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The Morrison Company Case Solution
Morrison Company developed smart label tags for the retail and pharmaceutical industries. President and CEO started the company in 2003 and initially concentrated on the pharmaceutical industry. Over time, the company expanded its operations to include players belonging to the retail industry. The market for smart label tags reached $4.9 billion in 2010, and this shows the immense potential that existed in this industry. Morrison Company also experienced growth in its revenue as well over time. However, there were specific issues concerning manufacturing and operations that needed concentration. The firm faced concerns regarding capacity constraints in the face of fast-growing demand. Apart from increasing revenue, costs were also escalating due to inefficiency in the organization's operational structure. The company prided itself on quick response, produced suitable quality labels, and increased order returns created a wrong impression on its overall image. It also became necessary for the organization's operational structure to develop the flexibility to meet increasing demand and customization from the customers (Wheelwright & Myers, 2011).
Following questions are answered in this case study solution
Analysis & Questions Responses
Case Analysis for The Morrison Company
This report emphasizes the main problems found in 'The Morrison Company' case study. An analysis of the case will follow this in the context of different concepts studied in operations management. After that, recommendations will be given to how Morrison Company can progress with its operations in a better manner.
2. Major Facts
Morrison Company's primary product lines are retail and pharmaceuticals. The RFID tags are generally distributed among security control, the pharmaceutical industry, contactless payment, and chain management (Wheelwright & Myers, 2011). Additionally, all data scanned from the tags could easily be transferred to the information system to gather, analyze, and closely monitor them. Also, the entire Morrison's manufacturing is situated in a single facility. The whole production process comprises six significant steps, and they start from inventory and eventually end with product packaging.
The company has a single 28,000 sq. facility hosting all the manufacturing and production processes in addition to the administration, engineering, manufacturing, and marketing departments. This building is located in an industrial park among other developed businesses. The manufacturing process involved 60 hourly production employees who earn an hourly wage and work one eight-hour shift for five days a week. The employees work un performing six (6) activities, including receiving, inspection, inventory, parts picking, inlay fabrication and testing, tag assembly and testing, personalization, and packaging. The fabrication of inlays takes place with two (2) fully automated RFID inlay assembly systems. The assembly systems have ten large, sophisticated automatic machines for tag assembly up to 20,000 units per hour for each machine. However, the customization process requires some manual adjustment of the machines. Moreover, the production process employees need to check for the Quality Assurance (QA) of each step in the manufacturing system.
In particular, Shauna Breen was hired as the operations manager by Jason Robbins, the company CEO to help identify some of the significant issues that the company is acing (Wheelwright & Myers, 2011). From the company's plant review, it was established that there was inferior operations management. Shauna Breen also examined the operations planning, inventory management, and daily operations of the company to improve the current situation and help drive the company's success.
3. Major Problems
A. Ineffective Capacity Management
The economic recession of 2009 affected IC manufacturers, thus decreasing the range of potential supply chain members. The low supplier base shifted the choices of Morrison in working with other companies. The Stock-outs experienced in the company was not a good sign, particularly looking at the forecasted demand of its diverse product lines; pharmaceutical and retail. Global demand for RFID tags was expected to increase at a CAGR of 34% from 2010 to 2015. The demand for Ultra-High Frequency Tags was expected to increase at a CAGR f 12.1% in the retail line. (Wheelwright & Myers, 2011) The company was also taking progressive steps to adhere to various technological trends; however, capacity was an issue, as it had to have a suitable infrastructure to meet the adequate demand in the future. This is mainly for the retail product line offered by the company.
B. Inflexible Supply Chain Structure
Ineffective production and process controls created problems for the company. The production facility and space were limited to accommodate different types of machinery and processes. Customizations have to be performed for various products and varieties related to the retail product line. The master production schedule is the basis for various activities related to production and planning for the day. Although some product offerings did not require a high level of customization, and the current system was suitable enough to be managed within the allocated time, there were issues related to other variety of products. This led to an unprepared infrastructure for meeting flexible requirements from the customer segment (Ardito, 2019).
C. Customer Service Concerns
The company faced issues managing its external customers and suppliers. Supply bottlenecks were created as a result of the building up of work-in-process inventory. Space constraints also added to the problems related to processing the inventory, and this did not allow orders to get fully completed. Furthermore, an economic recession also did not allow the chipmakers to upgrade their equipment, and so they were unprepared to meet the rise in demand for different chips (used in RFID technology); this also impacted the supplies to Morrison company, leading to shortages in the overall supply chain. Apart from this, the company experienced customer returns, which greatly impacted the reputation of the company that has always prided itself on maintaining a return rate of below 1%. However, in recent years, the return rate has gone up to 3%. It was also noted that the returns were mainly because of errors in content. This harmed the cost structure of the business. This has also given rise to concerns about achieving targeted financial targets (Boon-Itt, et al., 2017). The performance of the retail line of the company has not been satisfactory, despite an investment been made to produce highly customized products for the targeted audience.
4. Analysis & Questions Responses
Operations management plays a vital role in creating value for the organization. This is done by managing processes within the supply chain. It helps in transforming materials and services into outputs. Various processes in the organization have their customers and suppliers. The supply chain view focuses on various activities in a process, with each activity adding value to the preceding activity to ensure that waste is kept to a minimal and manageable level. The operations function is supported by other functions such as sales and marketing, and an integrated effort is made to ensure that a suitable supplier relationship is made, along with appropriately fulfilling different needs and specifications of the target audience (Cole, et al., 2019).
As far as the operations function is concerned, it is a highly integrated function in the organization. All the activities take place under one facility. The activities are also guided by the Materials Resource Planning (MRP) system. As part of the company's policy, the strategic decision was to keep a low inventory level, as the risk of product obsolescence was quite high. Strong coordination was developed with the suppliers through an organized electronic system. Different production plans existed for various products offered by the company. In a centralized facility, various distinctive parts (raw materials) are appropriately distributed between the product lines. This shows that a robust and integrated system is made to ensure attaining strategic business objectives (Demeter, 2017).
A. Capacity and Utilization Analysis
Capacity refers to the maximum output that can be derived from a system. Capacity management primarily consists of long-term and short-term perspectives. A systematic approach is taken towards making capacity decisions over a long period, which is done considering the resource constraints present within an organization. In the short-term, a company tries to manage the constraints found in the organization's supply chain process. A manufacturing organization needs to ascertain the utilization of the capacity. Utilization pertains to the extent to which resources are used for generating a certain level of output. Usually, two different ways are used to calculate capacity; input and output measures (Krajewski, et al., 2010). Output measures are used when a manufacturing process delivers a high volume of products that are also less in terms of the number of standardized units. Input measures are used in situation product variety is high, and at the same time, product mix also varies as per the audience's demand.
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