Operations the First Thing That Stands Out

Operations

The first thing that stands out about McNally's and Bukowski's suggestions is that they are not mutually exclusive. In terms of resources, these two options require different resources, and in terms of outcomes they are solving different problems. This paper will analyze the situation and explain the best course of action.

The first step is to identify the problem. Here, the problem can be viewed as one of declining sales, or it can be explained in terms of product defects. By taking the generic view of the problem, Murphy is able to write off the issue with a generic response. This is the wrong approach to improving the company. By determining the issues that contribute to the lack of sales, a better solution can be found. This should require customer research but we have evidence that customers are dissatisfied with the product. This is the basis for the subsequent decisions. Ideally, we would have more concrete information, and that is something for management to consider.

The next step is to evaluate the alternatives. The first alternative is that of McNally, to offer trade-ins, and start refurbishing old toys. This alternative solves the current problem of customer satisfaction, but it does little to address the long run issue. Sales are declining, and offering trade ins will not stem the effects of a bad reputation. This is especially true in the toy business -- if faulty products are putting children at risk nobody will buy the product.

Further, McNally's idea rests on a number of assumptions. The first is that it will work to solve the customer relationship management issue. That is speculative. The second assumption is that there is a market for refurbished products, and this is also speculative. The third assumption is that this is even viable financially. Buybacks, trade-ins and to other such programs are very expensive. The cost of defects could even buy higher with respect to potential legal action. McNally's solution, therefore, is an attempted band-aid based on speculative assumptions and one that does not, ultimately address the issue. Excess capacity for the workers is not a big issue -- loss of reputation caused by the defects is, and if that is not solved there will not be enough demand for the products to support these workers in the long run anyway.

Also McNally is mistaken if he thinks that his plan will not incur costs. Clearly there are costs associated with trade-ins. There are also costs associated with retraining works to handle refurbs. Further, making changes to the retail channel is not free either, and there will be cannibalism of existing products. McNally needs to start working with facts and not assumptions if he wants to keep a job here.

The other solution on the table is that proposed by Bukowski. This solution is to resolve the quality control problems with 100% inspection. This solution addresses the problem, unless of course the problems cannot be detected in new products. However, this solution is also costly. 100% inspection is nice if you can do it without costing too much money, but usually it is pricey. There would need to be many steps and tests, and there is still no guarantee that quality issues will not make their way to the marketplace. It does not address the customer satisfaction issue in the short run, either.

Bukowski's solution is more fundamentally sound in that it probably passes muster of a cost-benefit analysis but in the long run, it still does not address the core issue that faulty products are being produced in the first place. We are not in business to make refurbs and undercut our own business; we are here to make great products the first time. We should not need to inspect every single product that goes out in order to make sure that it has been produced to spec -- that assurance should come earlier in the process.

There is a better idea, an alternative as yet proposed. There are clearly some problems at the manufacturing level. The company needs to take whatever data is has with respect to the customer complaints and root out the problem. If the issue is in-house, then the problem can be solved easily. If the issue originates with a supply -- as is often the case -- then the company can begin to shop for a new supplier. But where Bukowski and McNally both fail is that their problems do not address the heart of the problem. Both are looking to deal with symptoms. The best solutions in operations management come from finding the real problem and addressing it at that level. Inspections can prevent faulty goods from entering the marketplace, but they do not prevent faulty goods from being produced -- those goods are expensive.