Operations Strategy for Future Developments of Delta Synthetic Fibres
Appraise the main Operations Management issues at Delta Synthetic Fibres.
Although Delta Synthetic Fibres implemented an operations management strategy that helped evolve their product line and fuel production, they could have optimized sales by addressing several issues. Manufacturing companies focus so heavily on the delivery of their product, that they do not invest resources in non-production related process improvements. They spend little time focusing on consumer wants and needs and more time on all of the functional inputs of production. DSF is no different. They failed to consider consumer demographics in relation to production facility choices and there was not a clear strategy between Sales, Marketing, Finance, or other ancillary departments that support productions.
Like many companies that are concerned primarily with production metrics, Delta Synthetic Fibres did not consider the impact of their location choices or production capacity options on consumer demand. Several research sources identify a strong correlation between production facility locations and consumer buying when a production facility has a close geographic proximity to the consumer. This is relevant particularly in the clothing industry, where products are very similar, prices are marginally different, and competition is high. Transportation costs rank as high as quality.
DSF elected 3 production locations: United Kingdom, Germany, and Chicago. The case does not suggest that any market research was conducted to support a high level of consumer demand for DSF products in any of these locations. No consumer-consumption analysis was provided that indicates that Chicago was a high-dollar revenue target for the U.S. Or that the U.K. Or Germany would provide substantial profit internationally. It is reasonable to infer that the location choices were a product of production discussions. Perhaps factors like lead time, operating costs, labor, transportation of materials, and efficiency variables were considered. But obviously, the facility location decision was not based on earning potential. In 2009, an article published in the CBS Business Network, supported the importance of factoring consumer-related research into decisions about the production facility location: "Consumers can reasonably be expected to choose the facility that minimizes travel and waiting costs. Thus, it is important to study the interactions between location decisions, capacity choices, and consumer choice processes as they relate to demand allocation." (Castillo, Ignacio, Ingolfsson, Armann, and Sim, Thaddeus. 2009)
It is not uncommon to find a disconnection in cross-functional planning between Sales, Marketing, Finance, and Production in a Manufacturing organization. Marketing departments develop a brand strategy for a product. They research a number of consumer statistics to determine the most viable strategy. Marketing confirms the budget to create this strategy with the Finance department.
After receiving confirmation that sales projections are valid based on verifiable assumptions, Marketing tasks the Sales department with generating sales activity to surpass sales projections. Rarely is the Production department involved in financial goal setting. They are charged with delivering output and streamlining costs for the company. According to "Chain Planning: A Case Study of Sales and Operations Planning," published in the Journal of Management Operations, functional areas such as Sales, Marketing, Finance, and Operations traditionally specializes in portions of the planning activities, which results in conflicts over expectations, preferences, and priorities. Organizations may be capable of integration while functions retain different incentives and orientations to maintain focus on their stakeholders' needs. (Rogelio Oliva, and Noel Watson. 2006).
Delta Synthetic Fibres did a poor job in connecting the Production organization with the Sales organization. This is not unusual. Within most companies, there is often a conflict between Operations and Sales. The sales department is charged with bringing in quality accounts and new revenue, but operations must fulfill all of the promises -- and the two rarely communicate well enough to get either task accomplished without problems. Without generating new accounts, growth is impossible. But if sales bills an account too low, the operational budget is too tight for cleaning staff to adequately service the account. The chief problem between the two departments is that salespeople tend to over-sell and over-promise, often leaving the operational staff to under- deliver and subsequently, to fail.
Based on an analysis presented in Dannette Y. Young's "Do Your Sales and Operations Department Get Along?" The most common problems between sales and operations existed at DSF:
Sales did not adequately research area wage rates and subsequently bid too low for the market.
Operations used different equipment from what sales promised.
Operations did not relay quality problems or issues to sales until it was too late to salvage accounts.
2. Identify the main product-based issues at Delta Synthetic Fibres, and outline the process of identifying what products that the business should produce.
In 2004, Delta Synthetic Fibres began to experience significant sales erosion in Britlene. The case suggests that the technical specifications of Britlene were not very different from competitive products; however, Britlene was more expensive. DSF failed to research its price position appropriately.
Many companies become so focused on production that they forget what direct competitors, who are not very different from them, charge for competitive. products. Making reference to earlier assessments in this paper which identified weaknesses between Manufacturing in other areas, this situation could have been avoided had Manufacturing communicated with Sales. The Sales department would have provided feedback on customer response to price. The end result was a cost spiral which left DSF in an inferior position by managing more costs in an environment of decreasing sales.
Another product issue experienced by DSF, was the fact that the company, for a long period of time, maintained mutually exclusive production processes for Britlene and Britlon. Labor efficiency, idle time, reworks, and overtime hours were higher based on this production design. This creates an environment where the company ultimately produces less product and costs are higher. Eventually administrative salaries become less equitable. For this reason, Manufacturing companies began drastic budget cuts or restructure staff. Fortunately, Paul Meyer, CEO, directed the organization to a different conversion process that made production more flexible. Ultimately, production equipment could be used to deliver both products with little to no change over.
The process to determine which products a company should produce involves four factors: cost, profits, output demands, and management process. The perfect production model involves a product with a low-cost/high-profit model, capable of delivering maximum capacity in a short amount of time, and requires a reasonably short management decision-making process. Specifically, a company's decision variables are classified into two categories: inputs and outputs. An input is anything which the firm requires for use in its productive process. An output is any commodity or service which the firm produces or processes for sale in the market. (The Production Decision).
Identifying a production location is the first decision. To locate the plant and to obtain the factors to operate the plant, the company has to spend money to establish capacity.
Once location and production capacity are calculated, a profit analysis is presented to determine how much money the company can make given its investment. Quantities are projected to assess market share. The last decision relates to how easily management can adopt the production process. For instance, in high regulatory environments, the last part of a go-to-market strategy may be determined by a regulatory body instead of the executive tier of the organization. (Facets of Production Decision).
3. Critically analyze and evaluate how Delta Synthetic Fibres implemented the "sustainable" strategies and techniques into its global business situation, highlighting typical difficulties that occurred, and how it can overcame them to achieve a successful outcome to support its competitive operations strategy.
You may quote appropriate cases or examples from Vietnam to support your arguments.
In 1972, Larry Greiner published a paper entitled, "Evolution and Revolution as Organizations Grow." He described how organizations go through at least 5 very different stages: (1) Growth through creativity, (2) Growth through direction, (3) Growth through delegation, (4) Growth through coordination and monitoring, and (5) Growth through collaboration. During the Growth through creativity stage, new businesses grow based on the novelty of their product. In the Growth through direction stage, managers growth the business until it becomes too large. During the Growth through delegation stage, an organization manages all of the challenges that come with decentralizing. In the Growth through coordination and monitoring stage, processes are streamlined to focus on shareholder value. Lastly, during Growth through collaboration, a company redefines itself to build a long-term strategy. (Barrett, Richard).
DSF entered the Growth through collaboration stage. Vice President of Marketing, Liam Flaherty, and CEO, Paul Mayer, implemented two sustainable strategies that to saved their Global Business. Their goal was to expand capacity by making process improvements to production facilities and strategically positioning themselves to enter Asian markets. Not only was the Asian cost structure more attractive, but the biggest sales opportunity was in the East Asian markets.
When posing several questions to the CEO about growing business, Liam Flaherty acknowledged the production facilities had old broken down production lines. He also identified the need to improve each facility. Executive management…