Consider the following scenario: Agricultural chemicals corporation: Management
ID: 396432 • Letter: C
Question
Consider the following scenario:
Agricultural chemicals corporation: Management at your agricultural chemicals corporation has been dissatisfied with production planning. Production plans are created using best guesses of demand for each product, which are based on how much of each product has been ordered in the past. If a customer places an unexpected order or requests a change to an existing order after it has been placed, there is no way to adjust production plans. The company may have to tell customers it can’t fill their orders, or it may run up extra costs maintaining additional inventory to prevent stock-outs.
At the end of each month, orders are totaled and manually keyed into the company’s production planning system. Data from the past month’s production and inventory systems are manually entered into the firm’s order management system. Analysts from the sales department and from the production department analyze the data from their respective systems to determine what the sales targets and production targets should be for the next month. These estimates are usually different. The analysts then get together at a high-level planning meeting to revise the production and sales targets to take into account senior management’s goals for market share, revenues, and profits. The outcome of the meeting is a finalized production master schedule.
The entire production planning process takes 17 business days to complete. Nine of these days are required to enter and validate the data. The remaining days are spent developing and reconciling the production and sales targets and finalizing the production master schedule.
1. what are the problems this process creates for the company?
2. identify 3 metrics that could be placed to measure the impact of the existing process?
3. what changes could be made to the process to make it more efficient?
4. how do information technology support the changes?
Explanation / Answer
1.The problems this process creates include loss of customer orders, low productivity, inefficient forecasting and loss of revenue and profit.
2. The three metrics include productivity, revenue through the process and the number of instances where there is change in customer order.
3. In order to make the process more efficient the company should change the habit of entering the data manually because there are chances of errors during manual entry. The analysts from production and sales department should meet and analyze the data together considering the senior management’s goals for market share, revenues, and profits to determine the targets instead of analyzing from their respective systems and later organizing a high level planning meeting. This will reduce the time spent on planning process and the analysts can spend their time on other productive activities.
4. Information technology can support the changes through the use of software systems that help to enter and analyze the data easily. The calculations will be accurate and forecasting of demand becomes easy and more accurate through the use of information systems. The manual data entering and analysis takes many days, but information systems can provide the data and analysis within seconds. The analysts can also compare their analysis with other similar companies through the use of data available through web.