Case Analysis.docx

Philippine Christian University Graduate School in Business Management 1648 Taft Avenue, cor. Pedro Gil Street, Malate Manila ================================================================

MASTER IN BUSINESS ADMINISTRATION

PRODUCTION AND OPERATIONS MANAGEMENT STAINLESS STEEL PHILIPPINES CASE STUDY ===========================================

Submitted by:

ARCHIELITO S. ESTRADA BERLIN O. PADILLA

Submitted to: MR. ELZEBER MURALLOS Professor

October 27, 2018

Case Overview: Stainless Products Philippines (SPP) is a small size manufacturing firm with a wide assortment of resistance-welded wire products. Of the company’s annual business of Php10,000,000, approximately fifty percent (50%) is accounted for by racks for holding dishes and glassware in commercial dishwashing machines, forty percent (40%) by point of purchase advertising display stands and ten percent (10%) by miscellaneous special orders for many different purposes. The company’s plant consists of two (2) floors of an old manufacturing building. The building is so laid out that the first floor is used for all manufacturing operations. Equipment includes a wire-straightening to cut to size the coils of wire that supply ninety percent (90%) of the raw materials needed; two (2) forming machines to bend the wire to desired shapes before fabrication; ten (10) spot-and-butt welders for fabrication and miscellaneous equipment used in welding, painting and crating the finished goods. The personnel of the company, inclusive of salesmen, number about forty (40) people. Most of the management functions are handled by Mr. Cruz, the owner of the company and his secretary. All production management from the time a work order is transmitted from the office is under the supervision of a salaried foreman who has almost complete supervision of the workforce of thirty-five men. The foreman is a man of “old school” who carries a heavy workload but does not believe in modern production management practices. At times, he has been reprimanded by the owner as the workers are trying to skip production in rush times. He is however, a valuable man who knows the business well. No logical successor to him has been found and no assistant foreman is being trained. Operations are for the most part, handled on a job-order basis. For example, when an order for the disk racks is received, the secretary date-stamps the order and places it in the Order Pending Basket. Shop orders are written up daily by Mr. Cruz, usually after the morning mail is received. Because of the varying sizes and types required for different washing machines, some technical knowledge is required to write up the orders. Moreover, customers are often not clear in stating their needs. The order is transmitted to the foreman, who is usually in a position through his general knowledge of the progress of other orders in the shop, to give a fair estimate of when the order will be started and finished. From this point forward, the foreman is responsible for the routing, scheduling, dispatching and inspection of the order. Few records are kept. the workers do turn in time slips but little utilization is made of them. Workers are paid a straight hourly rate and most of the workers is of a semiskilled nature and the workers are highly unionized. Advancements in wages are usually made on an overall negotiated basis. Although the foreman has a rough idea of who the best workers are, he has no figures of productivity to give him definite knowledge. No attempt has been made to specialize workers beyond allocating the most difficult welding operations to these men that are obviously the most skillful. 1

Mr. Cruz has long appreciated the advantages that would accrue to the company if some of the company’s production could be carried on continuously rather than on joblot basis. He realizes that certain sizes and models of the dish racks sell in larger volume than others, but because of tying up working capital in finished inventory that may move slowly, he hesitates to produce much stock. About half of the disk rack sales is for original equipment, that is to the manufacturers of dishwashing machines. The other half goes to hotels and restaurants for replacements of racks which are broken or damaged in use. Display stands are always of special design and usually orders are place for several thousands or more to be delivered on rather short notice. This is quite profitable but on the other hand, because of the piling up of work-in-process, it disrupts plant operations and clutters floor areas. Moreover, dish rack orders are side tracked, delivery promises are not met and steady customers become displeased. In fact, the display stand business is so difficult to handle that in some cases, very large orders have been refused because the present organization and plant simply could not handle them. Another problem that frequently confronts the management is the control of wireforming and welding fixtures. A set of permanent fixtures is used for the fabrication of dish racks but display stands require special foreman. In general, the conduct of business is characterized by lack of records keeping, which had been excused by the management on the ground that the company’s small-size and its inability to assume the additional overhead expense of adding non-productive workers in the organization. Recently, the management has received much advice regarding adoption of more specific management methods particularly, the need for an effective system of production control. So far, nothing had been done for three (3) reasons: first, there is reluctant to add to the overhead; second, the foreman has expressed considerable doubts to the value of such methods (he states that “I`m working as hard as is humanly possible and can`t bother to fool around with any more details.”); and third, the management feels that the company is so small that the present informal basis may actually be the most efficient way to operate. Expansion has been contemplated for some time, but there is some doubt whether the present organization could be expanded without complete reorganization. Mr. Cruz is uncertain whether a change is imperative!

Time Context: As of present, STAINLESS PRODUCTS PHILIPPINES is running its production and operations management in an informal basis which the company thought is an efficient way to operate its business for the reason that the company consider itself just a small-scale company. The company’s current practice and mindset hinder its plan to expand its business operations.

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View Point: Mr. Cruz, as stated in the case serves as the owner of the company and responsible on most of the management functions with the aid of his secretary. On the other hand, the company’s salaried foreman who has complete supervision of the workforce and handles most of the production operations (routing, scheduling, dispatching and inspection of the order). We can say that both Mr. Cruz and the foremen are the authorized people to implement any plan of actions that they deem effective and gives positive impact to the company.

Problem: The company is lacking efficient management method/s particularly on its production control system causing piling up of work in-process, disrupts plants operations, dissatisfied steady customers and sales loss. To have a clear picture of the problem, below are some of the internal issues the company is currently experiencing.

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Workers try to skip production in rush times. Lacks delegation of job as no assistant foreman is being trained. Lacks figures of productivity to better identify the best workers. Order control problem due to lack of technical knowledge when handling shop orders due to varying requirements (sizes and types for different dishwashing machines) from customers. Relying on estimation instead of having a clear master schedule of the production cycle. Lacks records keeping particular on machines or fixtures that require specialized workers Having trouble identifying what production operations should be utilized on certain products. Current foreman is hesitant to adopt more specific management methods particularly, the need for an effective system of production control.

Objective: MUST:

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Add forming machines to meet the production quantity requirements of display stands which usually order are placed for several thousands and delivered in rather short notice. Adding these machines will decrease the piling up of materials that require shaping or molding.

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Provide intensive training to maximize workers’ skills and to determine who among them are highly-skilled and be delegated on tasks that require specialized skills.

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Implement a master schedule (from the time a purchase order has been made up to actual production process) to assure the target completion date of project will be met and to determine any problems causing production interruptions and delays. 3

WANTS -

The company must come up with an effective human resource management approach in evaluating its workers’ performance to determine who deserves to have an advance in wages.

Areas of Considerations: Strengths • Stainless Products Philippines (SPP) is a small size manufacturing firm that produces wide assortment of resistance-welded wire products to dishwashing manufacturers, hotels and restaurants. • The company has effective point of sale system that provides revenues to the company considering that the company only has 40 employees which mostly comprised of 35 men in charge in production process. Weakness • Stainless Steel Philippines is lacking efficient and suitable production and operations management causing internal production problems and sales loss. • The company is having problems handling product orders (display stands) that require specific requirements from already steady customers. • The company is inefficient on delivering the goods (display stands) on specified time. Opportunities • The company has a higher opportunity to increase its product sales. • The plan for future business expansion is highly feasible if revenue increases and prevent sales loss due to refused orders from steady customers. Threats • Displeased steady customers may opt to switch to the company’s competitors who have effective production process and delivers the good on time. • Potential customers will be hesitant to make a purchase order due to bad reputation when it comes to delivering the goods.

Alternative Courses of Actions: ACA 1 SSP should acquire additional forming/shaping machines. The case shows that 40 percent (40%) of the company’s revenue is generated from display stand products where designs and sizes vary depending on customer’s specifications. In addition, display stands usual orders are in large 4

volume (in thousand). The proposed additional machines will help speed up and increase volumes of wires that requires shaping. Advantages: • Could cater larger volumes of coils of wire for shaping • Speed up the shaping process of wires Disadvantages: • Additional expenses for purchasing the machine • Additional operating expenses (Kindly fill this part)

Recommendation: (Kindly fill this part)

Plan of Actions: (Kindly fill this part)

Note: Feel free to add additional details which to think should be included in the case.

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