Question 6 Case Study Analysis (6 marks)

SuffiEffi (which stands for Sufficient and Efficient) is a manufacturing company that sells its products to one major customer (a large distributor) who later retails the products through a number of stores. At the beginning of each year, the customer provides an aggregate purchase order for 12 months which will then be divided into smaller individual orders randomly according to the projected demand of the distributor. SuffiEffi has agreed that the distributor will place the individual orders anytime so long it gives three days lead time before the due date of delivery. SuffiEffi is very happy with the business deal since it provides certainty of the sales volume for a year.

The products are made by a series of five processes and each process uses one dedicated machine. The production manager is satisfied to see that all machines never have less than a 100% utilization rate. This is because the production manager has decided that, in addition, to meet the customer's orders, the company must keep safety stock equivalent to one week of the full capacity of each machine (under normal 8 hours production shift), including raw materials and finished products. As such, overtime is often used for meeting the targeted outputs, and, on average, SuffiEffi uses 25% of the maximum overtime hours that it sets for the production system. The decision is based on the production manager's determination to serve customers' demands at a 100% service level, and the manager is happy to see that SuffiEffi's warehouse is always nearly full of ready stock. The company's trucks are also always ready in front of the warehouse to deliver customers' orders.

SuffiEffi is also determined to provide the best customer service in terms of quality, especially in handling customer complaints about defective products. To minimize customer complaints, the company provides extra products (around 10%) in each delivery in the hope that they will be sufficient to compensate for the number of defective products that might be found in the delivery batch. In addition, SuffiEffi always provides a quick response in replacing defective products with good ones, should the defective products exceed the faulty products. This strategy so far has been effective in reducing customer complaints.

The raw material used to make the products is purchased from one supplier that is located not far from SuffiEffi's factory with whom it has maintained a long-term relationship. However, the quality of the raw material delivered is not very good which often requires SuffiEffi to consume twice as much of the raw material necessary in making the products. The purchasing manager has identified an alternative supplier that can offer better quality raw material (it is also certified to ISO 9001 standard); however, the price is 15% higher than the current supplier, which causes a concern that changing the supplier will increase operational costs. SuffiEffi's management team considers that the company has been doing well so far, but it also welcomes suggestions for potential improvement.

1. Analyze the information presented in the case study and answer the following questions:

2. Identify the competitive dimensions that are applicable to SuffiEffi and evaluate the company's operational performance in those dimensions (2 marks)

3. Analyze the operations management of SuffiEffi and identify any problems that can impact the company's operational performance (2 marks)

4. Provide the recommendations for SuffiEffi to solve the problems that you have identified as well as the areas for potential improvement in the company's operations. (2 marks)

Demonstrate your understanding of the theories or the concepts of operations management with their application in your analysis and recommendations made in this case study.