Operations Management Lesson 7 Exercise

INTRODUCTION

The example I will use for this exercise is to compare the approaches that my fiancé and I used for our stocking our kitchen, before we moved in together.

FIANCE APPROACH

Method

• Periodic shopping – weekly shop
• Forecasts demand – identify meals for the period & create an ingredients list
• No inventory management - kitchen inventory is not checked
• Store Choice – utilise online shopping from major food retailer and convenience stores if there are shifts in forecast demand within the week

Advantages

• Scheduling – a weekly meal schedule is produced, so that certain ingredients can defrosted and more perishable items brought forward within the schedule
• Just In Time – online shopping can be delivered on specific date and time, when it may not have been possible to visit shops during this period

Disadvantages

• Redundant stock – shifts in meal requirements, can result in wastage and over stocking of perishable goods, as inventories not checked
• Space Mgmt – run out of space due to over stocking as inventories not checked
  
• Working Capital Intensive – capital cost of overstocking high value items as inventories not checked
• Responsiveness – where there are shifts in meal requirements and there is no safety stock, stock out costs occur as other food sources are found. These are often at a higher overall cost because of additional travel and time invested
• Safety Stock – A lack of inventory management also effects non food items as a schedule is not created for these porducts and are often missed e.g. loo role
• Discounts – as only the ingredients needed for the weeks meals are purchased, the potential for bulk purchase discounts is low

Summary

• Methodology - It’s clear that this approach uses a form of Material Requirements Planning (MRP) and is effective for ensuring that low value standard materials are restocked and medium & high value items are purchased if required that week. However, the usage of stock management information within this planning is very low causing stocking issues in supporting demand.
• Recommendation - monitor inventory levels to improve the accuracy of the MRP process

MY APPROACH

Method

• Inventory Management – inventory regularly monitored, with a list maintained of those items at or below the mental safety stock level
• Independent Demand – visit the shops and purchase goods to return the kitchen inventory to target inventory levels
• Store Choice – Utilise large hypermarkets for inventory restocking and convenience stores when only a few low value or perishable purchases are required
• Enjoy the Experience - Spontaneously buy additional ingredients that take my interest for creating future meals, plus the essential shopping cake treat!

Advantages

• Controlled Inventory Costs – inventory is maintained at desired levels, minimising stock out costs and ordering costs
• Flexibility – variety of stock enables flexibility in supporting changing demands (within constraints of the wide inventory built up)
  
• Discounts – as bulk purchases are made to restock the kitchen, the potential for bulk purchase discounts is high
• Space Management – effective use of kitchen storage space

Disadvantages

• Wastage – wastage occurs from stocking perishable items not required, although these are typically lower value items
• Purchasing Flexibility – the point at which shopping needs to occur varies and is not predictable, as the demand for ingredients shifts daily depending on the meals that I dedcided to make that day. It is not always a convenient/possible to go shopping when lower limit safety stock levels are breached.

• Capital Employed – capital employed in maintaining high value items, these may not be needed for quite sometime but typically have a long life span.

Summary

• Methodology - It’s clear that this approach uses a form of Reorder Point (ROP) stock control system, which results in a stable kitchen inventory and is able to support shifts in demand. Its largest disadvantage is that the re-stocking of perishable goods often means that this becomes a cyclical ROP approach.
• Recommendation – Plan some meals for each week, which help to utilise any over stocking of the higher value inventory items or perishable goods, to reduce wastage and capital employed.

CONCLUSION

• It can be seen that the approaches adopted by my finance and myself are quite different, with both having their advantages and disadvantages. The key driver causing these approach difference sare the objectives we apply to food shopping. My primary objective is to always have choice and be able to decide what meals to have each day. My fiancés primary objective, is to make plans so that there are less unknowns in the day to think about, as the meals are planned and the risk that she will need to go food shopping at an inconvenient time is lower
  
• Since living together my finance does most of the food shopping, as there are short to medium term shifts in the inventory needed dependant on the latest diet trend, which I’m just unable to keep up with.

BIBLIOGRAPHY & REFERENCES

• Slack, N., Chambers, S., Johnston, R., Betts, A. (2006) Operations and Process Management, London: FT Prentice Hall
• Walley, P. (2007) The Warwick MBA: Operations Management, Coventry: University of Warwick

: 20 Oct 2007 16:55 |  Comments (0) |  Report a problem