Mt435 Operations Management Unit 3

MT435 Operations Management

Introduction

On behalf of KU Consulting I would like to thank you for giving us the opportunity to present this proposal to your company. Albatross Anchor is a small family owned company which has grown exponentially since 1976. There are many operational challenges which you are currently facing due to your facility. The prices of your anchors are comparable to competitors; however you can’t seem to increase your profit margin.

We understand the importance of producing a high quality product in a facility which is safe and efficient. It is vital in today’s market to stay up with the latest technology and KU Consulting can help bring you in line with your competitors.

Question One

Based on the information presented in the scenario/case study discuss Albatross Anchor’s competitiveness in relation to (please address all items in the below list and provide support for your conclusions):

1. Cost

a) Cost of Production:

Even though you are currently charging the same price per unit as your competitor, which

is $8.00/per lb. for mushroom anchors and $11.00/per lb. for snag hook anchors, you are making as much as 35% less in profit margin. Your profit margin is falling due to your

operational inefficiencies. “Operational inefficiencies occur in every business, of course

and only those companies who are vigilant about uncovering them are capable of maintain strong customer relations”(Craemer, M. 2009). Due to these inefficiencies you need to re-evaluate your processes in your manufacturing facilities. Some of the problems we notices which are causing these inefficiencies are the cost of raw materials, shipping challenges, storage space, and the downtime when you have to switch from one manufacturing process to the other. When that switch occurs, you have 36 hours of lost production.

b) Economies of Scale in material purchasing:

“Economies of scale occurs when it costs less per...