MAN515 Operations Management Assignment Solution

MAN515 Operations Management Assignment Solution

MAN515 Operations Management Assignment Solution


Introduction

Background of Samsung

Samsung is a multinational company dealing with a variety of products and services. Established in 1938 with its headquarters in South Korea, it has become one of the most innovative companies globally. It is by far the largest company in South Korea contributing to almost a quarter of the country's total exports. The company has grown tremendously from cottage industry to a global leader employing over 300,000 workers across the world.
The company is involved in multiple businesses in the manufacturing and construction, and service sector. These are grouped under four strategic global business units to take full advantage of different
business process opportunities. As a conglomerate, the business includes the Samsung business unit deals with consumer electronics, building and construction, and engineering. The Hansol business unit, the CJ unit and the Shinsegae unit collectively deal with chemical manufacturing, supply chain and logistics, manufacturing of paper, advertisement and insurance among other business interests.

For the purposes of this report, focus will be on Samsung Electronics group which is the most successful of the business units. It deals with manufacture of mobile phones, tablets, personal computers, televisions, display screens, fridges, headphones, microwaves, freezers among other home appliances.

Samsung customers are spread out in across the world. The company has different packages for their different customers. To begin with it supplies other original equipment manufacturers (OEMs) with display screens. Secondly they supply the aviation sector firms with circuits and display equipment. Governments are also part of their customers ordering telecommunication equipment. Other customers include firms in the hospitality industry and individual customers. Samsung has segmented their customers according to their location and social economic aspects. On the smart phones market for instance, the segments include high end customers the midrange customers and the feature phone customers.

Due to the array of products that Samsung sells, the company has different sale approches. It has stores in all major markets in North America, Europe, Asia-Pacific, Africa and South America. In parts where stores are unavailable, it has agents, franchises and subsidiaries to sell their electronics. Lastly, the company has embraced online marketing where customers can order their devices. Damaged or defective devices are replaced if covered by warrants.

Samsung is the biggest Smartphone maker in the world having overtaken Nokia Corporation in 2012. Its sales as of 2017 averaged 175 billion USD. Its net profit was in the same year was in the neighborhood of 20 billion and asset base of a quarter billion US dollars. Its electronics are manufactured mainly in South Korea and shipped to the rest of the world.

Designing a new product using De Bonos Six Hat Thinking Model

Developing a new product

In this illustration, the assumption is that Samsung needs to develop a gaming console since they do not have this offering in their product line-up. Since the gaming console is mostly used by young people. Samsung believes that it can pull up sales by introducing the product in the market.

Hat

Detail

 

 

 

 

White Hat (Information)

 

  1. There is adequate market. This is from the fact that there are close to 2 billion young people on the planet who enjoy using gaming consoles.

 

  1. Disposable income for young people in Europe and North America ranges between 3000-6000 US dollars. This income encourages youth to spend on luxury products like gamming consoles

 

  1. Asian markets present great market potential because the region hosts 59% of the population that is growing an appetitite for luxury products.

 

  1. The economic growth rate in Asia Pacific region has been growing steadily at between 6.4% in Philippines and 8.1% in the republic of Myanmar with many other countries recording an average of 7%. This presents a huge market for the gaming consoles.

 

  1. Many millennials are spending huge proportions of their time on entertainment and the gaming console offers a good alternative to other forms of entertainment.

 

 

 

 

Green hat (New Idea)

 

  1. Instead of manufacturing the products in South Korea where the cost of production is increasing, new labour markets should be explored in China, India or Africa.

 

  1. Some features of the smartphones can be merged with the gaming console to appeal to the market already possessing the smartphones.

 

  1. Mass production of the consoles can lower the total cost of production.

  2. Recycling of waste electronic products can provide raw material for production of consoles

 

 

 

 

Blue Hat (Processing)

  1. The production process should take no longer than 8 months to avoid other players from accessing the markets first.

 

  1. What benefits will accrue from using the existing distribution networks?

 

  1. Additional time (2 months) should be allocated to conduct market research.

 

  1. Using artificial intelligence during production may shorten the lead-time and hence production cost

 

 

 

 

Red Hat (Emotions)

  1. The consoles should be released to the market to coincide with Christmas festivities as people love to play games this period.

 

  1. Red colour variation on the consoles will appeal to the customers

 

  1. Customers may not buy this console since it is the first model that the company is distributing

 

  1. The company has not adequately performed quality audits and risks recalling the consoles from the market

 

 

 

 

Black Hat (What can go wrong)

  1. There are other consoles in the market and this will not sell

  2. The company lacks adequate resources for production of the console

  3. Governments may enact new laws to restrict sale of the consoles

  4. Customers will not like the first experience using the consoles

 

 

 

 

Yellow Hat (The benefits)

 

  1. Our sales and distribution channels are well experienced in the market and will therefore increase company sales.

  2. Selling the consoles will open new frontiers for company growth

  3. The company will diversify on its products therefore reduce the risk of total failure if other products stall in future

  4. The company will make it harder for other entities to venture the market hence gaining competitive advantage

 

Design Review checklist consisting

 

Aspect

Question

Answer

Comments

Product packaging

  1. Is the console packaging aesthetic?

Yes

Samsung packaging have done trials with positive results

  1. Is the packaging environmentally friendly?

Yes

The materials used by Samsung are recyclable

  1. Does the packaging bear the console information?

Yes

All information on Samsung products is printed on the package and a manual included

  1. Is the packaging safe?

Yes

The package is made of safe bio-degradable material

Product Quality

  1. Does the company produce defective products?

No

All products are made from high quality raw materials

  1. Does the product undergo quality tests at the company?

Yes

The product is well tested before leaving the company.

  1. Does the product bear a quality mark from ISO?

Yes

The console bears the ISO 9001 mark of quality.

  1. Does the product have a warranty

Yes

The product comes with a limited warranty.

Legal /Regulatory Compliance

  1. Does the console comply with government regulations?

Yes

The console has been checked by government agencies for compliance

  1. Does the product meet the international safety SAR?

Yes

The product bears the SAR marking for compliance

  1. Does the console bear a shelf-life

No

However some components such as batteries should be replaced when worn out

  1. Does the console meet the industry standards for electronics?

Yes

The product is tested in all localities to comply with set standards

Promotion

  1. Is there any material to inform consumers of the product?

Yes

There are brochures and banners showing the product

  1. Is the product information understandable?

Yes

The information is written in multiple languages

  1. Is there any online presence of the product?

Yes

The company website and affiliate portals have the product information?

 

  1. Is there a discount for early purchasers?

No

The pricing set is standard to all consumers. The company may however offer gifts to heavy purchasers.

  1. Does the advertising appeal to the target market

Yes

Images and information contained appeal to the intended market

Pricing

  1. Is there a price list for the different product offering?

Yes

The pricing is determined by the product specifications

  1. Is the pricing similar in all localities?

No

The pricing is influenced by the government tariffs, distribution costs among other factors

  1. Can the customers’ order the product online?

Yes

The consoles can be ordered online using the prevailing currency exchange rates

  1. Will I pay for extra for repairs and upgrades

No

Unless the product damage is outside the scope of the warranty

Product identification/security

  1. Does the product have any security measures

Yes

The product has geo-location tag and a product key to

 

  1. Does the product include warnings to the user?

Yes

The product specifies the correct way to be handled

 

  1. Does the product include traceability function in case it is lost or stolen?

Yes

The product contains biometric data that can only be activated by the user

 

  1. Does the product contain maintenance information

Yes

Maintenance information is included in the user manual guide.

Brief summary of DR outcome

Samsung console is a product that is designed to fill the market gap in the supply of quality and affordable gaming alternatives to the prevailing competition. It is built using high quality and business environmentally friendly materials. In terms of packaging, the console provides the specifications, safety measures while using the device warning and the correct disposal mechanism for the packaging. The console has also met all the legal and regulatory requirements to ensure that the user safety is guaranteed always.

The console has been advertised in the news and print media. For any additional information the product specifications can be accessed online at the company's portal and affiliated distributors links. The pricing has been well specified and varies with the products features.

In terms of security and traceability in the event the device is lost or stolen, Samsung has invested in biometric technology to ensure that the device is traceable. In addition, the console is packed with various warning and maintenance directions to ensure maximum utility and comfort.

Summary

Value Stream Map for Samsung Gaming Console


forms

Type of waste

Example

Root-cause

Recommendation

 

Waste from transportation activities

  • Spillage of raw materials when offloading from suppliers

  • Damage to consoles when shipping to customers

  • Breakage of consoles during transport

  • Defective motor vehicles

  • Accidental falling of consoles during transportation

  • Move the production facility near the customers

 

  • Secure raw materials and finished products during transportation

 

Manufacturing defects

  • Damaged circuit boards

  • Overheating consoles

 

  • Poor quality control during manufacturing

 

  • Substandard raw materials

  • Automate production process using artificial intelligence

 

  • Quality control checks during delivery of raw materials

Storage/warehousing waste

  • Falling of consoles from pallets

  • Damage by natural elements such as storm

  • Faulty shelves and pallets at the warehouses

 

  • Ravaged warehouse

  • Repair the shelves and pallets

 

 

  • Repair of damaged warehouses

Excessive production of consoles

  • Manufacturing beyond customer orders

 

  • Disregard for Enterprise Resource planning system(ERP)

  • Employ Just-In-Time Production

  • Efficient Use of ERP

Time wastage

  • Occasioned by standby times lost while waiting for suppliers, storage and shipment

 

  • Shipment delays

 

  • The production facility is very far from the raw materials

 

 

  • The company does not have its own shipping arrangements

  • Move the plant closer to the raw materials

 

 

 

 

 

  • Forward integration into shipping transport

Production floor plan

JIT Production flow influence by the Kanban pull


JIT production flow influenced by the Kanban Pull

The JIT method of inventory control was introduced by Toyota Motor Company after suffering many instances of resource wastage coupled with poor space management. The system is based on the premise that Reorder levels for inventory are dictated by customer orders. As depicted in the diagram, there is no production of consoles unless customer orders trigger the process.This implies that the company only keeps inventory and finished products commensurate with the orders placed by the customers.

For this reason, there is never an instance where there are excessive or shortage of raw materials in the storage. On the same breathe, a there is never a case of overproduction of finished products waiting in the warehouse for distribution.

In the case of Samsung manufacturing Consoles, once a customer places an order, the company system picks the order immediately and produces finished consoles from the optimal raw materials kept in the storage. This in turn minimizes material wastage, space wastage and in the long run helps to keep the cost of production low. Other companies  such as Amazon and Ebay have borrowed a leaf  from toyota's JIT system and are reporting innumerable success.

Manage the operations

Development of a supply chain consisting of five elements
In order for Samsung to manage their operations, there are concerted efforts at ensuring optimal management of customer orders while at the same time ensuring smooth flow of raw materials from their suppliers. This is made possible through managing supply chain functions such as supply chain integration, planning of operations, managing their purchasing, demand and supply planning and lastly through ensuring effective distribution networks.

Supply chain integration

In the production of gaming consoles, Samsung has to ensure that the communication lines between the suppliers, the production team are well managed. The integration of all the parties involved from demand forecasting, inventory control, the production team and the budgeting team has to be in sync.
To ensure that gaming consoles are produced on the time specified and that the products are of high quality, Samsung has adopted demand forecasting as one avenue to be able to predict future needs of the customers. In addition the company has a very robust research and development department that keeps adding value to its products which in turn keeps customers interested in their products. This helps the company to maintain a sustainable competitive advantage.

Planning of operations

Samsung has to effectively manage their processes to ensure that there is minimal wastage hence leading to low cost of production of their gaming consoles. Moreover, the company conducts regular market forecasting to be able to predict utur demands hence maintaining optimal inventory. Lastly, Samsung has leveraged their broad marketing networks to ensure that new demands in the market are pursued by having handy supplies of raw materials when needed.

Purchasing

The market is always demanding consoles of high quality without compromising on pricing. To maintain this balance the Samsung purchasing department are well trained in managing cost effective supplies while at the same time making sure that the materials supplied adhere to the quality standards set by the company.

Distribution management

always look out for companies that keep their word in delivering ordered products. To this end, Samsung has established many networks including partnerships with other businesses, maintaining an online market for their products and  establishing franchises to make sure their console products and other electronics reach as many customers as possible within the delivery timelines specified.

Quality management

Samsung has enrolled its staff on intensive training on quality management programs such as lean sigma. This ensures that the staff are able to maintain demand from the customers by providing high quality devices.

Reorderly point safety stock and EOQ

This part of the report analysis specific inventory management controls to ensure smooth operations of a company by computing a desirable outcome given a set of constraints like is the case in the real business environment. The calculations desired include Inventory reordering point which is basically the stock a company should have at the very least to order inventory given certain market management demand. The computation will also cover safety stock and Economic order quantity.Inventory

Reorder point, safety stock and economic order quantity
The parameters given are:
1. Demand (D) per week = (500,000 to 1,000,000 per week)
2. Lead Time during replenishment (L/T) = a number between 1 and 2 weeks
3. Standard Deviation of demand during replenishment (SD) = 15%.
4. Carrying cost (H) per week = a number between $1and $5
5. 
Fixed cost of order (S) = a number between $100 and $200
6. Service Level = a number between 80% and 95%

1. Inventory Reorder Point

Chose service level = 90%
Z score = 1.30 for 90% service level
Request Variation σ = D*SD = 500,000*1.5= 75,000
Demand variation during replenishment = σ L/T= σ* LT =75,000* = 106,066 for a lead time of 2 weeks
Since
Then ROP= 500,000*2 + 1.3*106,066
ROP= 1000, 000+ 137885 =1,137,885 Items

Calculating Safety stock
LT =106,066
Safety Stock = Z σ L/T
Hence Safety stock = 1.3*106,066
Safety Stock= 137, 885 Items

Economic order quantity
Annual Demand= 500,000 *
52.1429 = 26,071,450
Annual Carrying cost H= 5*
52.1429 = 260.71
Since the Fixed cost S per order= a number between $100 and $200
200 is chosen as the fixed cost
EOQ = √2D*S/H
Therefore EOQ = √2 *500,000* 260.71/200= 1141.73 units

Interpretation of the inventory calculations

From the calculations it is evident that the demand that must be met by Samsung at any given week is at the very least 500,000 units. However since the EOQ has been found to be  1141 units it shows that Samsung is running on a shortfall supply to be able to meet the market demands. For this reason it is advised that the company should make better purchasing decisions to ensure that market demand is met to keep customers satisfied.

From the computed safety stock of 137, 885 items, it is evident that Samsung can run well on the current inventory of 500,000 per week up until the inventory reaches 362,115 items. At this point, Samsung can replenish their stock to keep the operations optimal.

C) Determining reliability given a fictitious MTBF

The reliability of a given machine is the ability to continue working up to a point in time when the manufacturer predicts, base on tests, that without servicing the machine will continue working. Reliability of the console gaming equipment produced by Samsung to fail may also be computed from the average time that the machine will continue working after it has been serviced after failing.
If for instance Samsung stated that their console units will work for 5 years without any failure for 12 hours every day, then the calculations based on this assumption would be as follows.

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