Operations Management STO7006 Individual Assignment - Liftall Company Your consultancy company has been called in to improve the performance of the Liftall Company

Question

Operations Management

STO7006

Individual Assignment - Liftall Company

Your consultancy company has been called in to improve the performance of the Liftall Company. Your colleague, a junior consultant, visited the company with the Manufacturing Manager and the Information Systems Manager. Unfortunately he was head-hunted by one of the larger consultancies and has now left. He has left you a short report (attached) which gives the main details. Your job is to produce the main text for a report to the company to describe our proposed developments to the manufacturing systems. The executive summary, introduction, etc. will be added later and you should focus only on the following questions, although you should provide references where appropriate.

Your tasks are:

1. Company competitive strategy

Identify the company’s competitive priorities and the strategy they are using. Consider how well this strategy is working for them, and offer a new or revised strategy for the future. The new strategy will provide a basis for identifying the most serious problems and issues for urgent action.

2. Problem assessment

Considering the strategy proposed, assess how well the current operational arrangements (systems and procedures) suit the strategic requirements and estimate the importance of any problems you identify.

3. Operations direction and proposals

Identify what can be achieved by improving the company’s operations and outline how the crane design and manufacturing operations should be managed in future. Include any relevant areas such as organisation, technology, factory layout, and explain how the operations should work.

4. Management decisions

Identify the key decisions that will need to be made by the management. Explain which decision-making techniques would be appropriate and how they can be used to help.

5. Costs and benefits

Estimate the costs and benefits of your proposed course of action. This does not need to be precise but it should convince the managers of the benefits of your proposals based on their current figures. Costs and benefits may be estimated on the basis of the financial information given in the brief (e.g. staff time, turnover, stock level etc) and estimated costs for equipment, consultancy time, etc.

Your manager may be able to clarify some of the details of the company and the brief. A clear proposal guiding the managers will be more helpful than a set of options. You may also e-mail your manager with queries, but don’t expect him to have all the answers.

A report of up to 2000 words is expected. You may wish to represent your ideas using diagrams as well as text.

This work is to be done individually, not by groups

Handed out 1^st February 2022

Report due by 3^rd May 2022, 3pm, in Moodle; allow a day for it to be checked by Turnitin

This assignment is worth 50% of the module

Stephen Childe

January 2022

Operations Management STO7006

Individual Assignment - Liftall Manufacturing Company

Marking Scheme

1. Company Competitive Strategy

Proposes business requirements to a high professional standard using the strategic approaches in the module, supported by appropriate further reading

20 points

Suggests business requirements to a good standard using the strategic approaches in the module, supported by appropriate further reading

16 points

Suggests business requirements using the strategic approaches in the module with some justification

12 points

Suggests business requirements to an acceptable level but lacking clear argument or with significant omissions

10 points

Inadequate or weak answer, perhaps not addressing the strategic requirements.

5 points

No answer or does not address the requirements needed to make the business competitive

0 points

2. Problem Assessment

Analyses the company’s current arrangements to a high professional standard identifying any mismatches with strategy

20 points

Analyses the company’s current arrangements well, in relation to its objectives

16 points

Sets out the current arrangements but with less clear linking to objectives

12 points

Understands the objectives of the company and the current operations without clearly linking them.

10 points

Inadequate or weak answer, perhaps not dealing with the current operations or the strategic requirements.

5 points

No answer, or does not assess the company’s arrangements.

0 points

3. Operations direction and proposals

Sets out clear proposals to a high professional standard using material from the module supported by appropriate further reading

30 points

Sets out clear proposals to a good standard using material from the module supported by appropriate further reading

24 points

Sets out proposals showing understanding of module material and further reading but possibly lacking justification or completeness

18 points

Sets out proposals based on acceptable but limited understanding of module material and further reading

15 points

Inadequate or weak answer, perhaps not dealing with the operations or not showing understanding of module material.

8 points

No answer, or does not offer any substantial proposals or does not apply module material.

0 points

4a. Management decisions

Identifies key decisions thoroughly at a high level of competence 10 points

Identifies decisions correctly with few mistakes or omissions

8 points

Identifies decisions to an acceptable level with some mistakes or omissions

6 points

Identifies decisions but lacking justification or detail

5 points

Identification of decisions and approaches weak, sketchy or unjustified.

3 points

No clear answer.

0 points

4b. Management decision approaches

Identifies and justifies decision -making approaches at a high level of competence using material from the module supported by appropriate further reading

10 points

Identifies suitable decision making approaches using theory correctly with some justification

8 points

Identifies suitable decision making approaches, possibly lacking theory or justification

6 points

Identifies decision-making approaches to an acceptable level with some mistakes or weaknesses

5 points

Identification of decision making approaches weak, sketchy or unjustified.

3 points

No clear answer.

0 points

5. Benefits and costs of your proposed actions

Expected costs and benefits presented to a level and style that should convince a manager to invest in this proposal

10 points

Expected costs and benefits presented to a level and style that should interest a manager perhaps with further questions

8 points

Expected costs and benefits presented to a good level for consideration by the managers

6 points

Expected costs and benefits presented to an acceptable level but lacking detail or explanation

5 points

Weak or inadequate examination of costs and benefits perhaps addressing only costs or benefits

3 points

No consideration of costs or benefits, or insufficient consideration.

0 points

Liftall Company

Product and Company Background

Liftall have been making cranes at this site for fifty years. Liftall employs 200 people at a cost of £5m. General overhead costs (not including staff and materials) total around £1m.Turnover is around £12m.

The product definition used by the company is that an overhead crane is used for picking up large objects from any point in a rectangular area and setting them down again within the area.

The crane consists of a number of key parts. The crane runs on a pair of parallel rails, typically at opposite sides of a building. Rails may be any length, made in sections. On each rail sits a trolley which can be motorised. A beam runs between the trolleys. The thickness of the beam is dependent upon the gap between the rails and the working load of the beam. Beams are commonly up to 15 metres in length. A “crab” runs along the beam, and on the crab is the hoist. The controller is usually a hand-held electronic device. There are up to 3 sets of motors on a crane; Trolley, Crab and Hoist. There are also a wide variety of gears associated with the combination of motors. Brakes are sometimes required. There are also a wide variety of safety features which may be built into the product dependent upon customer requirement. The product mix is low volume high variety, with up to 15,000 work items per year. The company considers all end items to be unique and individual to a customer’s requirements.

Customers

Because of the nature of the product, customers often build their factories around the design of an overhead crane. This can lead to problems if a crane takes longer to deliver than a factory takes to build!

The customer base falls into two overlapping sections;

1 Small cranes for steel stockholders, mechanical engineering facilities etc

2 Larger cranes for shipyards, nuclear power stations (where the electronics have to be nuclear hardened) and goods yards.

New developments in computer-controlled cranes are currently being tested. These cranes use computers to control the movement of material and to store information on the location of material. Cranes are normally sold as complete products – 20-30 are delivered each year. Crabs, hoists and controllers are also sold separately. Spare parts account for approximately 35-45% of turnover. Geographically, sales are made all over Europe with over half of all production going outside the UK.

There are four main departments – Design, Information Systems, Production and Marketing.

Design

The design department is probably the most powerful department within the company. As the company’s standard work has decreased and its engineer to order work has increased it has become more engineering-driven. Around 20% of Liftall’s staff are employed in design. The amount of design required varies from 1 week to approx. 1.5 years full-time work. They use a standard 2D CAD package. Part designs are added to a database. There are currently approximately 100,000 part designs listed in the Item Master database. Many of the parts listed may only be made once in ten years and we suspect that many are never used. This may be because;

1. Part information is never removed from the item master file

2. Most cranes are highly tailored to customer requirements.

Information systems

This is a small department controlling purchasing and costing, together with production information.

The company is running a production management system that they have developed themselves over the past 20 years. It runs on a PC and uses Excel. It is not connected to the design system. There is some concern that items can be missed and can be given the wrong dates. There are some items that are produced for stock in volumes of up to one hundred, however this is very unusual. A usual batch size would be 4-6 with most batches being one, but there are some larger batches of 20+.

All work orders are sent to the despatch office sixteen weeks before assembly is due to start. The parts for a job all have the same due date. Assembly is meant to start immediately after the parts due date and is allowed four weeks. When the parts due date is reached, components are often missing.

The control centre of the manufacturing organisation is the despatch office. All the work orders go to this office in the centre of the shop floor and it is from here that the work is distributed to all the machines. The next job to be loaded is decided by date-required order. The computer provides this but the supervisor has to balance this suggestion with urgent work requirements and shortage lists for cranes whose assembly is being held up by parts shortages. It is also at this point that work is sent out to sub-contract. Workload is difficult to judge although there is an estimate of the time required for each operation. Deciding how to plan work and which jobs to subcontract causes a great deal of work for the despatch supervisor.

The company manages an annual spend of £6m on parts and materials. Items such as motors and electronic control units are always purchased, and some have extended lead-times (e.g. electronics for nuclear sites). Some ordering of long lead time parts is done by the Design department to save time, but sometimes not using preferred suppliers. Parts that have a lower value are bought by the Purchasing Office who have arrangements with supply partners.

Production

In the production department there are separate facilities for each type of process in the manufacture of component parts, including saws and equipment for material preparation, machine tools for machining, plant for welding, painting and other operations. There are approximately 50 different machine tools arranged by function. Some computerised machines can work on design information downloaded from the design department with short set-up time. It also has facilities for assembly, testing, finish painting, product storage and despatch. The machine shop is run as a job shop, with machines ranging from the larger borers, which are over 40 years old, to some modern CNC equipment. The machine shop is arranged according to machine type. Some of the machines are quite special, for example for machining very long beams. At any moment, most of the machines will be waiting for work, while some will be busy, according to the mix of parts required at any point.

Families of parts that the company uses in large volumes (for example wheels, blocks, arms, shafts) are often chosen for subcontract if time is short.

Lead times for jobs differ, but queues mean that most items have to wait to be processed. The value of stock on the shop floor is currently £10m (consequently the return on capital is low). The assembly shop employs a number of fitters to assemble the cranes.

Marketing

This department is responsible for selling the cranes. This process involves generating the price from the price book, developing pricing for any new designs and for keeping an eye on progress of products while in the factory. This department is responsible for the contact between customer and the rest of the company. All requests for changes come through the sales engineer. In common with all capital goods manufacturers, spares play a major role in the business. The marketing department operate Master Scheduling to decide what week work needs to start on each product ordered based on the standard lead time. This seems to often result in lateness.

Costing is carried out on a contract basis. Planned work hours are used to build up the product cost. Feedback on the actual cost is sometimes used to amend the price book after a crane is delivered. Indirect overheads are apportioned on a simple multiplication of labour rate. General overheads and a margin for profit are added as a proportion of final cost.