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Operations Management is a process to manage the activities of any process in a productive way. Operational management is one of the most influential factors in the success of any organization (Andrew, 1982). Change of global trends, introduction of the innovative state of the art technologies and keeping track of the updated technologies is vital for any company to survive in the competitive economies.
The role of management is also crucial in indentifying the need of technology transformation and evaluating the effects of the transformation of the company. The parameters such as resource information, materials use and consumer trends are the fundamental aspects which keeps any organization effective and competitive. Without understanding these parameters and their influence, the company would face the risk of being strangled by the smart and updated competitors which will take the market share in no time. There examples which highlight these important aspects, and much research has been completed to present the concept of operations management and the role it plays in successful operations and management of the company (Bendoly et al, 2006; Chopra et al, 2004, Greasley, 2009; Neely, 1993)
This case study presents the key operations management factor through research and studying the operations of ‘Unaizah diary’. The diary is located in the Governorate of Unaizah, a small city in the Al Qassim Province of the Kingdom of Saudi Arabia.
The city is located in the south of Buraidah in the Al-Qasim province. The city has very warm summer and invariably cold winters, which is characteristic to a desert climate. The region of Unaizah has contributed significantly to the agricultural industry of the Kingdom. The subject region has an extensive agricultural area, where various farms are involved in the production of wheat and barley. Eatables such as fruits, vegetables and famous date palms are also amongst the products of this green land. Acoording to an estimate of the Central Department of Statistics and Information of Saudi Arabia, 2010, the city has an expected population of 163,729.
The Unaizah dairy is a small family dairy farm producing organic milk and yogurt products. The products distribution at the moment is limited to the locality of the city. The farm/diary has tens of animals through which milk is produced before being distributed. The produced milk is processed through site processing unit in which the milk is homogenized and pasteurized to ensure that the quality is maintained. The other primary equipments currently in service at the dairy are one refrigeration system and a distribution truck. Due to limitation of the transport services of the farm, no products are transported outside the city of Unaizah, therefore the customers outside the city come over to collect the products at the farm.
The animal health history is maintained through use of electronic data sheets. The staff scheduling and salary slips are also generated using the basic computer tools, and the online web page has not been developed. Furthermore, the climate conditions of the subject region are quite hostile, as the temperature shoots to quite high during the summer. This complicates the distribution/transport system in place at the farm as the milk has to be kept at less than 4 Deg Celsius until it reaches the consumer.
The main objective of an organization is to produce competitive products which can be sold to achieve the desired cash flow. Efficient management of operations therefore is an absolute necessity to achieve these objectives as these ensure that the required quality and as well as the quantity of the products produced are delivered to the consumers. Bettley (2008) described the operation management natures with respect to change in consumer requirements, sustainability and integration of an organization.
The Unaizah dairy, established in the early 1970’s has seen some significant changes in the operation of the business. Formally run on the traditional yield bases, the management transformed the business strategy to match with the revolutionized strategies. The owners of the farm wisely upgraded the tools and equipments and established a facility which now provided good quality dairy products, and offers viable business operations. This case study will highlight the theoretical aspects of the diary and present practical outputs of the subject diary.
The paper presented here aims at analyzing the key operational management practices of the Unaizah dairy. The techniques which can be used for developing and optimizing the operations, including Inventory management and capacity management, principles of supply chain management, quality modelling, waste management various other issues are outlined through research conducted. The case study further presents the applications of the management theories with respect to the applications and provides recommendations with particular emphases on information management and systems, project management and role of operations manager.
The subject dairy farm’s cows are producing large quantities of milk which can be utilized in a beneficial way. The company’s turnover can be increased through utilizing the additional milk for producing supplementary products which can be sold as side orders along with the primary products, such as cream, cheese, butter and oil etc. Other by products such as meat can also be sold periodically produced to inject cash into the revenue which can be utilized for the purchase of more animals and equipments. The distribution system and the managing the consumer demands can be optimized using effective outbound logistics and planning.
The objective of the capacity planning is to analyze the demand of the products, ensure that the demands are continuously met with the highest quality products, and reduce the cost of the product without compromising the product quality (Mieghem, 2003). Capacity Management is considered be one of the primary operations management activities, as it ensures that he consumer demands are provided with the quality products in timely manner. It further ensures that the no materials are wasted through excessive production. The activity enhances the brand name in the market and develops trust amongst the consumers. It reflects excellent company outlook which results in maintaining the balance of supply chain management. The importance of capacity planning with respect to organizational structures has been discussed in detail by Slack et al, 2010.
The demand expectancy assessment also plays a pivotal role in operation management. The capability to forecast the demand considering the market trends and condition, such as weather and festivals, can support the operational manager to produce the products accordingly. It involves efficient use of the record data sheet which shows the sales from the previous years during the same event. This assessment is then managed with arrangements of staff and other resources such as materials and transport services. The maximum capacity of the organization is defined by the maximum quantity of product an organization can produce at a given time (Mieghem, 2007). The dairy farm’s maximum capacity is depended upon the maximum milk the cows can produce. During the period in which the demand is at maximum, such as for the month of Ramadan, the diary can be operated at maximum capacity through use of effective planning. This can be done through storage of milk and having the processing equipment operational for maximum intervals of the day.
The case of Unaizah dairy has been reported to show that during normal operations the diary is not run under full capacity. The diary can therefore manage extended loads of high demand for the month of Ramadan and during festival periods (extra orders). Additional workers are hired to meet the additional demands for such periods, which ensure maximum utilization of labor cost as additional labor is hired on temporary bases. The company runs at formula where the labor cost has to be a fixed percentage of the total turnover of the season. Prediction of demand is on the bases of the previous records, which is analyzed on the start of each season, which is then applied to the change in capacity.
The Unaizah dairy collects milk from the surrounding farms, and have applied the infinite loading concept to extend the work load of the labor. With growing production of milk in farms, the labor work force is not sufficient and the diary management is now looking to expand the work force through employing additional staff members. The technical tools which are use to process the milk to produce products such as butter, ghee and cheese etc are already installed in the farm, however these can be upgraded for newer systems. Better raw milk utilization instead of just in time sale approach can also produce fruitful results for the company. Delivery on orders in festival seasons has been completed successfully by the farm management, which results in sale of large quantities of milk and other products. The capacity of the diary can also be increased, as currently the farm is not running on full capacity.
The farm milk is collected twice a day, as the animals are scheduled to produce milk twice a day in the cycle. The diary faces difficultly in processing the milk to produce the products as the most times the collected milk is more than the total demand and the distribution network is not as extensive as it is required to be. The infinite loading of loading results in sale of milk at cheaper prices and sometimes, it also results in wastage of the milk. The logistics support of the diary must be developed to ensure maximum utilization of the raw milk. Furthermore, failing to deliver the milk at scheduled time would also have adverse effects on the overall business of the diary.
Analyzing the organizational and operational conditions of the Unaizah dairy, it is observed that diary can have significant improving in various aspects of the operational management. These improvements would mean increase the cash flow and hence development of the overall business. The Quality management, inventory management and lean management must be improved. Quality can be improved through outlining clear procedures during the processing stage, and improving the logistic support (Mieghem, 2007). The products shall be handles with updated inventory system which can have the records of all the exhausted as well as new items, along with the expiry dates. The diary also needs upgraded information management system. Use of online software can be extremely useful for this matter.
The farm may also focus on the side products production for cases where extra milk is collected. Products such as ghee and cheese can be produced which has longer expiry dates. The process of production can also be enhanced using the latest state of the art processing units, however this would require investments in fixed capital of the organization, but it would eventually pay back through maximum utilization of raw materials and consequent high cash turn over. Advanced milk extraction equipment, milk robots and additional vehicles for the product transportation could also prove to be extremely beneficial for the diary.
The dairy also needs to develop improved business relations with the surround diaries, as this could prove to be beneficial in terms of reducing the food cost and improved capacity planning. For example, if on certain days extra milk is produced, the other diaries can be coordinated to sale this milk. And in days of shortfall, the same milk can be purchased to maintain the balance of supplies and production.
The marketing range of the Unaizah dairy can also be expanded for extended supply chain management. The products can be introduced to regions outside the city of Unaizak, such as in super stores and dairy product stores. This would improve the diary efficiency and improve the capacity of the farms. However, it is worthwhile noting at this point the extending the range of product supplies is only possible through effective marketing, and improvement in the product supplying services (Mieghem, 2007). The current mode of the flexible diary capacity has proved to be advantageous on high demand season, however the increase in demand would increase continues efficiency of the diary, and therefore would prove to be productive in the longer run.
Inventory management is the record keeping of the materials and products. The inventory is maintained to delivery of services without any interruption. Inventory list ensures that the cost of the all the consumables are recorded, quantities are updated and purchase of unnecessary materials are avoided. The inventory systems also ensure that all the products are utilized within the given time, and any expired materials are not consumed. This also helps in generating financial reports after each cycle.
The inventory system when applied correctly proved many benefits in operations of the company (Felea, 2008). It supports the management team in forecasting the demands of the materials required, products to prepared and the relevant costs. On periodic bases, the inventory system has to be updated manually, which does not cost much. In the supply chain management, inventory systems are also used to reduce the cost of the materials (Inventory Management and Tracking, 2012).
The management of inventory system is extremely important for business such as farms / dairies. Simple software tools can be used to run the inventory systems, which have buil-in calculation and forecasting mathematical models. Standard inventory system has information such as; material/product types, respective cost, utilization factor, expected consumption and or sale, expiry and/or delivery dates, total costs etc.
There are various inventory systems in place which can be utilized in operations management (Wild, 2002). The continues and batch inventory system are most often used for utilizations such as in dairy farms. The continues systems are operated through online connectivity, and it used by many food chains organizations in the UK. The batch systems are those in which the inventory is updated periodically through counting of the items, and updating on the inventory system. There are hybrid inventory systems in marker as well, in which part of the inventory is updated through online systems and part of the inventory is updated through manual count.
Currently, the Unaizah dairy I using excel sheets to maintain the inventory system. The management is facing various difficulties to manage the stocks of raw materials and delivery of products. The current inventory systems have not been updated and the company faces high risk of materials wastage at all times.
It is strongly recommended that the Unaizah dairy update the inventory system to continues-batch management system. The system is best utilized for maintaining records, forecasting the demands and subsequent requirements of the materials. The system will maintain the data of the incoming raw milk in the form of batch process. The inventory system will be updated with the received amount of milk. The system would also analyze the expected demand of each product, which means the system would show the amount of excess raw materials/milk is in stock. This calculation will base upon the previous records of sales (of the same season) and the materials to be used for production of each product. This would highlight any need to produce the side orders such as cheese to avoid wastage of the materials.
The system would also be integrated with the expiry dates of each material and products. Once expired, the inventory system would automatically subtract the expired material quantity from the system. The sold quantity of products will be updated in the systems to reflect the latest inventory after each operation. This recommended system is expected to increase the efficiency of the diary. There are various companies which can provide and install such systems; some of these products only have to be purchased once in the life time.
Analysis on project management allows for planned and control completion of the project by means of fulfilling technical and financial requirements as well as identifying the key constraints. The process of keeping the project quality, time and costs under control in addition to achieving perfect coordination and management level is known as Project Management, a step that is perhaps the key to project success. It should be noted that Project Management is an extremely useful process which simplifies a project in a range of ways by reducing the complexity of approach and improving the overall productivity levels of workers and employees. The idea further ensures all information and required knowledge is attained and there is satisfactory work being done by breaking down the big pictures into small pieces.
However, what puts Project Management ahead of every other aspect of a project is the fact that this idea helps an organization, group or an individual keep hold of material and possessions, useful personnel, money and equipment thereby reducing the chances of failure. Project Managers are always expert time managers as they have the ability to estimate the time for each task to be performed by the team.
The initial planning and scheduling helps Project Manager to keep tasks to be performed in line and under control as well as allotment of time for each proposed project / activity. What this simple technique returns is that the organization, group or individual gets access to detailed information and time span regarding every task to be completed and every task that has been already completed. The idea makes the process of assigning number of people for a task a lot simpler by producing a detailed workers plan. From starting to the end, Project Management acts as a bridge communication between different inter teams and departments and ensures the project is completed within the estimated time span and with the desired quality (Heizer and Render, 2004).
Small scale projects can be managed with ease without the use of advanced & professional software. Project Manager also uses techniques such as critical path methodology, arrow method and the project network technique to ensure reliable and efficient pre project planning. Failures of Project Management may result from various reasons including lack of support from various parts of the organization, poor decision making and communication, legal limitations, and inability to estimate correct time spans (Azzopardi, 2009; Lewis, 2002).
As discussed above, it is clear that the project management is an integral part of project handling process. There is a need to complete various steps of a project to ensure smooth and perfect project management. The Unaizah dairy is committed to make a name in an extremely competitive environment by applying project management techniques over many years. The organization had already applied the technology on various projects resulting in more experience and better performance. Furthermore, there is now focus on using the concept of Project Management to maintain existing cattle at the farm as well as identifying new and healthier ways of purifying milk. The Unaizah dairy is planning to place milk storage machines / refrigeration systems at the local markets in the future and also buy more inventories to increase milk’s life. The company is eager to complete all these tasks in a timely manner to ensure there is maximum return on time and material investments.
Graham in 2003 and Zekic in 2012 suggested that whenever business tasks share a feasible relationship with the environmental changes, the products in the market experience a very shocking rejection. Therefore, there is a need for The Unaizah dairy farm to apply the project management technique in each and every project they will tackle in the future. The organization is recommended to perform the required preliminary and secondary research to determine the short term and long terms goals based on demands of customers. The idea is to improve the entire business process, from buying to selling and maintenance to reproduction of livestock. On the way to successful completion of each project, the Unaizah dairy farm will come across useful and perhaps best project management techniques and learn how to apply them in a perfect way. However, the fact that this technique will improve the cattle maintenance process as well as identifying new money making opportunities is what the company will benefit from the most. Over the last few years, the Unaizah dairy farm is experiencing a considerably low consumption of milk compared to the amount of milk produced at site on a daily basis and therefore there have been concerns over the efficiency of the business process.
Therefore, the senior management and other relative staff is doing everything they can to use the excess milk in the best possible way. The farm ensures timely supply of milk and other fairy products such as cheese, Oil and butter to various parts of Saudi Arabia while looking after our customers’ price demands. Side products such as Oil, Cheese and butter are prepared in an effort to make the best use of excess milk on site. However, the farm is keen to produce more powdered milk as it has a longer life, which helps in avoiding excess product wastes. Finally, the farm may also look into reduce the amount of milk picked up from the local farmers as the onsite cattle is producing sufficient milk as per current requirements.
The lean management process is actually designed to ensure minimum waste is produced by working on the logic improvement for onsite employees and functional teams. There are numerous benefits of correctly applying this technique. The company can improve its market value, labor efficiency, maintenance records and product quality by keeping the production under and control and effective time management. Plenert, G., (2007) highlighted the concept of lean management will become of huge significance in the 21st century. Lean Management has been applied throughout the globe in an effort to reduce the price while ensuring best product quality. Toyota Motors in Japan were the first to successfully implement this idea to reduce waste amounts considerably.
When applied correctly, lean management can help an organization improve their overall production and profits in addition to reducing the time span. Lean management also ensures each product contains zero defects and fully satisfies consumer or the customer. While in mass management, products are manufactured as per engineers’ choice that results in high costs and financial losses for organizations, the idea of lean management determine clear goals and objectives and then create a suitable workers team to achieve those goals. When products are manufactured through mass manufacturing, the end focus is always on the price whereas with lean management relations with customers are built with future in sight. From our discussion here, it will be safe to say that the lean management technique has gained immense popularity mainly because it is easy to implement and also brings huge financial gains: both long term and short term (Jackson and Jones, 1996).
As highlighted in the previous section, the process of lean management will be implemented in an effort to reduce the amount of waste produced on a daily basis. This can be done by converting the excess product into a useful product for the consumers or by using the waste as a raw material for perhaps another new production process. The Unaizah dairy is committed to improve its business processes by using the best business and management systems and in 2012; the farm implemented the lean management principals in their business activities and expressed the willingness to stay a step ahead of the competitors. The Unaizah dairy is gaining immense popularity in the Kingdom for adapting the industry best practices with the aim to consistently improve the entire business process to help the end consumers. The Management is further looking into ways of improving the lean management process by making suitable changes. The Senior Management has already identified key novel objectives that will be looked after by a small management team.
The job of this management group is to ensure the lean management process if implemented in a perfect way to keep various constraints under control and objectives of the programme are achieved in a timely fashion. Almost every manufacturing industry implements the lean management technology to add value to their production process in addition to maximizing the profit levels. Essentially, the lean management process provides the farmers with a clear goal on both individual and organizational levels.
As discussed before, the most suitable way of optimum utilization of the materials is to use the excess milk / product as a raw material for another new process to convert the excess milk into other products such as oil, butter, yogurt and cheese more frequently. The organization may look into producing flavored yogurt, chocolates, ice creams, oil and cheese to reduce the amount of waste milk.
Another way of dealing with this problem is to place refrigeration machines at different locations of the sales territory. This idea intends to reduce the amount of wasted milk and increase the revenues for a small initial investment. Employing someone to run an ice cream parlor on wheels is another option the farm could look into in the near future. Ice creams are strict dairy products and a small scale plant can be put in place to convert the excess milk into ice cream to target bigger sales and profit numbers. Other waste from the farm can be used to prepare fertilizers for the live stock and this process will be completed as part of the farm maintenance plan. The working environment and the organizational culture should be satisfactory for the employees so they work to the best of their abilities. Finally, it is extremely important to make sure that all employees of the organization are well trained and equipped to deal with unexpected circumstances and situations.
Just like project management and lean management, quality management plays a key role in success or failure or any business model. Quality management is even of greater importance and significance in dairy products industry where there is a need to deal with microbial pathogens that can contaminate the dairy products. Pasteurization in this regard in a very critical process which ensures milk or dairy products are handled in the perfect way to keep the bacteria under control to ensure best product quality for the end consumer. For the Unaizah dairy farm, it is imperative to make sure that the milk remains in the best quality and within the expiration date at the time it reaches the consumer.
There is a focus on the pricing as consumers belong to various classes. Quality management can help the business in a wide range of ways. While quality management can add to the price of a product, it provides quality assurance and performance which are second to none when it comes to customer satisfaction. Quality management incorporates regular checks and inspections of products of milk to keep product quality in checks. These regular checks can also helps in detecting any underlying quality related problems and reduce the chances of risk to people’s health by keeping the quality under control.
Last but not the least, this methodology also helps in maintaining good customer services as well as meeting varying demands of dairy product consumers (Total Quality Management). The amount of financial and human resources required to be invested under quality management mainly depend on the demand of quality and competition among rivals. Sometimes, Quality management is also referred to as management approach for a company that wants customer feedback on their quality in an effort to provide best customer satisfaction experience (Ross, 2000)
Quality management is of critical importance for the Unaizah dairy farm and therefore there is focus on training each member of the team. To be able to ensure perfect product quality, the farm needs to define clear goals for the employees who will eventually be responsible for maintaining the required quality standards. As discussed before, there is a requirement to make sure the milk is fresh and under the expiry date at the time it reaches the end consumer. This can be achieved by following the recommended production steps and making sure the employees strictly adhere to the rules and regulations of the processing plant.
The farmers are also expected to play their part in this regard by inspecting the milk quality at early stages. The quality of milk also depends on the storage units, which must be inspected and monitored by responsible managerial staff on regular basis. The first quality check will be made as the milk reaches the plant from farmers. There will be a quality check performed on the milk produced by the farm itself, followed by quality checks at each stage of production. Finally, quality management will be performed at the time of product packaging to keep the milk as fresh as possible.
Quality Management is compulsory for all dairy product companies as it ensured continuous improvement of product quality and guarantees customer satisfaction in the long run. Another aspect of quality management for a milk processing plant is to regular check the health of cattle at the farm. In this regards, veterinary doctors should be called in according to the proposed schedule and the food for the cattle should also be thorough inspected (Ross, 2000). In future, the Unaizah dairy farm may reject from the outside farmers completely if they fail to meet he required quality measures.
Information management system is another factor that contributes significantly towards success of a project and therefore there is a requirement to bring Information management into play to improve precision in daily activities from management and nutrition to reproduction and genetics (Powell, 2003). Information technology has helped a number of farms cut excessive costs over the last few years and Unaizah dairy farm intends to do the same. Only the most advanced information technology systems will be implemented at the site to ensure continuous improvement.
Establishing and maintaining long term strategic relationships are included in the duties of operation management. Operations Management is a crucial part of the entire business process and mainly consists of in house operations including production, storage, stocking and delivery. The operation manager further assists the supply chain department to ensure all operations are performed smoothly and continuously (Van Mieghem, 2007). For the Unaizah dairy, the role of operations manager is of great importance as he or she will be responsible for determining long term and short term strategic goals in addition to looking after other business activities such as quality management, time management, capacity management, inventory and building strong relationship with employees.
the case of Unaizah dairy operation management and business strategies have been analyzed, and the study shows that the business model of diary can be improved significantly through implementation of the smart business and operational plans. Reviewing the processes of the farm, it was observed that capacity planning and inventory management are one of the primary concerns of the diary, and following the recommended directions, the company’s financial situation can show much improvements. The project, lean and quality management aspects of diary/farm are being addressed by the management team, however there is room for further improvements with respect to standardizing the management practices and planning
Case study of Unaizah Dairy