Operations Management Assignment

Read the following mini-case study, and answer the THREE questions that follow: Panasonic Corporation, a giant Japanese electrical-household appliances assembly plant will relocate its whole operations in high technology LCD assembly factory in Japan to Malaysia. Its Regional and Corporate Director (Asian & Oceania), Masaru Maruo, said the move was an integrated strategic effort to make Malaysia its main hub for production plant in streamlining its production using high technology for their LCD television and camera products for domestic and global market. He said, the company has already ceased its operations and assembling productions of the LCD panels in the Philippines (2002), Australia (2005), and recently in Indonesia, last March (2009). He said that the decision was made to enable Panasonic to focus on the existing operations in Shah Alam, Selangor, as the main centralised centre for TV LCD production and digital cameras in this region. This decision was taken because we receive strong cooperation and support from the Malaysian Government continuously since we started operations 44 years ago. Political stability, investment incentives and competitive economic policies, high skilled labour with multi-language proficiencies are the major factors that attract us to continue our operations and expand our businesses in Malaysia. Those factors are important for our operations expansion as well as for enhancing our capabilities to produce more competitive products to compete in this challenging and competitive business he said at the press conference in his office at Panasonic Towers, Osaka, Japan, yesterday. Source: Raaf, A.R. (2009). Panasonic Pindah Operasi Pasang TV LCD ke Malaysia , in Berita Harian, 11 December 2009, Malaysia.

QUESTIONS 1. Critically evaluate the factors that attract investors, such as Panasonic Corporation, to set up operations in Malaysia. [8 Marks]

The major factors that attract investors such as Panasonic Corporation to set up operations in Malaysia is that malaysia is government incentive Government policies that maintain a business environment with opportunities for growth and profits have made Malaysia an attractive manufacturing and export base in the region. The private sector in Malaysia has become partners with the public sector in achieving the nation's development objectives. A major factor that has attracted investors to Malaysia is the government's commitment to maintain a business environment that provides companies with the opportunities for growth and profits. This commitment is seen in the government's constant efforts to obtain feedback from the business community through channels of consultation such as regular government-private sector dialogues. These allow the various business communities to air their views and to contribute towards the formulation of government policies which concern them. Another factor is that Malaysia has an educated work force they are highly skilled with multi language capabilities,

Page 2 Malaysia offers investors a young, educated and productive workforce at costs competitive with other countries in Asia. Backed by the government's continued support of human resource development in all sectors, the quality of Malaysia's workforce is one of the best in the region. Literacy levels are high at more than 94% and school leavers entering the job market have at least 11 years of basic education. In addition, labor productivity has grown steadily at more than 3.3% per annum over the last few years surpassing that of many developed countries. Another major factors that investors love about Malaysia is its Infrastructure in Malaysia is designed to serve the business community; it is one of the best in Asia. Telecommunications network served by digital and fibre optic technology, also it has a good transportation system such as five international airports (all with air-cargo facilities), well-maintained highways and seven international seaports make Malaysia an ideal springboard to the Asia-Pacific market. Another factors that attract investors to Malaysia is that they are in a good location , Malaysia strategically located in the heart of South East Asia, offers a cost-competitive location for investors intending to set up offshore operations for the manufacture of advanced technological products for regional and international markets. 2. Based on the above operation, identify the four (4) types of inventory needed to operate the factory. Discuss two (2) inventory management models that may be adopted in such a factory. [8 Marks] Compare and contrast the following manufacturing terms: a) Material Requirements Planning (MRP); b) Manufacturing Resource Planning (MRP 2); and c) Enterprise Resource Planning (ERP). [9 Marks] [TOTAL = 25 MARKS] [Note: Use 1,500 to 2,000 words for the answers, supported by good references] 1
Supportive Government Policies
Government policies that maintain a business environment with opportunities for growth and profits have made Malaysia an attractive manufacturing and export base in the region. The private sector in Malaysia has become partners with the public sector in achieving the nation's development objectives. A major factor that has attracted investors to Malaysia is the government's commitment to maintain a business environment that provides companies with the opportunities for growth and profits. This commitment is seen in the government's constant efforts to obtain feedback from the business community through channels of consultation such as regular government-private sector dialogues. These allow the various business communities to air their views and to contribute towards the formulation of government policies which concern them.

3.

Liberal Equity Policy

Generally, foreign investors in Malaysia's manufacturing sector can hold 100% equity in projects which export at least 80% of their production. However, effective from 17 June 2003, 100% foreign equity holding is allowed for all investments in new projects, as well as investments in expansion/diversification projects by existing companies irrespective of their level of exports.

Educated Work Force

Malaysia offers investors a young, educated and productive workforce at costs competitive with other countries in Asia. Backed by the government's continued support of human resource development in all sectors, the quality of Malaysia's workforce is one of the best in the region. Literacy levels are high at more than 94% and school leavers entering the job market have at least 11 years of basic education. In addition, labour productivity has grown steadily at more than 3.3% per annum over the last few years surpassing that of many developed countries.

Page 3 . The ABC classification process is an analysis of a range of objects, such as finished products ,items lying in inventory or customers into three categories. It's a system of categorization, with similarities to Pareto analysis, and the method usually categorizes inventory into three classes with each class having a different management control associated : A - outstandingly important; B - of average importance; C - relatively unimportant as a basis for a control scheme. Each category can and sometimes should be handled in a different way, with more attention being devoted to category A, less to B, and still less to C. Popularly known as the "80/20" rule ABC concept is applied to inventory management as a rule-of-thumb. It says that about 80% of the Rupee value, consumption wise, of an inventory remains in about 20% of the items. ECONOMIC ORDER QUANTITY (EOQ) MODEL The economic order quantity (EOQ) is the order quantity that minimizes total holding and ordering costs for the year. Even if all the assumptions don t hold exactly, the EOQ gives us a good indication of whether or not current order quantities are reasonable. Ordering Costs are basically the costs of getting an item into the firm s inventory. Holding Costs are basically the costs incurred due to storage space, interest, obsolescence, insurance, etc. Advantages Cost Minimizing Q Assumptions: Relatively uniform & known demand rate Fixed item cost Fixed ordering and holding cost Constant lead time

ERP
Advantages The fundamental advantage of ERP is that integrating myriad businesses processes saves time and expense. Management can make decisions faster, and with fewer errors. Data becomes visible across the organization. Tasks that benefit from this integration include: [citation needed] Sales forecasting, which allows inventory optimization Chronological history of every transaction through relevant data compilation in every area of operation. Order tracking, from acceptance through fulfillment Revenue tracking, from invoice through cash receipt Matching purchase orders (what was ordered), inventory receipts (what arrived), and costing (what the vendor invoiced) ERP systems centralize business data, bringing the following benefits: They eliminate the need to synchronize changes between multiple systemsconsolidation of finance, marketing and sales, human resource, and manufacturing applications They bring legitimacy and transparency in each bit of statistical data. They enable standard product naming/coding.

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They provide a comprehensive enterprise view (no "islands of information"). They make

realtime information available to management anywhere, any time to make proper decisions. They protect sensitive data by consolidating multiple security systems into a single structure.[33] Benefits ERP can greatly improve the quality and efficiency of a business. By keeping a company's internal business process running smoothly, ERP can lead to better outputs that benefit the company such as customer service, and manufacturing. ERP provides support to upper level management to provide them with critical decision making information. This decision support allows the upper level management to make managerial choices that enhance the business down the road. ERP also creates a more agile company that can better adapt to situations and changes. ERP makes the company more flexible and less rigidly structured in an effort to allow the different parts of an organization to become more cohesive, in turn, enhancing the business both internally and externally.[34] Disadvantages Customization is problematic. Re-engineering business processes to fit the ERP system may damage competitiveness or divert focus from other critical activities. ERP can cost more than less integrated or less comprehensive solutions. High ERP switching costs can increase the ERP vendor's negotiating power, which can result in higher support, maintenance, and upgrade expenses. Overcoming resistance to sharing sensitive information between departments can divert management attention. Integration of truly independent businesses can create unnecessary dependencies. Extensive training requirements take resources from daily operations. Due to ERP's architecture (OLTP, On-Line Transaction Processing) ERP systems are not well suited for production planning and supply chain management (SCM) Harmonization of ERP systems can be a mammoth task (especially for big companies) and requires a lot of time, planning and money.[35] Recognized ERP limitations have sparked new trends in ERP application development. Development is taking place in four significant areas: more flexible ERP, Web-enable ERP, interenterprise ERP, and e-business suites. Each of these potentially addresses current ERP failings.

MRP
MRP software's main role is to better calculate the requirements needed for manufacturing production. MRP software calculates the correct materials required for production, the optimal quantity of materials required and at what time the materials are needed. This data remained only in the MRP system and not visible to other departments within the organization. When initially introduced in the 1970's companies immediately saw the benefits of this new tool. Raw material consummation dropped, wastes reductions occurred and manufacturing became leaner.

Expansion
MRP software grew into MRP II software and given the name manufacturing resource planning. Manufacturing resource planning software realized the need for the software to take on more than just a functional production role. MRP II software incorporated vendor management, capacity planning and billing. MRP II software eventually morphed into ERP software.
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ERP
ERP software goes beyond MRP II software in a number of areas. ERP software works through all departments of an organization or enterprise. It allows for collaboration between departments and let's

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each department's data "speak" to another. For example, purchasing buys the raw materials required for production based on the data received from productions daily usage information and the forecast generated by the forecasting team. Receiving and warehousing see the order quantities the purchasing department bought and plans the receiving labor and warehouse storage around the expected quantities. At the same time, accounts payable can prepare payment based on vendor terms as soon as the shipment arrives and quality control as entered the inspection data into the system. Each department's data affects additional departments within the enterprise.

Integration
Most MRP software exists as a stand-alone application. The software does not integrate well with legacy systems or purchased applications or if it does it requires many hours of IT support to make it work. ERP software has various modules that integrate into a complete software package. Companies purchase the initial modules they require and purchase additional modules when needed. The new modules easily integrate into the existing ERP backbone structure.

Advantages
Most companies rely on enterprise wide data and intelligence. One of the big advantages of ERP systems remains its ability to see an organizations entire supply chain, from offshore suppliers to the needs of the customer in its hometown. ERP systems combine data from multiple sources within an organization to create an overall view of a company's health and it also provides analytical tools for process improvement.
MRP stands for Material Requirements Planning. In more advanced applications, MRP represents Material Resources Planning. ERP stands for Enterprise Resources Planning. At each increasing step, from MRP to MRP2 to ERP, more functional areas are brought into the resource planning system. MRP, MRP2 and ERP are steps of increasingly complexity aimed toward managing corporate resources effectively and efficiently. MRP is the simplest resource planning system, while ERP is the most complex. Read more: MRP & ERP Systems | eHow http://www.ehow.com/about_6535613_mrp-_amp_-erpsystems.html#ixzz2WXL329EC

Definition of MRP
MRP originally stood for Material Requirements Planning. Material requirements planning ensures the right materials are in the right place at the right time and in the correct volume. MRP, both in material requirements planning and material resources planning, aims to minimize bottlenecks in production from material shortages, prevent excess inventory and keep work in progress to a minimum.

Read more: MRP & ERP Systems | eHow http://www.ehow.com/about_6535613_mrp-_amp_-erpsystems.html#ixzz2WXLG6ir4

Definition of MRP2
MRP2 stands for Manufacturing Resource Planning. MRP2 software includes MRP1 functionality. MRP2 expands upon MRP1 because it allows for planning of labor as well as materials. Another feature within MRP2 includes running "what-if" scenarios of forecasted demand. MRP2 systems also allow for integrated financial planning and management, with labor tracked per assembly operation. This information is fed to the financial system, simplifying time keeping and payroll. However, MRP2 also has more advanced data analysis functionality built in. MRP2 systems typically have built-in data analysis modules allowing for forecasting and modeling based on actual production data within the MRP system.

Definition of ERP
ERP stands for Enterprise Resource Planning. An ERP system encompasses all manufacturing, design, engineering, planning, ordering, financial and even legal information within a single software system. Some ERP systems also include customer relationship management modules and sales force management systems.

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Similarities Between MRP and ERP

MRP and ERP are both designed to minimize bottlenecks in production from material shortages, prevent excess inventory and keep work in progress to a minimum. MRP and ERP are often used interchangeably. They are similar, since both MRP and ERP are used to ensure the right materials are in the right place at the right time and in the correct amount. ERP systems include all purchase information, recorded contracts, proposals and even customer contact databases. However, ERP is an implementation of MRP principles across an entire company, not just finance. Thus, ERP grows until it encompasses all corporate finance, planning, manufacturing and contract management functions, in addition to basic material procurement and manufacturing production planning.

Read more: MRP & ERP Systems | eHow http://www.ehow.com/about_6535613_mrp-_amp_-erpsystems.html#ixzz2WXLSi36J

Page 7 Walsh, Katherine (January 2009). "The ERP Security Challenge". CSOonline. CXO Media Inc. Retrieved 2008-01-17. O'Brien, James (2011). Management Information Systems(MIS). New York: McGraw-Hill, Irwin. p. 324. The Minefied of Harmonising ERP. Retrieved on August 17, 2012. http://www.ehow.com/about_6614110_difference-between-erp-mrp-software.html Silver E.A. and R.Peterson, Decision Systems for Inventory Management and Production Planning, Second Edition, John Wiley & Sons, 1995.
Cecil Bozarth ECONOMIC ORDER QUANTITY (EOQ) MODEL: Inventory Management Models : A Tutorial Published on: Jan, 28, 2011

http://www.mida.gov.my/env3/index.php?page=invest-in-malaysia http://malaysiabizadvisory.com/setting-up-franchise-business-operations-in-malaysia/ http://www.alliedelec.com/images/products/mkt/pb/panasonic/pdfs/Panasonic-IA-PackagingGuide-2011.pdf