MANAGING OPERATION ASSIGNMENT

(BMPJ 6603)

NAME : FELIX JOSEPH SITIN

PROGRAMME : MASTER IN MANAGEMENT
WORD COUNT : 3,498 WORDS

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EXECUTIVE SUMMARY

The story is about an organisation named R Griggs & Company Limited which has been
contracted by Dr Klaus Maertens to produce the “Dr Martens Air Cushion soles for the
international market. The product is a top seller in the comfort shoes market in Germany.
Griggs, coincidently, is a manufacturer of army and workwear boots with a bias towards
comfort. It went on to make footwear with the Dr Martens sole, branded AirWair and it went
on to become a success leading to the organisation being licensed to make the sole to the rest
of the world.

The aim of this study is to analyse the strategies employed by R Griggs and Company Limited
as a result of a major restructuring made earlier. The restructuring was made to improve control
over its operational and selling activities across the world. However, problems occurred which
required drastic action to be taken so as to avoid losses.

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Table of Contents
EXECUTIVE SUMMARY

1.0 INTRODUCTION ................................................................................................................................ 4

2.0 MAIN BODY ....................................................................................................................................... 4
2.1 PROBLEM STATEMENT ................................................................................................................ 5
2.2 FINDINGS ..................................................................................................................................... 5
2.3 LITERATURE REVIEW ................................................................................................................... 6
2.3.1 CAPACITY PLANNING .......................................................................................................... 6
2.3.1.1 TYPES OF CAPACITY PLANNING…….……..…………………………………………………………….6

2.3.1.2 XAPACITY PLANNING STRATEGIES…….……………………………………………………………….7

2.3.2 JUST IN TIME CONCEPT…………………………………….…………………………………………………………..9

2.3.3 LEAN OPERATION…………………………………………………………………………………………………………11

3.0 CASE STUDY……………………………………………………………………………………………………………………………….13

3.1 PROBLEMS AFFECTING THE PLANTATION DIVISION…………………………………………………………….14

3.2 PROBLEMS AFFECTING THE PROPERTIES DIVISION……………………………………………………………..15

3.3 THE RESTRUCTURING PROCESS…………………………………………………………………………………………..15

3.3.1 RESTRUCTURING OBJECTIVES…………………………………………………………………………………….15

3.3.2 PLANTATION DIVISION RESTRUCTURING STRATEGIES……………………………………………….15

3.3.3 PROPERTIES DIVISION RESTRUCTURING STRATEGIES…………………………………………………16

4.0 CONCLUSION AND RECOMMENDATION…………………………………………………………………………………….18

REFERENCES

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1.0 INTRODUCTION

When we look at the situation concerning R Griggs and Company Limited, it actually
concerns the major restructuring they made to improve control over its operational and
selling activities. This re-organisation resulted in the consolidation of all manufacturing
companies under the name of R Griggs & Company Limited with all the sales and
distribution being controlled by Airwair Limited.

This case study focuses on the follow-up for this major upheaval. An operational review
made several months after the launching of the restructure which revealed considerable
confusion concerning key issues such as:-

- Unclear boundaries between managers and departments

- Inadequate systems and the absence of meaningful management information
- Lack of encouragement for local management to take ownership of issues undertake
their control
- \lack of visibility of the numbers of orders and the available production capacity

The operational review showed serious problems within the business process at
operational levels, such as adverse effects on customer service, staff morale and general
management control.

2.0 MAIN BODY

This case study shows that planning is an ongoing process of continuous improvement.
Where changes take place, it is important to evaluate performance so that further
modifications can be carried out where necessary. Problems started to crop out even
when the main objectives of the organisation has been achieved.

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2.1 THE PROBLEM STATEMENT

The problems uncovered are

 The move for centralisation made staff morale low as there s a feeling of low
customer contact and self-determination. The workforce felt that management
would just hand out workloads as well as delivery schedules that are
unachievable.
 Local management teams also have to focus upon issues such as meeting
delivery schedules and stock/inventory control.
 The Griggs Group need to identify ways in responding to fashion products with
short product life cycles so as to avoid large stocks of finished goods
 Some distributors felt that the number of orders completed on time was
unsatisfactory. They also felt that Griggs could not be relied on to discuss on
problems relating to capacity, what could be made and for when.
 There are several fundamental flaws in Griggs current system. Production
schedules were not put into place until materials have been received, Orders
were difficult to trace once production has started.
 Griggs is in dire need of a planning or scheduling system, as without it
production planning would be impossible. Staff were often losing customers
order and occasionally urgent deliveries were

2.2 FINDINGS

Based on the case study, the company was facing difficulties on their
manufacturing capabilities. This concerns capacity planning and the company
needed to have strategies that can be used to increase capacity.

The organisation is also concerned with late delivery. This is considered crucial
in meeting deadlines and orders of a company. Therefore, the concept of JIT
(Just n Time) is needed to be implemented in managing the issue of late delivery
and fulfilling customer orders.

Lean operation is also a factor that needs to be understood to enable the

company to compete in the marketplace and achieve competitive advantage.
Therefore, all issues mentioned above will be answered in the section under
Findings.

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2.3 LITERATURE REVIEW

2.3.1 Capacity Planning

According to Utley, M. & Worthington, D. (2012) (1) , Capacity planning

is defined as, the process by which organizations determine the broad
level of resources they make available for the delivery of a service or a
set of services. sufficient to enable an organization to meet demand for
one or more packages while achieving specified service standards’’.
According to Reid & Sanders, “Capacity planning is the process of
establishing the output rate that can be achieved by a facility. Planning
for capacity is important if a company wants to grow and take full
advantage of demand” (2013, p. 334) (2) . According to Liske (2012) (in
(3)
Hutagalung, Rambe, & Nazlina, 2013) if capacity planning is
executed well, it can meet the demand of existing customers as well as
be able to increase the company’s revenue. Ria Amalia (2012) (in
Hutagalung, Rambe, & Nazlina, 2013) opines that consumer demand
can be met by adding machines at the work centre that is experiencing a
shortage of capacity

Companies often encounter obstacles to determine the optimum amount

of production due to fluctuating demand. In addition, the company faces
difficulty in meeting the demand of consumers when demand soars as
the production capacity of the company is limited. If this continues, the
company will cease to make profits as well undermine consumer
confidence.

2.3.1.1 Types of Capacity Planning

Capacity planning based on the timeline is classified into three

main categories long range, medium range and short range.

 Long Term Capacity

Long range capacity of an organization is dependent on

various other capacities like design capacity, production

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 capacity, sustainable capacity and effective capacity.
Design capacity is the maximum output possible as
indicated by equipment manufacturer under ideal
working condition.

Production capacity is the maximum output possible

from equipment under normal working condition or day.

Sustainable capacity is the maximum production level

achievable in realistic work condition and considering
normal machine breakdown, maintenance, etc.

Effective capacity is the optimum production level under

pre-defined job and work-schedules, normal machine
breakdown, maintenance, etc.

 Medium Term Capacity

The strategic capacity planning undertaken by

organization for 2 to 3 years of a time frame is referred
to as medium term capacity planning.

 Short Term Capacity

The strategic planning undertaken by organization for a

daily weekly or quarterly time frame is referred to as
short term (4)

2.3.1.2 Capacity Planning Strategies

There are three primary strategies companies use to perform

capacity planning. Each comes with its own set of
advantages and drawbacks, so you'll need to think carefully
about which one is most appropriate for your company:

 Lead Strategy – The Lead Strategy is the most

aggressive of the three approaches to capacity planning.
Here, the company increases its production capacity in
advance of anticipated increases in demand. Some
companies use the Lead Strategy as a way to lure
customers away from competitors, especially if a
competitor is vulnerable to inventory shortages when
demand skyrockets. The big risk with the Lead Strategy
is that the anticipated increase in demand never
materializes and you are stuck with excess inventory.

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 Advantage of lead strategy: First, it ensures that the
organization has adequate capacity to meet all demand,
even during periods of high growth. This is especially
important when the availability of a product or service
is crucial, as in the case of emergency care or hot new
product. For many new products, being late to market
can mean the difference between success and failure.
Another advantage of a lead capacity strategy is that it
can be used to pre-empt competitors who might be
planning to expand their own capacity. Being the first in
an area to open a large grocery or home improvement
store gives a retailer a define edge. Finally, many
businesses find that overbuilding in anticipation of
increased usage is cheaper and less disruptive than
constantly making small increases in capacity. Of
course, a lead capacity strategy can be very risky,
particularly if demand is unpredictable or technology is
evolving rapidly.

For example, a new vineyard anticipates using less than

10 acres of land in its first 5 years but purchases 100
acres of land as a long term investment in the business.

 Lag Strategy – The Lag Strategy is much more

conservative than the Lead Strategy. Instead of
increasing capacity in anticipation of suspected
increases in demand, the Lag Strategy responds to actual
increases in demand by boosting capacity after the
operation is running at full steam. Although you won't
accumulate excess inventory, the time it takes to ramp
up production can result in the loss of customers to the
competition.

Three clear advantages of this strategy are a reduced risk

of overbuilding, greater productivity due to higher
utilization levels, and the ability to put off large
investments as long as possible. Organization that
follow this strategy often provide mature, cost-sensitive
products or services.

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 For example, a call centre with 10 staff that doesn't hire
more employees until everyone is working overtime.
This may serve to boost efficiency and productivity as
current resources are heavily utilized. It tends to result
in poor performance such as slow response or quality
failures.

 Match Strategy – The Match Strategy is the middle

road between the Lead and Lag Strategies. Rather than
substantially boost capacity based on expected or actual
increases in demand, the Match Strategy emphasizes
small, incremental modifications to capacity based on
changing conditions in the marketplace. Even though
this strategy takes more effort and is harder to
accomplish, it is much more risk-averse than other
capacity planning options. (5)

For example, a data center that adds 20 servers when its

capacity touches 90%.

2.3.2 Just In Time Concept

In a business, it is extremely crucial to meet deadlines in order to make

sure those who keep the company in business are happy. Deadlines are
important inside the company, in its relationships with creditors and even
for the professional development of employees. Meeting deadlines keep
the customer happy, enhance employee’s morale, ensures good business
credit as well as a lot of other advantages.

JIT production system identifies the hidden problems in the value chain
and reduces the production waste of the system while increasing the
throughout (Sales-Raw Material Cost). Even though the JIT system
seems to be interesting and less complicated, it requires lot of
coordination with supply chain to avoid delays in the production
schedule.

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 Less space needed

With a faster turnaround of stock, you don’t need as much

warehouse or storage space to store goods. This reduces the
amount of storage an organisation needs to rent or buy, freeing
up funds for other parts of the business.

 Waste reduction

A faster turnaround of stock prevents goods becoming damaged

or obsolete while sitting in storage, reducing waste. This again
saves money by preventing investment in unnecessary stock, and
reducing the need to replace old stock.

 Smaller investments

JIT inventory management is ideal for smaller companies that

don’t have the funds available to purchase huge amounts of stock
at once. Ordering stock as and when it’s needed helps to maintain
a healthy cash flow. (6)

Harley Davidson
Harley Davidson’s use of JIT is mostly characterized by its
transformation in the late World War 2 era from an inefficient
manufacturer that solved all of its problems with extra inventory
to a nimble manufacturer able to meet demand and provide short
lead times.

Results of Harley Davidson’s JIT Implementation:

o Inventory levels decreased 75 percent.
o Increased productivity.
o Harley Davidson’s success with the implementation of JIT
had a lot to do with the fact that when JIT was put into
practice, process problems could no longer be hidden by
costly inventory that helped to meet ship dates. The
inefficiencies in the processes were quickly identified and
solved. (7)

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2.3.3 Lean Operation

Lean over the years has become a “buzz” word. Started with lean manufacturing
in the late 80s (rebranding the Toyota Production System) [1], and nowadays
the term “Lean” can be found almost everywhere, just to offer some examples:
lean services, lean entrepreneurship, lean software development, lean product
development, lean accounting, lean startups and the list goes on and on. The
underlying concept though is the same; maximize the customer value with
minimum waste, i.e. “manufacturing / delivering more with less”.(7)

Lean Manufacturing is about eliminating waste (the nonvalue-added

components in any process) and satisfy customers. Waste identification and
elimination is central to lean manufacturing philosophy. Through lean,
manufacturing can be achieved by using less human effort in the factory, less
space, less financial resources and less material for producing the same product

So how does lean operation assist Griggs compete in the marketplace and
achieve competitive advantage?

1) Reduced Inventory Cost

A lean organization maintains just enough stock to complete orders.
Customer orders trigger purchases of materials to meet the requirements of
the order. Large inventories of materials and supplies ties up funds, that a
company could use to grow and drive itself forward.

2) Reduce Lead Time

Lean organizations use a pull method to move materials and products

through the production process. A pull system requires the next step in a
production process to pull the product through only when it is prepared. For
example, some organizations use a batch system to move materials through
the production process. Only when a batch is completed at the next
workstation can product be moved forward. The ideal in lean manufacturing
is a single-piece process with one product moving through the production
line at a time. This eliminates bottlenecks in the process and reduces lead-

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 time. A reduction in lead-time improves customer service, which can give a
company a competitive advantage in the market.

3) Quality Improvement
Lean manufacturing systems focus on making small quality improvements
in company processes to improve the overall quality of the product.
Improving the quality of the product and the process improves reliability
and customer satisfaction. In a lean manufacturing system, employees have
the power to make improvements at any stage in the process. For example,
employees at each workstation must ensure the product meets quality
standards before moving it on to the next workstation. Workers can send a
product back to the previous station if it does not meet specifications. The
system builds quality checks and inspections into the process instead of
inspecting the product at the end of the line.

4) Employee Involvement and Morale

Quality improvement techniques allow workers to participate in changes to
processes and production methods. Empowering workers to participate in
change increases morale, which increases productivity. A productive and
empowered workforce increases production rates and reduces costly
employee turnover.
A few examples of how lean operation can assist Griggs is as follows:

 Value stream and process mapping

Value stream mapping and process mapping involve evaluating and
charting broad and specific processes to better understand precise areas
of waste. Once processes are mapped and analysed, existing issues can
be pinpointed and eliminated or streamlined.

 Tightly controlled automation and production flow

Well-implemented assembly lines are essential to lean production. Lines
should be automated where possible, but accommodate live workers
where quality control demands.

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  Inventory reduction and Kanban
Under lean production practices, inventory levels are strictly regulated,
often using a system called Kanban. With a Kanban system, essential
inventory is replaced only when an employee takes a small “Kanban
card” to a supervisor; inventory is then procured or replaced strictly as
needed. Inventory is kept with corresponding Kanban cards on a
centrally located Kanban rack.

 Employee training
Employees should be trained not only on lean principles, but on the
specific lean methods and processes to be utilized moving forward. (8)

3.0 CASE STUDY

I chose to focus on LGM Properties Corporation (LGMPC), an organisation

which restructured its operation, similar to what R. Griggs did. LGM Properties
Corporation is an organisation that is involved in the production of rubber and
oil palm. Aside from that, it is also involved in the properties sector. LGMPC
was incorporated on 1 January 2002 under the Malaysian Rubber Board (MRB),
1996 and commenced operations on July 1, 2002.

The inception of LGM Properties Corporation (LGMPC) would enable the

Malaysian Rubber Board (LGM) to fully concentrate its activities on the actual
R&D aspects of the rubber industry. The function of generating funds to
supplement the financing of these would become the responsibility of the
Corporation.

As of 2012, the Malaysian Federal Government has announced that by the year
2020, all Government Owned Agencies will have to be self-funded. LGM
Properties Corporation, being a subsidiary of the Malaysian Rubber Board
(MRB), has been instructed to increase its productivity and efficiency to
generate income for the MRB. It was forecasted that LGMPC is expected to
contribute at least 40% of MRB’s financial requirement.

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 Notwithstanding the issue above, LGMPC was also affected by several issues
on its operation activities, which is as follows.

3.1 Problems affecting the plantation division

The performance of the plantation division is heavily dependent on the market

determined prices for rubber and fresh fruit bunch (FFB) aside from the
plantation’s production level.

The problem faced by the Plantation Division is as follows:-

a) Commodity prices is dependent on market determined prices

b) Drop in price of substitute products
c) Indonesia’s pricing policy on palm oil
d) Low productivity due to matured and newly planted trees
e) Shortage in labour supply

3.2 Problems affecting the Properties Division

The problems affecting the Properties Division is as follows:-
a) Oversupply of new office space in Kuala Lumpur
b) Inefficient rental collection system
c) MRB taking back the development activity on commercial lands
d) Lack of marketing efforts on MRB’s other facilities

In order to generate more income, the Plantation and Properties Division came
up with income generating ideas. Efforts were also made to push the marketing
of other assets.

3.3 THE RESTRUCTURING PROCESS

3.3.1 RESTRUCTURING OBJECTIVES

a) To increase its contribution to the Malaysian Rubber Board
b) To further improve LGMPC’s productivity efficiency
c) To improve revenue and minimise cost

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d) To implement a successful control system
e) To further improve LGMPC’s operation process
f) To further improve staff skills and welfare
g) To uncover other income generating sources

3.3.2 PLANTATION DIVISION RESTRUCTURING STRATEGIES

The Plantation Division has implemented the following strategies for the
following years.

 Reduction of weeding cost

a) Correct usage of chemicals and weed management is implemented to

reduce weeding costs, erosion and leaching during fertilizing

b) Weeding round is also reduced as this incurs high labor cost

 Fertilizer Control

a) LGMPC implemented regular agronomist visits to ensure tree health and

growth is in accordance to planning.

b) Installed wooden pallets to avoid fertilizer solidification.

c) Made subsoil fertilizing for hilly areas to reduce fertilizing rounds and
lessen down leaching

 Pest Control

a) Usage of owls for rodent control (1 nest: 10 ha). The current rate
is 1:30ha and installation of mobile nests has been implemented. It
was completed in 2013 and aimed at reducing the purchase of
rodent baits.

b) Planting of beneficial plants for leaf eater control has been

implemented with an intensity of 1 decameter per hectare. Planting
was completed in 2015 thus reducing the need for pesticides.

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  Replanting and Rehabilitation
a) The density for newly rubber planted areas is 500 trees per hectare
for flat grounds and 450-480 trees per ha for hilly areas. These
areas are planted with new trees and all works were completed in
2013.

b) Planted mangroves and watery areas with oil palm.

 Harvesting and Tapping

a) Harvesting intervals are made below the 20 days and rubber
actual/possible tapping above 85%.

b) Percentage of ripe fresh fruit bunch (FFB) collected was targeted

at above 95% and rubber scrap sales to be made every 10 days.

c) To reduce dependency on foreign workers, tapping was only made

on the fourth and sixth day in new tapping areas.

d) Implemented “rescue team” strategy by having its own tappers and

harvesters which doubles as maintenance workers to counter any
shortage in labour supply

 Workers Safety and Health Act 1994

a) All plantations have an Occupational, Safety and Health (OSH)

meeting once every 3 months.
b) Equipped and educated staff and workers with the Efficient
Agronomic Practice Certification

3.3.3 PROPERTIES DIVISION RESTRUCTURING STRATEGIES

In order to generate more income, the Properties Division has come up with
several strategies.as follows:-

 Increase rental rates to its commercial properties

 Aggressively promoted MRB’s other assets such as futsal stadium, electronic
billboard, conference hall, mini theater, banquet hall, parking lots and
signboards

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 To demand for the development activity to be returned to LGMPC as it has an
existing team of highly skilled and experienced staff to plan and ensure
completion.

 LGMPC’s Properties Division would look into prospective joint venture with
reputable parties to develop MRB’s properties with commercial values
(Source: LGMPC)9

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4.0 CONCLUSION AND RECOMMENDATION

The purposes and objectives for which the Corporation is established is to

generate revenue for the Malaysian Rubber Board. LGMPC has certain strength
in that its cash flow is healthy amid having the solid backing from its owner. The
restructuring strategies utilised by both division have increased the productivity
required for the restructuring objectives.

Table 1. Details of Plantation Division Performance (2014 – 2018)

Year 2014 2015 2016 2017 2018

Rubber
Production 1,034,560 713,730 78,849 258,857 232,525
(kg)
Oil Palm
Production 15,497 20,972 22,981 20,757 23,859
(tons)
(Source: LGMPC) 9

Table 2. Details of Properties Division Performance (2014 – 2018)

Year 2014 2015 2016 2017 2018

Occupancy
85% 86.5% 85% 90% 92.5%
Rate (%)
(Source: LGMPC) 9

I would recommend that LGMPC to:-

1) Demand for more landed properties from MRB to develop and manage
2) To develop and commercialise new tapping and harvesting technology from the
Research and Development department of MRB
3) To fully utilise unused portion of the Plantation for other farming activities such
as livestock or other plantations.
4) Contract terms of highly ranked personnel to be further extended from the current
practise of 2 years in order to benefit from their industrial experience

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CITATIONS AND REFERENCES

1) Utley, M., & Worthington, D. (2012). Capacity planning. In International Series in

Operations Research and Management

2) Reid D. R, Sanders R. N. (2013) 2) Operations Management: An Integrated

Approach, 5th Edition International Student Version

3) Hutagalung R I, Rambe A, & Nazlina MT, (2013) Perencanaan Kebutuhan Kapasitas

Produksi Pada Pt Xyz

4) Juneja. P, reviewed by Management Guide (2010). Capacity Planning. Retrieved from

https://www.managementstudyguide.com/capacity-planning.htm

5) Capacity Planning Strategies (2019, June 2) Retrieved from

http://www.gaebler.com/Capacity-Planning-Strategies.htm

6) Alfasi, N., & Portugali, J. (2004). Planning Just-in-Time versus planning Just-in-Case.
Cities.

7) McLachlin, R. (1997). Management initiatives and just-in-time manufacturing. Journal

of Operations Management.

8) Holm, M. (2010). Leadership for Lean Operations. In Leadership for Lean Operations.

9) Interview with LGMPC Senior Manager (Properties) & Senior Manager (Plantations)

10) LGMPC Annual Reports from 2014 up to 2018

11) Gilson, Stuart C. (August 02,2011) “How To Make Restructuring Work for Your
Company." Retrieved from http://hbswk.hbs.edu/item/2476.html. .

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