Operations Management MRF Tyres case Study

1.0 Introduction

The operations management is very important part of the company to deliver the products to the customers. The operations management deals from raw materials, product manufacturing and m sales and distribution. An effective operations management can lead the companies to success. At the same if there any problems in the operations management, it could severely impact the performance of the company and sales as well. In recent years OM became central part of the organisational strategic management. The strategic operational management links with various components of management to achieve the companies goals and targets resulting the financial gains.

In this study we critically examine the fundamentals of operations management for an company which has global presence in terms of manufacturing and customers. A focus has been made on the different components including the supply chain management, quality management and logistics. We applied these principle to case study of MRF Tyres. The issues are discussed in the context of existing problems in supply chain management. A new product launched into the market and the company has done excellent job of handling the product launch. They also revamped the whole process to effectively manage the operations globally.

2.0 Operations Management

Figure 1. Operational Management Life Cycle

3.0 Operations Function

Operations function must also be well integrated with other parts of business.

Operations function is one of 3 primary functions within a business: Finance, Marketing, and Operations.

Work of 3 primary functions overlaps each other and all 3 must work to reach the full potential of the system.

Operations Function

In many companies, operations function retains the greatest percentage of employees.

And, it is responsible for the largest part of the budget.

Operations Function

Therefore, operations function plays a significant role in success of businesses.

Types of Operations

If a company has an ability to manufacture tangible products, we call it a manufacturing company.

Manufacturing operations deal with goods/tangible products. Example industries: Agriculture, forestry and fishing, Mining, Construction, etc.

Inputs (raw materials, etc.) and outputs (products) are tangible and visible objects.

Types of Operations

Manufacturing transformation processes are some kind of chemical or physical processes (ex: welding, assembling).

The other companies who are not manufacturers are referred to as service companies.

Types of Operations

These deal with non-manufacturing operations or service type operations. Example industries: Transportation, Finance, real estate, insurance, hotels, etc.

Here, there are also inputs and outputs. The output is a satisfied customer.

Processes in service operations include giving advice (consultant firms), transporting, packaging, storing, serving (food), etc.

Other examples: educational institutions, repair shops, and barbers.

Types of Operations

The change in the percentage of work force between years 1900 and 1994 is as follows:

– Number of People working in finance, services, real estate and insurance increased dramatically (graphic illustration)

– People working in agriculture and mining declined dramatically

– People working in communication and transportation increased slightly

– People working in construction and manufacturing not much changed

Types of Service Operations

Some service operations deal with tangible outputs even though they do not manufacture a product: examples are distributors, mail service, library, etc.

Other service operations deal with intangible products. These are pure service operations: examples are financial advice, counseling, etc.

Types of Service Operations

In some service operations, customer is not present as a participant: examples are architectural design, repairing automobiles, insurance, etc.

Types of Service Operations

In some others, customer is present: examples are health care, hair cut, travel, etc.

Types of Manufacturing Operations

Some companies are make-to-stock producers. These firms make items that are completed and placed in stock before customer order is received. Ex: Arcelik plant.

Some companies are make-to-order producers. These complete the end item only after receiving a customer order.

Types of Manufacturing Operations

Because manufacturer cannot anticipate what each customer wants. Example: a metal fabrication shop, which gives the desired shape to any kind of metal.

When the company produces standard modules and assembles these modules according to the specifics of a customer order, this is an assemble-to-order producer.

Examples are: PVC window assemblers, and modular kitchen board assemblers.

Types of Manufacturing Operations

The extent to which a factory has the flexibility to produce a variety of products is another characteristic used to distinguish between types of factories.

One extreme is to produce custom products in low volume or in single units. Example is a metal fabrication shop.

Types of Manufacturing Operations

Other extreme is to produce a standard product in very high volume. Example: nuts and nails.

According to variety and volume of production, operations are categorized as 1) Job Shops, 2) Repetitive Manufacturing, and 3) Batch Manufacturing.

Operations Management

Figure 1. Operation Management Functions

4.0 Components of Opertions Management

Operations Strategy

Product Design and Process Selection

Supply Chain Management

Total Quality Management

Just-in-Time and Lean Systems

Forecasting

Capacity Planning and Location Analysis

Facility Layout

Work System Design

Inventory and Resource Planning

Scheduling Issues

5.0 Supply Chain Management

Supply chain management forms very important and integral part of the operations management. In this study we closely examine the Supply Chain Management. This is partially because the case study we are going to examine in foolowing sections has major issues in the supply chain management. Supply chain management is the network of unified organizations concerned with the final provision of goods and services which are required by the customers. It focuses on the entire movement of raw materials which are stored, inventory, and end goods from starting point to the point of usage. It monitors the supply chain activities such as planning, designing, control with the aim to generate net value, build competitive infrastructure, influencing logistics worldwide, and coordinate demand and supply so as to measure the performance.

SCM include planning and managing all activities engaged in logistics management, sourcing, procurement. It is also engaged with the important mechanisms of coordination and cooperation with the partners like suppliers, service providers (third party) customers and intermediaries

SCM is the strategic and systematic coordination of the organization functions and techniques across the business task within the company and supply chain for improving the performance of the organization in the long term.

Traditionally, planning, marketing, manufacturing, purchasing and the distribution organizations beside supply chain is functioned independently. Organizations will have their respective objectives and goals and these all are frequently conflicting. Marketing objective who are concentrated on better customer service and to maximize the sales conflicts with distribution and manufacturing goals. The final outcome of all these factors states that they don’t have a single integrated plan in the organization. There are few methods where the organization can follow to integrate all the functions together. Supply chain management helps the organization to integrate all the factors. The coordination between various departments is the key for effective supply chain.

Supply Chain Process

The most important objective of SCM is to satisfy customer demands by using the resources most efficiently, distribution, labour and inventory. SCM aims to meet the supply and demand. Generally there is lot of confusion between SC and logistics, logistics performs the activities within the organization where as supply chain focuses on procurement and manufacturing and it has a wide focus, it involve many enterprisers, suppliers, retailers.

Logistics

Logistics if the method of planning, controlling and implementing the well-organized managing that offer products and services. It is the science where it plans to carry out the progress and to maintain. This operation deals with development and design, distribution, acquisition, movement, storage, maintenance.

Logistic Performance

Logistics is the processes which interface and interrelates with all over the organization and with outside companies, merchants, customers. Logistics is accountable for the association of goods from the suppliers and delivery to the end customers, it moves through the manufacturing services, packages, warehouse and third parties and distributors. Logistics should perform efficiently for the success of the organization. For performing logistics most effectively there are important five issues.

Product movement

Information about the product

Service and time

Integration

Cost

Logistics performance means the amount of how successful the logistics management in the organization. The goal of the logistics is to transport goods from one place to other place fastly, reliable with reasonable prices in order to meet the customer needs if they maintain this process successfully then automatically the organization goals will achieve. With the help of latest technology organizations had overcome the fissure between successful logistics management with the issues it had faced.

There are few issues in logistics performance across the world, because people had observed that the cost is not decreasing but increasing in logistics and service levels are decreasing. The most important thing that every organization should consider is cost of logistics as this affects the performance of the logistics.

Logistics Performance Metrics

Examining the performance of particular process needs a well definite metrics which helps the organization to establish goals. Managers need to be effective in identifying the performance metrics, related units, techniques to monitor. Managers need guidance and training in identifying all these functions. Metric is the benchmark and that measures the organizations capability in meeting the needs of the customers and organization objectives. While selecting the performance metrics organization should be very careful they cannot select it blindly. An efficient performance metric structure make possible for continuous improvement in the organization.

Logistics performance metrics are of four types

Internal process

Innovation

Consumers

Finance

Logistics Performance Measurement

Performance measurement has continuous issue in logistics and supply chain management. Process to improve the logistics performance resulted benefits for the organization. Every organization need not follow the same methods to improve the performance of logistics different organizations follows different methods but the ultimate aim of every organization is to achieve the predetermined goals. Possible improvement will be better position of organization measurements needs. Logistics performance measurement focuses on

Initiating characteristics that will measure should have

Viewpoint that measures need to assume

Certain measures that organizations need to select

Performance measurement should be selected as per the organization capability to detect performance consistently with organizations particular logistics missions and goals. Organizations follow different ways in order to differentiate them in the industry is with their goals. The goals of the firm establish the nature of business operations.

The structure developed by the organization recognizes four achievable performance measurements that logistics organizations can refer. Each extent illustrates different direction of measures. By evaluating every dimension they can know whether the organization is meeting the needs of the measurement with current measure and also helps them to find out which dimension can achieve the goals of organization.

Logistics management

Logistics management means planning, organizing and delivering the products to the customers at the right time and right place. Logistics management is very vibrant field it should provide solutions to different problems within a short time. There are so many important benefits in logistics management such as it helps the organization to know the time, location value, with the help of logistics management they can meet the customer satisfaction and employee satisfaction as both are important for the success of the organization. It improves the performance of the entire system, increases the sales of business, generates the revenue, and improves the process of order. To improve the process of logistics and to achieve good profits they need to make sure all the benefits are used properly. Some important features of logistic management that should not be avoided are

Inventory

Transportation

Packaging

Integration

Warehousing

Loading

Security

Location and time

Shipment

Raw material handling

Route

Logistics applies to every organization in the world as every organization motto will be to satisfy their customers. Organizations such profit making and non profit making, sports, media,

Performance measurement and metrics should be properly followed by the organization to be successful in the market, these are very important factors in the organization. Logistics strategies should be properly planned and implement to meet and satisfy customers. In the modern world and the availability of innovative technologies it is very important to sustain the competitors. They need to perform different programs to know the effectiveness of the logistics management and performance such as logistics audit. This program is designed to know the and compare the performance of logistics, systems, practices and businesses with high standards.

Once the organization has analyzed the conclusions of supply chain and logistics it becomes more and more noticeable that competition is more between the organizations and innovation is moving from one firm to other firm in the global world. SCM and logistics is becoming a important sector in industry.

6.0 Case Study:

Operational Management issues in the MRF Tires Company

Problem Definition:

The MRF is launching a new and state of the art tires systems for heavy vehicles. The company has spent huge amount of money in research and development to bring to the current technology levels. This is first of its kind in the market in the Tyres. MRF would like to reach the product to end customers by target date without any delays. The MRF is teamed up with VISTA supply chain solutions to reengineer its distribution network to deliver the product. The VISTA has its own freight carriers across the globe. It also has the road transport division and air-cargo division.

The MRF has manufacturing facilities in various countries. The raw material for the product manufacturing sourced from different countries as well. When the product is delivered to the customers all accessories should be packaged together. To launch a new product the company would like to have the customer service capabilities up to the speed from the beginning. MRF knows that the distributors and retailers should require to up-to-the minute information regarding the product and its availability. In the recent years, the MRF Tyres experienced phenomenal growth in terms of volume of sales and products. Due to increased growth there are issues in the delivery products to the customer within reasonable. This has lead several complaints from distributors as well as customers. The management has took this issues very seriously and wanted to resolve the issues for current products. Especially the top management does not want the problem occurring for newly launching product. .

Solution

MRF previously handled many new product launches. However, given the importance of the product and public expectations, this time MRF decided to team up with VISTA supply chain management systems to deliver the product. When the new product is launch the capability to predict the volume of product and time scale for delivery is the key for success. The major components of New Tyres (XFS200) are manufactured in Asian Region and the product is assembled in Japan and Thailand. The accessories for new product are manufactured in Eastern European countries. Product Supply to North and South America: The VISTA flown assembled product from Japan and Thailand and accessories from Eastern Europe to Kentucky.

In Kentucky product and accessories are packaged together. The packaged product is distributed to retailers in North America by road network and air freight. The Latin American region was covered with air freight from Kentucky. In addition if online orders are mailed directly by air-mail. Product Supply to North and Europe and Africa: The assembled product was air shipped to Bucharest, Romania and is packaged with accessories. The packaged product is air-shipped to retailers in Europe. Also there is warehouse located in the Brussels to handle the online orders. The Bucharest centers also handled the shipments to Europe. Product Supply to Asia Pacific Region: The accessories are flown to Thailand and packaged with product. The retailers in Asia Pacific region was delivered from Thailand. While the product was enroot the VISTA system informed the retailers about the delivered times. So that retailers can adjust to not miss sales opportunity.

Results Due to implementation of synchronized supply chain management resulted in sales targets set by management. The key to success is distributed warehousing and distribution centers and integrated tracking system. The major results are: a) The synchronized system significantly reduced MRF’s supply chain by (40%). b) This also resulted in increased speed to end customers. c) The increased service to the retailers. d) The product has been launched at the same time globally without having in delays reaching retailers and end customers.

7.0 Summary

In this paper the operational management is critical reviews and its contributions to the strategic management. The various components are thoroughly examined and problem areas are clearly identified. The Operational management principles are applied to the present case study. The MRF tyres is an global tyre manufacturing company with operations spread over the World. The majority of the manufacturing facilities are located in India and south Asia. Due to phenomenal growth in the recent years, resulted in various issues in the supply chain management. This resulted in non-availability of the stock in certain parts of the World. There are sever delays in delivering the products to the customers. This has lead to complaints from customers and affecting the company performance. We applied various operational management principles to resolve this and to get company on track. One of the effective method is implement the Just-in-time approach, implementation of global IT systems, and partnering with logistics companies to deliver the products across the World. To achieve the sales targets and customer satisfaction the different KPI analysed. A fictitious consumer electronics company product launch has been analyzed. The MRF achieved its sales targets by reengineering the supply chain management. The global presence of VISA and effective product delivery and communication helped for successful product launch. This also reduced the cost for MRF and reduced supply chain by 40%