Answer To: ©Aspire2 International – DBN509 Assessment 2 – XXXXXXXXXXPage 1 of 6 NEW ZEALAND DIPLOMA IN BUSINESS...
Soumi answered on May 15 2021
Running head: OPERATION MANAGEMENT: A CASE STUDY ON FONTERRA 1
OPERATION MANAGEMENT: A CASE STUDY ON FONTERRA 18
DHRUV. D. PATEL
YIB00012K
OPERATIONS MANAGEMENT
ASSIGNMENT 2
OPERATION MANAGEMENT: A CASE STUDY ON FONTERRA
Executive Summary
In the current assignment, Fonterra is being identified as a successful dairy business organisation in New Zealand, which has uses proper operation management skills to cater its success. In the course of the discussion, Fonterra is found to have high capacity, which has its issues managed by its management and proper understanding if the market. Taking reference from the chosen organisation, Fonterra, the role of business layout, its potential issues, TQM and inventory has been discussed, which have given a proper idea about the fact that all the mentioned aspect prove their effectiveness if the organisational management have the ability to use them in the context of their needs and situations.
Table of Contents
Introduction 4
Fonterra’s Capacity Management Issues and Incorporated Solutions 4
Location Factors Affecting Fonterra’s Business and Challenges of Factor Determination 6
Principles of Plant Layout and Implementation Challenges at Fonterra 9
The Principle of Space Utilisation and Its Implementation Issues 9
The Principle of Economy and Its Implementation Issues 9
Elements of Total Quality Management for Continuous Improvement at Fonterra 10
Key Components of Fonterra’s Supply Chain 12
Functions of Inventory at Fonterra 13
Guiding Principles of Material Handling at Fonterra 14
Conclusion 14
References 16
Introduction
Operation management is an important part of business success attaining, as it manages the production of products and services and ensures change management into the operations when deemed necessary. In the current assignment Fonterra, a New Zealand based dairy product producer and seller. It is New Zealand’s biggest and World’s sixth largest dairy business organisation. The company was the result of merger between New Zealand Dairy Group and Kiwi Cooperative Dairies, in 2001.
The company operates under a cooperative structure, which makes 10,500 farmers in New Zealand its owners. Fonterra has 21,400 employees engaged in daily works. In terms of operation management, Fonterra executes merchandising business operations, which includes the collection of raw material, their processing, and production and packaging, inventory management, the inbound and outbound logistic (Fonterra, 2019). The current report aims at exploring the capacity management issues at Fonterra and offer proper solution to them.
Fonterra’s Capacity Management Issues and Incorporated Solutions
Firstly, at Fonterra, the issue of stock piling due to reduced market demand has to be mentioned as one of the major capacity management issue, faced by the company. As stated by Nambisan, Zahra and Luo (2019), in the global business contexts, countries with higher demands for products regulate the degree of operation management type, frequency of work and performance levels and as the demands in such markets decline manufacturers and product sellers, face issues of stockpiling, as the production remains higher than that of the actual demand. With the current condition of the market offering lesser demands for the dairy products both in local and international market for Fonterra, the company is facing issues with its capacity management patterns, as the requirement for more productive and efficient process is felt needed.
Secondly, the storing of the data of the decentralised layout of the manufacturing plants across the local and international markets, which require effective data processing and storing has also emerged as another major issue for Fonterra’s capacity management. As opined by Khanagha, Ramezan Zadeh, Mihalache and Volberda (2018), the decentralised distribution of production facilities, along with the need for registering their market demands, create issues for the central database as the data are not processed and piled up, without segregation. As seen in the case of Fonterra, the inconsistency of the collected data and their processing as well as storing has lead the company to face issues while formulating proper marketing strategies .
As solution to the problem of shrinking market share and reduced demands, Fonterra has resorted to use technological aid to generate higher production efficiency, which would make the reduced demands, cover the profiting needs as the lower quantity products will have the same selling price, while the cost of production will be reduced drastically (Scoop, 2014). As explained by Almena, Lopez-Quiroga, Fryer and Bakalis (2019), organisational business plans include the production cost and the selling price margin as the scope for profiting for the organisation, as the consideration of quality and production cost remains inversely proportional.
Business organisations reduce either the production cost or increase the number of sold units to acquire the profiting ratio and in case of Fonterra, the production cost has been reduced to adjust to the lower units of dairy products sold. On order to tackle the inconsistency of demands from different markets within and outside New Zealand, Fonterra has reduced the traffic of its products from the major port, such as Taranaki to lesser capacity ports such as Napier and Tauranga, which has offered the company the flexibility to send its products to different markets, reducing the pressure of the lower demands and inconsistency.
Location Factors Affecting Fonterra’s Business and Challenges of Factor Determination
The first location factor, catering ample significance from the perspective of Fonterra’s context is the power supply. In general, as mentioned by Balbontin and Hensher (2018), power supply location gives the business set up points their values and profiting potentials, as the closer the business location will be the faster and cheaper power supply process will become,. In addition, the power supply location also determines the degree at which the service will be provided by the power supplier. In context of New Zealand power supply has been considered very carefully, which is made evident from the fact that the Headquarter of Fonterra is in Auckland, which has multiple power supply points such as Greenmount, Rosedale and Kings Wharf, making the supply of power easy available and convenient (The Grid, 2019).
Second, location factor, which in addition to Fonterra prove to be significant for business organisations is the communication. As stated by Johansson and Olhager (2018), as a location factor, communication includes the aspect of transport as well as telecommunication, which makes the meaning of the work implied wider. From the perspective of Fonterra’s location, it is found that in New Zealand the roads, rivers, seas and the telecommunication providers are available, which makes the business propositions beneficial. The degree of communication determines the efficiency of the business and the coordination that exists between the different stakeholders, departments, and facilities lay across the marketplace (Fonterra, 2019).
The third location factor, which caters ample significance, is raw material used for the business. It is evident that without the raw material of the business the commercial commodity developed and sold by business organisations will not be executed, therefore, the availability of raw material is important. As mentioned by Yang, Boev, Haefner and Lanza (2018), in case business organisations get the supply of raw materials from its existing business market and country, the prices of raw material and its transport generate ample scope for higher profit earning, while a lack of availability of...