted to check the strength and weakness of the business.
The logistics models are a basic inventory management tool. A framework is necessary for all the models whether it is the order level or the delivery level. A proper model of the costs and the quantities is made and then execute in a proper way to get effective results.
Supply chain management (SCM) can be defined as the unified management for outlining and supervising the supply chain activities to make the most of customer values and gain feasible competing benefits. These activities involve product development, production, logistics, sourcing along with information systems which are used to co-relate with the supply chain activities.
The processes involved in the Supply Chain Management of a Fast Moving Consumer Goods company in New Zealand are:
The company must develop a plan to describe how a service or a good will fulfil the demands of the customers. A beneficial supply chain is to be planned. The major area of planning is maintaining a set of metrics so that the supply is monitored which is of less cost, and deliver good quality and value to the customers.
This stage is associated with the relationship with the suppliers. Company must choose the suppliers efficiently so that it can buy the goods and services at the best possible price, at the right time and in right quantity. After this, the managers can administer goods and services inventory, accept and verify consignments and license supplier payments.
At this stage, various things like arranging production actions, examining the products, packing and then scheduling delivery. This is a crucial process as here the company is able to manage quality levels, labourer capacity and production productivity.
This process combines all the processes which involve handling customer problems, and choosing the best distribution strategy. The customers are invoiced and the exact payment is received, along with this management of import and export requirements is done.
The processes for Call-Us Plumbing Supply as Fast Moving Consumer Goods are:
The Call Us Plumbing Company prepares a list of activities which are required to attain the objectives. A proper plan is made so that the demands of the customers are satisfied. The company improves the business plans and their marketing ideas. Along with this, plan is made so that the supply is tracked and hence the costs gets as low as possible without disrupting the quality in a proper way.
The company purchases goods from the suppliers. The final step of purchasing is taken care by the finance department who makes records of the products which are bought. The company takes care when the prices are low, how much quantity is needed. The payments are being licensed at the end.
The Company seeks that the work is done effectively along with the best accessibility of assets and the customer’s demands. Processing is examination of products and then delivering them. The availability of materials is checked and then a sales plan is prepared. The quality levels and the production productivity is managed.
Distribution deals with proper coordination of the organisation and sales. The Company takes care that the delivery of the products is done timely and the payments are received. And it implements the best distribution strategy and seeks the import and export requirements.
The supply chain management process flow diagram of Call-Us Plumbing from their supplier to producer and to customer is as follows:
This flow depicts flow of an item from the manufacturer to the consumer. The company makes sure that the material flows as fast as possible so that the cash cycle gets minimized. This flow is bi-directional as the item can flow in opposite direction as well in case of any repair and exchange.
This flow depicts flow of all the data like the monthly schedules, purchase order, complaints and reports on the performance. The flow from producer to consumer end comprises of presentation of the product, offer, acceptance of the order, delivery, payments, etc. Flow of information is very necessary as it maintains an interaction between the producer, supplier and the customer.
After the invoice is made by the producer, the client cross checks the invoice. After that money flows from the customer to the supplier and then to the producer.
The Call-Us Plumbing Company produces the plumbing items and hence is the producers.
The Company decides on its own if it wants to achieve all the processes or wants more firms. After taking all the information from the customer and the acceptance of the order the company tarts planning the production process.
The Company transports the products to the supplier and then supplier transports it to the customers. Many factors affect the transportation like the fuel prices, globalization, labour laws and economic uncertainty. The transportation managers should decide the primary mode of transportation and plan the outsourcing. He should make sure that the services are satisfied and that too at the minimum costs. A proper planning or the routes is scheduled according to the different customers.
A proper storage of materials is necessary. For labelling, tool is selected according to the quantity of orders and the business process types. The Warehouse team stores the products at the storage location and then seeks the functionality of the products. The other processes like labelling and shipping functions are then supplied.
For distribution of products the Call-Us Plumbing Company makes sure that the basic features like speed, visibility are maintained. The delivery should be managed quickly and easily. A proper visibility of the product is given to the customer so that no return request arises.
The major current trends in supply chain management are:
The supply change management is getting more digitized which includes cloud, mobile and network connectivity. It’s changing to get digital customers and is working with digital business technology.
Outsourcing the supply chain is proved to be very beneficial for the companies. Although there are risks with this process but the companies are adapting this as they gain many economic profits. If the outsourcing is planned in a good manner then it is one of the best trends of the supply chain management.
Internet of things of things is gaining market as by using its application the supply chain can be optimised easily. As the companies data can be on going and external data can be collected easily.
Direct delivery became a very famous trend as the transportation cost is reduced. Along with this, there was an increase in the number of customers because the time span of delivery was also reduced.
Using this type of analysis, the demands of the consumers can be easily forecasted by use of tracking and searching data. And with this analysis the inventory levels in supply chain is maintained.
A deep understanding of the humans and interaction with the machines increased supply chain performance. Robotics is used in warehouse and work is made easy also the efficiency is increased.
The four strategies of supply chain are:
This strategy is used in supply chain when the company knows the demands but the delivery time is less. The company keep producing the products but as the time is less it discharges the shipment slowly but continuously so that the stock is maintained. Throughout this strategy, push and pull is done at the retail channel.
This strategy comes into practise when the production of products on the basis of the demands. The lead time period is very long and the supply of demand is stable. This strategy is implemented to maintain the stability of the demands along with this their quality is ensured.
The basic aim of strategic inventory strategy is to make an analysis of the demands. After the analysis is done, the company gets to know how much stock is to be delivered along with the delivery place. To keep up the stock many strategies are combined with the strategic inventory strategy.
The pull strategy comes into play when the lead time is very short and on the other hand the demand is very high. In respect to fulfil the demands the chances of wastage gets high. Therefore, pull strategy takes care that the demand meets but with minimum wastage. Hence, the pre stock kept in the inventory is used along with the new products.
The supply chain strategy which is appropriate for Call-Us Plumbing Supply to improve their performance is the active supply chain strategy or the push strategy. As the basic motto of push strategy is to stabilise the demands. It is also flexible in nature as the lead time is very long and the company can acknowledge the changed customer requirements if there are any. This strategy performs effectively in response to the customers. The company mostly asks time to improve the supply and meet the demands of the customers. If the customer will be satisfied it will gain more business for the Company. Hence, the company gains reputation as well as profit.
From the research, it can be concluded that Call-Us Plumbing Company is a successful company in New Zealand.
In terms of supply chain management, the performance of the company is highly efficient and impressive. The supply chain management is defined according to the demands of the customers and is examined by their satisfaction. The inventory management is done in a way that at the time of high supply there is sufficient stock to fulfil the demands. Along with this, the capacity is efficient enough to complete the creation rate and supply the customer demands.
Call-us Plumbing Company administers the plumbing items supply business and the work is done according to the customers demands. To improve its performance in terms of supply chain management the company should have an eye on the EOQ model and implement ideas to reduce the total holding cost and the order costs. Along with this, the company should also hold inventories so that the products get delivered on time. If there will be extra raw materials in the inventory the performance of the capacity can be increased easily.
References
Muller, M. (2011). Essentials of Inventory Management. USA: American Management Association.
Wisner, J.D. (2016). Operations Management: A Supply Chain Process Approach, USA: SAGE Publications.
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