Operations Management Gavin Manufacturing Company Case Study

Gavin Manufacturing Company

Team VIPER

Purpose:Team VIPER has been retained by Gavin Company executive Mike Gavin to help the company increase profitability by determining the best strategy and balance between inventory and optimized workforce while exceeding customer expectations. Case background: 1. Mike Gavin is the head of Gavin widgets manufacturing company. 2. Competing widget companies are moving into Gavins market and lowering prices forcing Gavin to make some hard business decisions. 3. Clients are moving toward JIT widget orders. 4. Many of Mikes relatives are shareholders and are theyre demanding increased profitability even suggesting an 18% hurdle rate. 5. Gavin Company maintains a large inventory on hand to accommodate JIT orders and they outsource jobs when demand is escalated.

Problem:How does Gavin Company increase productivity while managing the increased demand for JIT delivery of widgets and remain a low-cost industry operator. Possible Solutions/Options Assessment:The case offers several potential staffing options to optimize both the widget production machinery hours and the requisite manpower necessary to operate the machinery. On the whole companies traditionally are (and rightly so) protective of the innovation activities they use in product and process development and intellectual property. We have assumed that the Gavin Company is no different in this sense. Outsourcing

Gavin Manufacturing Company

Team VIPER

Although outsourcing can reduce risk and potentially costs, outsourcing complex products subjects companies to significant uncertainty. Some the problems are as follows: y While outsourcing can result in alliance building and in innovation, the efforts often require the orchestration of multiple organizations. y y Project specifications without a clearly define scope of work can be problematic. Shared information systems require companies to synchronize and exchange data across organizations with the inherent challenge of avoided miscommunications. y Value chainintegrators(aka: program managers)have the task of to coordinate and negotiate across the supply chain interface to maintain the integrity of the product from concept to customer delivery. This management function entailshundreds, of interrelated and parallel activities all of which can cause serious problems. y The possibility exists that a supplier could extract concessions, or could become a direct competitor. Off-shoring Off-shoring can reduce labor costs and afford inroads to gain access to new markets but at a potentially significant price. Deficiencies include the following: y Increases linkage costs including tangible costs such as like travel, telecommunications and secure data transfer, and the potential for miscommunications.

Gavin Manufacturing Company

Team VIPER

Employee continuity is important, and many offshore locations have a reputation for accelerated worker churn.

Team recruitment headaches are created by churn and any exodus exposes employers to a potential loss of proprietary information.

In sourcing Team VIPER believes that by keeping activities internal, there should be little to no loss of unique physical, intellectual or human assets. Additionally, if future uncertainty is high, contracting may be costly. When the emphasis in manufacturing management is materials inventories, ordering, and production lead times, labor and material efficiency, work-in-progress (WIP) levels, finished goods inventories, the just-in-time (JIT) model is dominant and by maintaining a well-developed staff production can be accelerated.JIT production techniques emphasize the elimination of waste, (activities within a manufacturing company that do not add value to the product) including:inventories, materials handling, quality problems, shop floor delays, material lead times, and unnecessary clerical and accounting procedures.Usage of existing in-house employees ensures the right resources with the right talent in the right place at the right timeallow Gavin Company to meet project deadlines and peak workloads while maintaining highquality deliverables and minimizing fixed/overhead costs. Recommended Solution:Based on the above outlined options, Team VIPER decided that outsourcing/off-shoring the labor in order to increase productivity is a risky proposition for several reasons. The outsourcing company could steal market share if the also produce widgets or if they are a company that supplies materials needed to produce the widgets. Another intrinsic risk is that proprietary knowledge of development

Gavin Manufacturing Company

Team VIPER

or processes could be compromised. Therefore, based on case analysis via value chain analysis and regression analysis data (performed by Mr. Gavin), Team VIPER is recommending that the Gavin Company operate under a modified version of solution Mix 1. Conclusion: Gavins objective is to operate the business in the cost-effective manner by aiming to reduce labor costs while increasing shareholder value in the company. We feel that the company leaders can leverage a JIT labor model using the existing work force to create a buffer to economic oscillationsand minimizing fixed costs.