Operations Planning & Control

| June 19, 2015

Operations Planning & Control

Coursework Briefing
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Two reports to address the questions given at the end of the two case studies attached

There are two case studies in this assignment. Your task is to write two self-contained reports which address the questions in the case studies. The reports should have their own structure. Each report should include an introduction, a main body – using appropriate and meaningful headings and sub-headings to structure it – and a conclusion. Use tables, figures, and bullet points where appropriate to support your discussions and enhance your report presentation. The length of this assignment should be no more than 3000 words in total.

The reports need to make reference to relevant external reading to support your discussion and arguments wherever relevant.

The relevant calculations performed in MS Excel and the project plans produced using MS Project should be attached as appendices. Use the “copy picture” function in MS project to copy network diagrams and Gantt charts into MS Word.

You will need to include key figures and tables in the main body of the report so that the report content can be followed easily without the need to refer to appendices. Readers will only check appendices if they require further detailed information.

The general marking criteria in the module specification document are applied wherever they are applicable, which is attached at the end of this assignment briefing.

PART ONE – RINGINGLOW FARM

Case date: At the end of 2014

Introduction
At the beginning of 2011, Fred and Gillian GILES decided to open up their mixed (dairy and arable) farm to the paying public. They invested all their savings into building a 45-space car park and a 6 space park for 40-seater coaches; a safe viewing area for the milking parlour; special trailers for passengers to be transported around the farm on guided tours; a children’s adventure playground; a picnic area and a farm shop. Behind the farm shop they built a small “factory” making real dairy ice cream.

Gillian took responsibility for all these new activities whilst Fred continued to run the commercial farming business. Through advertising, giving lectures to local schools and organisations and through personal contact with coach firms, the number of visitors to the farm increased steadily. By the end of 2014, the number of paying visitors levelled out to just short of 20,000 per year. The monthly data regarding the number of the visitors in 2014 can be found in table 1 in appendix 1 at the end of this case. Although the farm opened to the public at 11:00 am and closed, after milking was finished, at 6:20 pm up to 90 per cent of visitors in cars or coaches would arrive later than 12:00 noon, picnic until around 2:00 pm and tour the farm in the afternoon. By 3:00pm, around 40 per cent would have visited the farm shop and left. The remaining 60 per cent would wait to view the milking, and then visit the shop to purchase ice-cream and other products before departing.

Visitors to the Farm
Gillian opened the farm to the public each year from April to October inclusive. Demand would be too low outside this period: the conditions were often unsuitable for regular tractor rides and most of the animals had to be kept inside. Early experience had confirmed that mid-week demand was too low to justify opening, but Friday through to Monday was commercially viable, with almost exactly twice as many visitors on Saturdays and Sundays than Fridays and Mondays. Gillian summed up the situation:

‘I have decided to attempt to increase the number of farm visitors by 35 per cent through all the opening months in 2015 (This implies that she is planning to increase visitors 35 per cent in each month across all the opening months). This would not only improve our return on “farm tour” assets, but would also help the farm shop to achieve its targets and the extra sales of ice-cream would help to keep the “factory” at full output. The real problem is whether to promote sales to coach firms or to intensify local advertising to attract more families in cars. We could also consider tie-ups with schools for educational visits, but I would not want to use my farm guide staff on any extra weekdays as Fred needs them three days per week for “real” farming work.’

The Milking Parlour
With more than one hundred cows to milk, Fred invested in a ‘carousel’ parlour where cows are milked on a slow-moving turntable. Milking usually lasts from 3:00 pm to 6:00 pm, during which time visitors can view from a purpose-built gallery which has space and explanatory tape recordings, via headphones, for 15 people. Gillian has found that, on average, spectators like to watch for 10 minutes, including 5 minutes for the explanatory tape.

‘We are sometimes a bit busy on Saturdays and Sundays and a queue often develops before 3:30 pm – about after 3 shows – as some people want to see the milking and then go home. Unfortunately, neither Fred nor the cows are prepared to start earlier and we cannot increase the number of people allowed in one show. However, most people are patient and everybody gets their turn to see this bit of high technology.’

The Ice Cream Factory
The factory is operated 48 weeks per year-equivalent to an average of 4 weeks a month, 4 days per week, 8 hours per day. All output is in one-litre plastic boxes. There are two stages in the process required to make ice cream: mixing and fast-freezing. Although extra mixing hours are available, the current fast-freezing equipment cannot safely and fully fast-freeze more than 450 litres over a working day. As it takes one hour to clean out between flavours, only one of the four flavours is made on any one day, there is therefore 7 hours for production and 1 hour for cleaning the equipment to be ready for the next day. The equipment is maintained once every month for about two hours during non-working days. Therefore time spent in maintenance does not affect the daily efficiency and utilisation. This assumes that nothing goes wrong during those working days. The finished goods freezer holds a maximum of 11,000 litres, but to allow stock rotation, in practice it cannot be loaded to above 9,000 litres. The finished goods inventory was zero (0 litres) at the beginning of 2014. A level capacity plan was operated in 2014 with 425 litres produced in a single production day. Finished goods inventory at the end of December 2014 can be obtained using these data and sales data given in table 2 in appendix 1 at the end of this case study. The ending inventory for 2014 carries over to 2015.

Ice Cream Sales
The finished product is sold to three categories of buyer: retail shops, paying farm visitors, and local customers who only visit the farm shop.

Retail shops
The majority of output is sold through regional speciality shops such as delicatessens and food sections of department stores. Deliveries are made by Gillian in the van on Tuesdays.

Paying visitors to the farm
Having been shown around the farm and ‘factory’, a large proportion of visitors buy ice-cream at the farm shop and take it away in well-insulated containers that keep it from melting for up to two hours in the summer. Gillian commented:

‘These are virtually captive customers. We have analysed this demand and found that on average 1 out of 2 customers buys a one-litre box.’

‘Farm Shop Only’ Visitors
A separate, fenced road entrance allows local customers to purchase goods at a separate counter of the farm shop without payment for, or access to, the other farm facilities.

‘This is a surprisingly regular source of sales. We believe this is because householders make very infrequent visits to stock up their freezers, almost regardless of the time of year or the weather. We also know that local hotels buy a lot this way, and their use of ice-cream is year-round, with some additional volume being required at Christmas when there are a larger number of banquets.’

Conclusion
Gillian’s concluding comments were: ‘we have a long way to go to make this enterprise meet our expectations. During these years, we have invested a relatively large amount in capital. We probably made only a small return on capital employed this year. We must make our investment work better. In 2015, we expect the same percentage of farm visitors to purchase ice cream from the farm shop. Therefore the ice cream sales in the shop should increase even though the local demand is expected not to change. At the moment, because of a competitor’s aggressive marketing campaign, we have received fewer contracts compared to the same period last year. We expect an 8% reduction in our sales to these outlets in 2015. I am thinking of increasing the number of flavours of our ice cream from 4 to 10 in the future to try and defend the delicatessen trade against the competitor.’

Appendix 1    Ringinglow farm data records

Table 1    Monthly number of paying farm visitors in 2014

Jan    Feb    Mar    Apr    May    Jun    Jul    Aug    Sep    Oct    Nov    Dec    Total
Visitors    0    0    0    1748    2576    3690    3995    4258    2577    922    0    0    19766

Table 2    Monthly ice cream sales (litres) in 2014

Jan    Feb    Mar    Apr    May    Jun    Jul    Aug    Sep    Oct    Nov    Dec    Total
Retail shops    2780    2904    5702    3658    4734    6131    5917    5380    5272    3442    2473    5380    53773
Farm shop total*     501    834    669    1331    1954    3281    3522    3879    1934    1307    835    1230    21277
Total    3281    3738    6371    4989    6688    9412    9439    9259    7206    4749    3308    6610    75050

*Includes sales from both ‘paying visitors to the farm’ and ‘farm shop only visitors’.

QUESTIONS                         (50% of the total mark)
(It is recommended that you use Excel to produce plans and perform calculations.)

1.    Evaluate Gillian’s proposal to increase the number of farm visitors in 2015 by 35 per cent. You may wish to:

•    analyse the demand for farm visits in 2014 and 2015 with a focus on the peak-time demand and its impact on farm visit operations.
•    analyse the capacities and identify the capacity constraints for the farm visit side of the business.
10% (300 words)

2.    Explore capacity plans for the ice-cream production business by:

•    Analysing and comparing the ice cream sales for 2014 and expected demand in 2015.
•    Identifying (do not calculate) the level capacity plan (monthly) which had been used in 2014 for the ice cream factory and the final goods inventory at the end of the year.
•    Producing (calculate the monthly production rate) an effective level capacity plan, which satisfies all the monthly demands in 2015, based on the Gillian’s farm visitor increase proposal.
•    Identifying the capacity constraints of this level capacity plan. Producing a chase demand plan to solve the problem.
•    Evaluating the efficiency and utilisation of the equipment over these two years.
•    Exploring the implications of different capacity plans in terms of the impact on the business
20% (600 words)
3.    What factors should Gillian consider when deciding to increase the number of flavours from 4 to 10? Identify advantages and disadvantages of this proposal. (You also need external reading on relevant topics from different operation management books, in addition to the core text and contents covered in lectures and seminars.)
10% (350 words)
4.    Make recommendations to Gillian for her to manage capacity/demand more smoothly without further investment in capital?
10% (350 words)
Note: For any calculations, assume that each month consists of four weeks. The effects of public and Bank Holidays should be ignored for the purpose of this level of analysis.

PART 2: THE DEVA CONSTRUCTION CORPORATION

Case date: November 2014

The Deva Construction Corporation has been awarded a contract for the construction of a 20,000 seat stadium. The construction must start by Monday 2nd February, 2015 and be completed within one year. A penalty clause of £150,000 per week of delay beyond the week starting from Monday 1st February, 2016 is written into the contract.

Jim Brown, the president of the company, called a planning meeting. In the meeting he expressed great satisfaction at obtaining the contract and revealed that the company could net as much as £3 million on the project. He was confident that the project could be completed on time with an allowance made for the usual delays anticipated in such a large project.

Bonnie Green, the director of personnel, agreed that in a normal year only slight delays might develop due to a shortage of labour. However, she reminded the president that for such a large project, the company would have to use unionised employees and that the construction industry labour agreements were to expire at the end of Friday, November 20th, 2015. Past experience indicated a 50-50 chance of a strike.

Jim Brown agreed that a strike might cause a problem. Unfortunately, there was no way to change the contract. He enquired about the prospective length of a strike. Bonnie figured that such a strike would last either 8 weeks (70 per cent chance) or 12 weeks (30 per cent chance).

Jim was not pleased with these prospects. However, before he had a chance to discuss contingency plans he was interrupted by Jack White, the vice-present for engineering. Jack commented that a colder December in 2015 than had been assumed was now being predicted. This factor had not been taken into consideration during earlier estimates since previous forecasts called for milder weather. Any concrete pouring in December might thus require special heating at a cost of £5000 per week.

This additional information did not please Jim at all. The chances for delay were mounting. And an overhead expense of £5000 per week would carry on being incurred in case of any delay. The technical details of the project are given in the appendix to this case.

The management team was asked to consider alternatives for coping with the situation. At the end of the week four proposals were submitted.

1.    Expedite the pouring of seat gallery supports. This would cost £200,000 and cut the duration of the activity to 6 weeks.
2.    The same as proposal 1, but in addition, put a double shift on the filling of the field. A cost of £100,000 would result in a 5-week time reduction of this activity.
3.    The roof is very important since it precedes several activities. The use of three shifts and some overtime could cut 6 weeks off the roofing at an additional cost of only £80,000.
4.    Do nothing special until November 20th, 2015. Then, if December is indeed colder than normal and no strike occurs, defer the pouring of the seats until the cold wave breaks if the schedule permits; otherwise heat whenever necessary. If a strike occurs, wait until it is over (no other choice) and then expedite all remaining activities. In that case, a two-third of the normal duration of any activity could be cut in maximum. The additional cost per activity for any week which is cut would be £30,000.

Appendix: Technical Details of the Stadium

The stadium is an indoor structure with a seating capacity of 20,000. The project begins with clearing the site, an activity that lasts 8 weeks. Once the site is clear, the work can start simultaneously on the structure itself and on the field.

The work in the field involves subsurface drainage which lasts 8 weeks, followed by filling for the playing field and track. Only with the completion of the filling (14 weeks), can the installation of the artificial playing turf take place, an activity that consumes 12 weeks.

The work on the structure itself starts with excavation followed by the pouring of concrete footings. Each of these activities takes 4 weeks. Next comes the pouring of supports for seat galleries (12 weeks), followed by erecting pre-cast galleries (13 weeks). The seats can then be poured (4 weeks) and are ready for painting. However, the painting (3 weeks) cannot begin until the dressing rooms are completed (4 weeks). The dressing rooms can be completed only after the roof is erected (8 weeks). The roof must be erected on a steel structure which takes 4 weeks to install. This activity can start only after the concrete footings are poured.

Once the roof is erected, work can start simultaneously on the lights (5 weeks) and on the scoreboard and other facilities (4 weeks).

Note: Always keep the unit of the task duration in weeks, NOT in days. Therefore you do not need to consider whether they work 5 days or 7 days in a week. As in the Ringinglow case above you can ignore the impact of public and Bank Holidays. Make sure your project tasks are “Auto-Scheduled”. You may use 1/2 or 1/3 week in calculations if this is necessary.

QUESTIONS                (40 % of the total mark)

5.    Produce a project plan (in Network Diagram and in Gantt chart form) using MS project software based on the details given in the appendix and attach both the diagram and the Gantt chart as appendices to your report. Explain the plan regarding its duration, critical activities and critical path. Identify the plan’s limitations in your report.
15% (450 words)
6.    Analyse the four proposals in terms of their validity to the total project duration based on project management knowledge. Based on the analysis calculate Expected Costs (EC) for each valid proposal, and propose a decision using EC as the sole criterion. Discuss the strengths and weaknesses of each proposal.
15% (450 words)
7.    What other factors might enter into the decision? For example would behavioural, organisational and/or cultural factors play a part? You should make reference to external reading when covering this point. What decision would you recommend to the president of the Deva Corporation? Please support your arguments with reasons (this is applied to all points in this question).
10% (300 words)

Module Assessment Criteria
Learning Outcome    Assessment Criterion    Level Descriptor
<40    40-49    50-59    60-69    >70
1    Demonstrating effective communication of ideas and techniques     Little or no attempt at describing issues     Basic analysis
Basic description of issue    Reasonable attempt at analysis at causes of issues – some wider coverage     Good attempt at analysis at causes of issues – some wider coverage     An in-depth analysis of cause and effect, demonstrating breadth of research and of thought.
2    Ability to analyse a production scheduling problem appropriately, showing ability to offer a constructive solution.     None or little attempt at analysis – description of ‘suitable’ techniques without support     An attempt at some of the ‘more obvious’ elements that the situation describes     Recognising the ‘majority’ of issues – showing how these may be related. Some supporting examples     Recognising the ‘majority’ of issues – showing how these may be related. Supporting discussion using direct and indirect examples     Situational analysis with clear description of relationships – recognition of alternatives with clear argument in support
3    Being able to evaluate alternative solutions to the task.     ‘Leaps in logic’ when moving from analysis to solution     A basic use of a ‘methodology’ in support     A structured approach to the problem(s) and solution(s)     Explanation of why analysis methodology is appropriate – possible comparison between ideas.     Comparison between ideas where appropriate. Clear, logical argument. Critique of techniques used – benefits and pitfalls
4    Demonstrating an ability to draw upon and to use a range of information sources.    None or very poor ‘Audit Trail’ to show argument for or against offered solution(s)     Initial attempt at describing relationships between issues, analysis and theory.     Some research – and or evidence of some further reading. development of ‘theory – practice’ relationship     Good clear links between theory and practice.     Strong links between theory and practice. Clear evidence of extensive further reading – clear identification of ideas (and sources)

Essential Reading
The core texts are:

Slack, N., Chambers, S. and Johnston, R. Operations Management, any editions from 3th Edition to the newest Edition available (7th), Pearson (relevant chapters in Part 3)

Waters, D. Operations Management: Producing Goods and Services, any Editions, Prentice Hall (relevant chapters)

And other relevant books on Operations Management relating to ‘planning and control” aspects.

However, please consult resources online (instructions above).

APPENDIX
Some important reading

Please read the following extracts from Nigel Slack’s book BEFORE lecture 4.

The following pages (extracts) are taken from Slack et al, 2006 Operations Management 5th edition; Pearson, London.

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