Operations Management at HOLLY FARM Essay

Operations Management at HOLLY FARM Essay

1 ) Introduction This consultancy report is ready for Holly Farm in order to improve future business. Inside the second element of this survey; ‘Evaluation of Current Operations and Gillian’s Business Strategy’ and ‘Conclusion’, Holly Farm’s operations will probably be critically evaluated in the facet of current and future potential capacity limitations and some other operational complications. Also, Let me discuss the feasibility of Gillian Giles’ strategy for the business there. In the last part; ‘Recommendations and Actions Plan’, Let me show a suggested alternative strategy for the business and several solutions to get alleviating it is constraints. 2 . Evaluation of Current Procedures and Gillian’s Business Strategy 2 . you Gillian’s Aspires and Goals 2 . 1 . 1 Product sales Forecast Relating to Gillian’s forecasts, during your stay on island will be an increase in farm shop revenue by 50 percent, there will be a decline in retail shops sales simply by 13. 3% in 2004 (Table 1). However , these kinds of forecasts are unlikely to come true. First of all, its selling shops product sales has increased by simply 75% on average of each 12 months, and its farmshop sales has increased by 28% on average every year for the most recent five years. It may be uncommon that the girl dramatically improvements these the latest growth tendencies on her outlook without any factors that could influence on both channels. Secondly, because the ice cream industry in the UK is usually mature and stable (Table 2), abrupt changes of previous tendency hardly happen excepting going into strong fresh players in the region, spoiling the farm’s reputation hugely and trading tremendously for the marketing for its farm shop. Moreover, in terms of Holly Farm’s taking care of on its farm guests, this abrupt change of the number of visitors can result in collapses of its functions. These reasons discussed over clearly show that Gillian’s demand prediction is not reliable. Hence, they have to prediction in the additional way. 2 . 1 . 2 Line File format Gillian desires to increase the number of ice cream flavors from several to five. However , this line extension can cause the following problems. To start with, many items of fairly lower demand items will be abolished due to their expiration schedules. In 1999, ice Cream Cha?non published the date of top ten your favorite ice cream flavour in the united kingdom in 1998 (Table 3). I am able to assume that, when ever Holly Farm produced all these ten products, the talk about of each item in their items would be the same as the market shares of each flavour ice cream in the whole market. Those items that total demands are less than one particular, 516 lt per annum, consequently below the fourth position, must not be produced since it is obvious that the items can be abolished due to their expiration schedules (Table 4, Calculation 1). Moreover, in the matter of retail product sales, the lowest annual demand for each item is three or more, 035 litres (Calculation 1). Secondly, as well major of the raw materials will be thrown away just before they are applied. Since the periods that are needed raw materials to get completed to use are longer than optimum storage occasions allowed, also strawberry flavour for blood; 2nd item and delicious chocolate flavour for chocolate; 3 rd item could possibly be abolished before being completed to use. Far more could raisin for rum and pampre; 5th, citrus sorbet pertaining to lemon iceberg; 8th, clown flavour to get banana; ninth and tropical fruits intended for tropical fruits; 10th always be (Table 5). Finally, the line extension will result in more expensive through regular changing items and smaller amount of production than optimum production generally in most items. For instance , when the diverse item from before the first is produced, the production line should be carefully washed up ahead of time in order to avoid making different shade or flavouring ice lotions from their unique specifications. In fact , it takes one hour to clean ice cream producing machine among flavours in Holly Farm building. This cautious clean-up is likely to cause higher cost and reduced productivity. Furthermore, smaller amount of production will lead to bigger fixed price per development unit and, as a result, can lead to higher total cost. 2 . 2 Ability Constraints installment payments on your 2 . 1 Production Range Although it is apparent that Holly Farm provides a crucial ability constraint on its production line, Gillian has hesitated to tackle this problem, therefore, has left behind the growth technique in spite of the recent eco friendly growth pattern of the annual earnings. In order to proceed the growth technique, she should try to solve the situation. For instance, your woman should work out with its staff for the expansion of working days in a week coming from 4 days and nights to 5, 6 or seven days in the busy period. Although Holly Farm building groped regarding the probability of producing the different volumes of packages of ice cream for reacting special orders for the neighborhood catering transact, I would recommend that they can stop seeking to do this. Wasting a lot of ice cream, taking two or three hours to create the dispenser up and being demanded low warrant my declaration enough. In the event they extended this trial, more serious capacity constraints would be caused. installment payments on your 2 . two Milking Parlour According to the case, the amount of visitors who want to see the milking parlour on a busy day time in2003 was 206. Nevertheless , the capacity in the gallery for watching milking parlour is 200 tourists per day (Calculation 2). It may be said that they are really about going over the capacity in 2003. Additionally, Gillian wishes to increase the quantity of farm site visitors in 2004 by 50%. The problem would grow in 2004. The problem in milking parlour is not ignorable. 33% of total revenue of Holly Farm building, including paying out visitor product sales; 11% and entrance cost; 22%, is usually provided by farm guests, and 27% of total revenue in the farm is related to its milking parlour (Table 6). This kind of incident plainly shows that in the event the milking parlour made visitors dissatisfied, the revenue of the farm could decline significantly. Therefore , without the solution for the capacity limitation related to milking parlour, the farm would neither be successful nor make it through in the near future. Apart from the capacity limitations, the milking parlour provides queuing concerns. This case described that regarding 100 people visited the gallery by 4 pm hours to 5 pm hours on a active day. Then I have already stated earlier that 206 people stopped at the photo gallery on a busy day (Calculation 2). Hence about half with the visitors came there within just only one hour. As a result, a queue is manufactured before starting the milking parlour and is not really solved the queue for some time. The queuing problem conveniently leads to client dissatisfactions and could result in critical decline in the total revenue as I aware above. installment payments on your 2 . 3 Distribution In accordance to this circumstance, Gillian provides ice cream to retail clients by the delivery van once weekly, and the delivery van contains a capacity of 500 litres of ice cream and have a freezer. Even though the average maximum temperature in the warmest month in the UK via 1971 to 2000 was less than twenty degree centigrade (Met Workplace, 2003), the temperature around the van could be much than 30 degree centigrade. Additionally, attempting to deliver all goodies for that week at once is likely to lead to longer duration of delivery. As a result, melting ice cream would be accelerated. It indicates that these details cause more than half of business customer complains in 2003, which respect melting ice cream. This problem can be one main reason why Gillian forecasted that retail product sales in 2004 decrease simply by 13. a few %. Nevertheless , it is more modest to tackle and solve the problem to be able to meet marketplace demand than to prediction wrong in order to avoid the problem. installment payments on your 3 Other Problems 2 . 3. one particular Raw Materials Stock Control This case mentioned that Holly Farm has currently purchased raw materials with an ad hoc basis when an operative feels that the materials will be required. While it might be true that the quantities from the raw materials the farm uses are so small that the farm hardly provides any other better ways to control them correctly than one an ad hoc basis, their way to deal with shares is obviously unacceptable because businesses are to have natural material stocks in order largely to have a barrier for production, response to unexpected larger or perhaps smaller requirements and benefit from price discount rates on large order. In fact , they have acquired several experiences unwanted stocks and shares and short stocks of materials and flavour. The former led to needless cash outs, the later caused dysfunction, rescheduling of productions and re-timing of maintenance times (Waters, 2002). 2 . three or more. 2 Inventory control of last products Holly Farm did not control its stock standard of final merchandise in the year 2003. As a consequence, a brief stock happened at the end of September (Figure 1). Short stock of ultimate products is somewhat more serious than one of unprocessed trash. While it immediately causes retailers’ loss off their sales, it is indirect results are more popular, including misplaced goodwill, loss in reputation and loss of potential future revenue (Waters, 2002). Moreover, via January to February, there is a minus cash flow due to overstock, therefore, by overproduction (Figure 1). If the farm building had not stored enough cash to dietary supplement this unfavorable cash flow, they would have had to raise money. Yet , potential funds suppliers such as banks, building societies and individual traders would not end up being willing to loan or sum to the farm because of the farm’s mismanagement of cash. 3. Bottom line As I reviewed above, Holly farm has its own problems in the operations. These types of problems appear to be appearing through its current remarkable progress. Holly Farm is at a turning point. Whenever they grow with huge expense? Should they cover their problems with sacrificing their very own bright upcoming? In the next a part of this record, I will provide several suggestions to their challenges. 4. Tips and Plan of action 4. 1 Business Aims and Goals 4. 1 ) 1 Product sales Forecast Seeing that Gillian understands Holly Plantation has a range of capacity restrictions, she seemed to decide to never take the expansion strategy but to take the profit focusing approach, which is feasible by expanding the discuss of the farm shop product sales in its total revenue just on the supposition that it is likely to increase in the number of it is farm visitors and to accept all of the guests. Nevertheless, not a significant rise in the number of the farm tourists is potential, nor disregarding growth opportunities for its selling sales can be reasonable. Therefore , I would like to propose to take on the growth technique to Holly Farmville farm with several solutions to ability constraints. Simply by linear regression (Waters, 2002), the twelve-monthly sales of retail retailers, the farm shop and total are computed at 93. 0, 32. 5 and 125. a few thousands pound, respectively (Table 1, Figure 2). In such a case, both relationship coefficients of retail shop sales and farm shop sales are above 0. 9500. Thus these forecasts can be said to be trustworthy in terms of the linear regression. However , once Holly Plantation adopts this kind of forecast, they should mention the subsequent things. Initial, the outlook by geradlinig regression is located only upon historical info. Thus it is assumed that the foreseeable future trend is definitely referred to yesteryear one. In that case, because the pattern is recognised as geradlinig one without any particular reason, if the pattern were based around the different routine such as logarithmic, exponential and moving typical, the prediction could become failure. Furthermore, the forecast does not include any expertise. Consequently , it could be a vulnerable discussion in terms of environmental changes. In any case, due to the risk of the forecast’s failure plus the huge effects of the sales forecast for the following plan, I strongly recommend that Holly Farm as well as consultants again discuss within the sales forecast of 2005 before proceeding the plan. 5. 1 . 2 Line Expansion As a result of the topic in the section 2 . 1 ) 2, I like to recommend Holly Farmville farm not to grow its development line coming from four things in the year 2003 to ten items in 2004. All of the problems We mentioned, that are related to the expiration schedules of final products and raw materials, can cause unexpected cost up. Apart from the discussion above, the argument over if they should decrease the number of products from four is also debatable because the demand of the other things than top one is even now so low that keeping these items is definitely hardly validated. However , I propose Holly Farmville farm to keep the amount of items 4 based on the following discussions. Initial, while it is not a problem pertaining to Holly Farm building to have just one item if perhaps they did business only on their farm shop, in order to expand their very own sales upon retail programs, keeping several items can be inevitable to get the advertising reasons. Second, even when they will sale your favorite ice cream on their farm shop, only one item may not be eye-catching for their consumers. Finally, in terms of accountability of companies, it is difficult to explain why they abolished the items with their customers unless of course they demonstrate keeping the items that they halted selling is harmful for the business. By keeping the number of items at 4, Holly Farm building can keep the stock degree of final items of each item more than one particular, 516 litre per annum (Table 7). Even though the problems more than raw materials’ stock level still remain, the solution for people items will probably be discussed in section4. several. 1 . some. 2 Capacity Constraints 4. 2 . 1 Production Series The process distinctive line of ice cream in Holly Farmville farm consists of batch processes, an industrial developing method through which several distinct serial and, or parallel operations are carried out to make a product, as opposed to continuous procedure (Williams ainsi que al, 2001). Hence, the capacity of the range is limited by the one of the bottle of wine neck procedure. In this case, the bottle throat process is a ageing method, a continuous cold process in the ice cream equipment, and one batch capacity of the process is 350 litres. In addition, the process takes 8 several hours. In order to embrace the capacity, they have to make the equipment bigger as well as to shorten the time. Nevertheless, mainly because it is hard pertaining to Holly Farm to make any kind of big investment, they do not possess any other method than person to give up to improving capacity of the procedure line in a short-term. While the alternatives to increase in the annual production, there are contract-out and file format of operation days via 4 days per week to 5, 6 or 7 days a week. Because of Holly Farm’s troubles in disclosure of its very own original quality recipes to the version due to its old-fashioned corporate traditions, the risk of rise in total cost and potential constraints of whole ice cream manufacturers inside the busy period, it would be hard for Holly Farm to contract away its goodies production. Consequently , I propose exts of operation days as solution for capacity constraints of the production line. some. 2 . two Milking Parlour I propose the subsequent three alternatives for the capability constraint and queuing concerns in the milking parlour. Firstly, abolishment of explanatory tape through earphones would be successful. It is apparent that the mp3 makes a bottle neck of the series of procedures in the photo gallery. By replacing the tape through headsets to one not really through headphone but basically broadcasted inside the gallery and waiting area (Figure 3), service period per visitor would be shortened, and the potential of the gallery could be increased. Secondly, layout of browsing time to the gallery would alleviate it is queuing issue. For example , the farm divided the duration of the milking parlour into five; 4. 30 pm – 5. 00pm, a few. 00pm – 5. 35 pm, a few. 30pm – 6. 00 pm, 6th. 00 pm – six. 30 evening, 6. 40 pm – 7. 00 pm. When ever visitors enter to the plantation, it allocates them in each time block. While there happen to be vacancies in the time stop visitors desire, it is great idea that site visitors choose which will block they can be in. Finally, queuing entertainments are effective to allay customer dissatisfactions. For instance, while guests are in a queue, the scene of milking parlour will be showed on a TELEVISION SET screen from the waiting place. This answer can be expected for making service time shorter simultaneously to make customer dissatisfactions reduced. 4. 2 . 3 Syndication In order to carry out growth strategy I suggested in section 4. 1 . 1, resolving problems in distribution is vital because bigger burden about distribution can be inevitable intended for the technique. Hence, I suggest that Holly Farm works on the delivery truck equipped with a freezer of about 1, 500 litres and replaces outdated one by it. I assume which the farm rent a VOLKS WAGEN LT35 Refrigerator / Refrigerator Van by a rental firm (Figure 4). The monthly rent in the van should be thought about £1, emmergency 911 as a changing cost. 4. 3 Various other Problems some. 3. you Raw Material Stock Control I propose that minimum order quantities of strawberry and chocolate flavour decrease by current 1, 000 cubic centimeters to four hundred ml, since the farm could hardly complete using them within their maximum storage time allowed in 2004(Table 8). While the reorder costs for these items will probably be charged 3 times as much as normal ones, the expense of the raw material which will be abolished, hence, abolishment price can be taken away. Even though the expense down will be almost balance by reorder charges, this action would be necessary in aspect of green issues. Since Holly Farm has used relatively large amount of milk powder, box and cardboard, I recommend these natural material purchases at the financial order amounts (Waters, 2002). When they imagine the farm building attempted to order these raw materials at minimum order amounts in 2004, the cost down is anticipated to be more than 2, 500 pound per annum (Table 9). In terms of you a chance to place orders, I propose the reorders of raw materials based upon the reorder level (Waters, 2002). When calculating the reorder levels of each things, I believed that demands can be equally divided into each day. The reorder levels of recycleables are shown in Stand 10. This control technique is not deemed any questions about ingestion of unprocessed trash, in other words, creation schedule of yummy ice cream. However , because the farm has not taken any kind of flexible scheduling method for its production; Just-in-Time, MRP, MRPII (Waters, 2002) and so on, it truly is thought that there is absolutely no problem. 4. 3. two Inventory control of final products In the farmville farm, production of ice cream has been executing based on a fixed schedule. Therefore it is crucial to hedge the danger regarding questions of long term demands. Consequently , I propose a final product stock control based on the safety stock level regarded as standard deviation as future uncertainties (Waters, 2002). Since the uncertainties in each month are very different, the levels must be varied (Table 11). I suppose that the primary factor that affects to ice cream demand is weather conditions including heat. Thus the protection stock amounts of each month are calculated by standard deviations of five weeks including after and before each 8 weeks. This method is not as safe as periodic review strategy is. However , the strategy can be affordable because the likelihood of unexpected transform of require was controlled below five per cent. 4. some Aggregate Organizing Based on revenue forecast of every month (Table 12), I made a great aggregate plan for Holly Farmville farm in 2005 (Table 13). In order to meet up with all forecast demand without any big purchase in its creation line and to eliminate pointless stocks, I recommend them to take the policy of chase require production (Waters, 2002) (Figure 5). Whilst this is not only the best plan but as well only one coverage for the farm at this time due to its ability constraints, they have to operate thoroughly because it can be very difficult to organise. By using this insurance plan, they can keep the stock level relatively low (Figure 6). 4. a few Cash Flow Analysis Basing on an assumption that Holly Farm has to spend 50% more income for overtime works of part-time staff than usual kinds, I analysed cash flow with the farm ( Figure 5 Demand and Production in 2004 Figure 6 Share Level Control Table 14). 14% with the total cash-out, £9, 958/anum out of £91, 158/anum, will be put in for extra payment for overtime in 2004. Hence, the farm ought considering increasing the capacity its production range when the revenue forecast comes true. In comparison with the actual cashflow in 2003 and the income forecast based on Gillian’s program in 2005, the cash stream in 2004 will be comparatively allocated between each month similarly. Especially, actually between January and May, you will see few adverse cash flows ( Figure 7). The farm’s credit rating during the term can be better. In terms of earnings during the year, even though the cash flow in the proposal is no more than one about Gillian’s program, the cash position will be much better than one in 2003. 4. six Break Even Evaluation The profitability in the plan is not better from 2003 result due to an increase in the proportion of the adjustable cost inside the annual earnings. The main reason for the decreased profitability is a serious increase in extra repayment for overtimes. While the make your money back point in the plan drops from 2003 result, this is because a remarkable embrace total revenue in 2004. The perimeter of protection to sudden decrease in total sales will be improved. The break even stage on my plan is higher than one based upon Gillian’s optimistic plan. The reason is that Gillian assumed they can increase farmshop sales which has a £1 perimeter per litre of ice cream and £2 access fees (Table 15, Physique 8). Yet , as I mentioned in section 4. 1 ) 1, her forecast can be unreliable. Consequently , the farmville farm should tolerate against the unprofitability in 2005 and should retain its expansion strategy. Euromonitor plc. (2003) Euromonitor market research: Ice cream in the United Kingdom. London. Attained Office (2003) UK Local climate and Weather Statistics: year 1971 – 2k Averages [Online]. Obtainable from: http://www.met-office.gov.uk/climate/uk/averages/19712000/areal/uk.html [Accessed 27th January 2003]. Business office for Countrywide Statistic (2003) New Revenue Survey the year 2003 [Online]. Available by: http://www.statistics.gov.uk/statbase/Product.asp?vlnk=5749 [Accessed 29th December 2003]. SMV Commercials of Yeovil (2003) SMV Commercials web page: Vehicle local rental [Online]. Available from: http://www.smvcommercials.co.uk/code/vehiclerental.asp?vehicle=13 [Accessed 29th December 2003]. Waters, D. (2002) Procedures Management: Making Goods and Services. second edition. Birmingham, Prentice Corridor. Williams, T. and Rathwell, G. (2001) Glossary: Venture Integration and Communications Systems [Online]. Last current on 29th May 2001. Available by: http://www.pera.net/Tools/Glossary/Enterprise_Integration/Glossary_B.html [Accessed 25th December 2003].

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