Mapm5029 Management Accounting And Performance Assessment Answers

Answer:

Introduction:

This assessment identifies the issues that are relevant for strategic decision making by operations manager in a manufacturing company. This report analyzes the case study on The Royal Navy which is a company that designs and manufactures parts and equipment required to assemble war ships. The Royal Navy manufactured its equipment and parts at their Royal Dockyard while at the same time depending on the services of various vendors. The vendors were contracted to supply specialized items and equipment that the company found uneconomical to produce by itself. The dependence on these vendor results to operational problems for RN since at time they may delay in supplying the required items and equipment and hence affecting other production related activities in the organization (Ruhanita, 2011). Ships may end up delaying before they return to duty. The outsourcing of the vendors also results to issues on quality standards and the workers of RN may be forced to put more work on them and hence resulting to extra cost of labor and loss of productivity.

This report therefore identifies the operational, strategic and financial challenges faced by RN and identifies ways in which these problems could be solved. The report begins with identification of the major strategic decisions the operational manager should take when choosing appropriate manufacturing processes. The most significant of these considerations are indicated. The issue of interference by management through ordering that Goodrich employees as few workers as possible is discussed.The management should have let the operational manager make decisions on staffing depending on analysis carried out. The paper also analyzes the initial manufacturing design using the data provided. The implications of RN achieving a maximum fleet size of 1000 vessels are identified and explained in this paper based on the statistics available to RN at the time. Suggestions on improving information flow in the Royal Dockyard through improving design and application of modern technology are made in the report (Thukaram, 2013). In addition to these, the paper also contains recommendation on improving production plan and how to meet the various types of demand it RN is faced with.

1. Operations managers play a very critical role in management of production in a company. The operations manager is charged with the responsibility of minimizing production costs in an organization by designing production systems that are very efficient. Operations manager is also expected to draw production plans and schedules for factory workers so as to ensure that an organization keeps up with the level of demand. This also ensures that all the production related activities run smoothly without delay or interference. At the RN, the operations manager is expected to make major strategic decisions which affect the production and the general performance of RN. One of the strategic decisions is on the products to be manufactured at the Royal Dockyard. The operations manager should estimate and analyze the cost of producing each products needed by RN. After determining this, the operations manager can then analyze and compare the cost of manufacturing the products and the cost of outsourcing the same (Krznaric, 2007). This information helps the operations manager to make a decision on which products to manufacture in their factory and which ones to outsource from other suppliers and hence maximizing efficiency in the organization.

The operations manager at RN also needs to make strategic decisions related to processes. Processes are very crucial especially in production since most of the activities are related. The failure in one or some of the process may lead to collapse of the all the activities and operations within the organization. The operations manager needs to decide on the processes that should be followed in order to successfully complete specific tasks in an organization. The processes chosen have to be the most economical in terms of time and even cost. Strategic processes helps to ensure that the company optimizes production while employing as little labor as possible. Division of labor and allocating of tasks is very important in a manufacturing company since the activities of the organization depend on processes which are interrelated and therefore every single process is crucial in determining the final output.

Apart from the strategic decisions on products and processes, the operations manager also has a huge responsibility of making decisions on the manufacturing facilities of the organization. One of the issues identified as being at the center of the problems faced by RN is on the manufacturing facilities. Manufacturing facilities in this case involves plant the building factory, machine and equipment. The operations manager of NR makes strategic decisions on the location of manufacturing plant and factories within the organization or any other location as deemed appropriate (Puddefoot, 2010). The operations manager considers factors such as availability of raw materials, production processes involved and their arrangement as well as the bulkiness of the materials. In the case of RN for example, bulky items required in manufacturing and repairing ship should be located closest to the sea. The operations manager also makes decisions on the new technological equipment and machinery required. He/she recommends to the management new technology that would contribute to increased efficiency in manufacturing. The other important strategic decision made by the operations manager is on the capacity of the manufacturing plants and factory. The operations manager makes an analysis and determines the need to increase the production capacity of the factory depending on demand. The operations manager has to ensure that the demand is not temporary since expansion of capacity involves huge costs and therefore it should be ensured that the new capacity does not end up being underutilized. The operations manager also makes decisions on the employee numbers and the distribution of the same in the factory. This happens by identifying the areas that are key in the manufacturing processes and allocating more and highly experienced staff (Carl & James, 2018). The decision to cut on factory staff or to increase the factory employees also majorly depends on the operations manager of RN.

2. (a) The recommendation by the board of RN to Goodrich who is the operations and factory manager is interference by the management. This interference is justified because of the various reasons highlighted in the case as being the motivation behind the recommended change. As discussed in the case study, RN was having problems in meeting the supply and therefore it ended up depending on external suppliers to supply some of the materials needed in building and repair of ships (Garrison,  Noreen& Brewer, 2012). The dependence on external vendors brought further challenges to RN since most of the vendors supplied materials that were of poor quality and which wear out easily. There were also challenges in delivering the materials on time and hence leading to delays in repair of ships. This eventually ended up inconveniencing the soldiers and hence having grave effects on the navy. In order to meet the supply and fulfill the demand for ships, Brunel shows it is appropriate to mechanize the production process. Mechanization of production at the Royal Dockyard meant that production of parts required for building and repair ships would be faster. The recommendation and interference by the management is also justified because, RN was experiencing a challenge of getting skilled and semi-skilled labor. By mechanizing production, Brunel helped the Royal Navy to solve this problem since the demand for skilled and semi-skilled labor was replaced by use of technology in production. The number of skilled employees required to work at the RN`s manufacturing plant should reduce by more than half as a result of mechanization of the production system of Royal Navy. In addition to this, the interference by the management is justified since it helped to solve the problem that the organization faced regarding quality of materials supplied by the vendors. Royal Navy was now able to manufacture its own materials and hence assuring maximum quality output. As a result of the intervention, the costs of outsourcing such as communication and transportation costs were reduced and hence leading to increased efficiency at the Royal Navy factory.

(2 b) The initial design of one man per machine was not effective before mechanization of production. This is because; a lot of labor was required since most of the activities at the facility were manual. It therefore means that be allocating every machine to a single person, there would be under utilization of labor (Collier & Agyei- Ampomah, 2008. There are instance where there was delay in supply of raw materials. In such instances, the employees stayed idle since the initial design was not flexible enough to reallocate labor between the available machines. The original design of one man per machine also resulted to overwork by factory workers who were allocated sections that were forever busy. Given that in the original design every person was operate one machine irrespective of the level of demand or activity in the factory, it seems that workers were idle most of the time they were expected to be at the factory working. The new system of allocating staff depending on demand brought many changes in the operations of Royal Navy. From the information provided, we can calculate the total production for the year 1808 as follows:

1808(Annual production) = 48.29+43.94+52.32+31.06+155.36=330.97 Units

From the above calculation, the average production per person throughout the year can be determined by dividing the total production by the four men.

Therefore:

330.97/4=82.74Units per man

The average production for every machine per year is therefore determined as follows:

330.97/18= 18.39 units per year

During this period, it means that by allocating one man per machine, the capacity of the machines would have been underutilized. This is because, the small machines would only be used for 92 days per year, the medium machine, 127 days and the large machine 186 days. This therefore means that the small machine will have been utilized by 238 days per year, the medium machine will be underutilized by 203 days and the large machine will be underutilized by 92 days per year. Although the factory was not expected to be fully utilized at present, it was expected that the utilization would keep increasing to accommodate future demand. If the staff is distributed depending on demand, the machines will be fully utilized throughout the 330 days with only four men operating the 18 machines. In the previous one man per machine system, 18 men would be required to operate the 18 machines and the production does not increase at all (Jones& McCaughey, 2008). Given that each man earns 24 shillings per week and there are 52 weeks every year, it therefore means that RN would have spent the following on labor:

52×24= 1,248 shillings

When this is converted to pence based on the exchange rates at the time;

1,248÷20= 62.4pence

The Royal Navy would have spent 62.4 pence per year as an expense on labor.

By adopting the system of allocating labor depending on demand, RN was able to save the following.

4×52=208 shillings

208/20=10.4 pence

Hence; 62.4-10.4= 52 pence

By allocating labor depending on demand, Royal Navy is able to save 52 pence per year which is a very significant amount.

(2c) With Royal Navy attaining its maximum ship capacity of 1000 ships between 1808 and 1809, there is expected to be economic, social and technical challenges that are going to arise. The attainment of maximum capacity means that production at he mill will have to be cut by more than one third. This is because, production was mainly for building new ships and hence very few ships will be built per year (Drury, 2012). The number of ships being built depends on the number of ships destroyed at war. The war is expected to end and a period of peace of between 10 to 20 years expected means that the Royal Navy will have to lay off more than half of its employees. This is because; the demand for labor will go down drastically since most of the machines will not be operating due to sharp decline in demand. The laying off of workers will result to social problems such as low standards of living. Unemployment will also be high. The employees retained will also be underutilized since they will only work depending on ships destroyed and once the war comes to an end they will have no work to do at all (Collis, 2016). The royal Navy will have incurred costs in paying idle labor. Some machines may also breakdown during the period of peace and hence resulting to costs of repair.

(2 d) To determine whether the factory should continue operating or not, it is important to carry out an analysis of the economic benefits and costs of the project throughout the lifetime of the project. By doing this, it is possible to identify at which point the project will become economically unviable due to costs being higher than the benefits of the project  (Jones & Mccaffery, 2008). . At this point, it is advisable to close the factory since it will have come to the end of its useful life. In order to determine whether the Royal Navy factory should be closed or not, the economic benefit of the factory during the initial years should be calculated first. The costs of running and maintaining the factory during this initial period should also be calculated and the two should be compared to determine which is higher. The costs and benefits of the factory from between 1808 and 1965 should be calculated separately. This is because there is significant change in production processes and technology which is used throughout the remaining life of the project. Therefore, the economic benefit of the factory each year is estimated by estimating the production of the factory each year (Khan  & Jain, 2010). Production rate of the factory per year depends on presence or absence of war and the demand of ships during this war period. During the years when there was war were like the first and the second world war, the production capacity of the factory increased due to increase in demand (Mowen, 2017). Therefore, in order to analyze and determine the point at which the factory should be it is important that the production rate for each year is estimated separately. The cost incurred each year in running and maintaining the project is also estimated and the totals for both are determined. The ratio of benefit to cost is determined by dividing the benefits to cost. During the year which the ratio is closest to one, this is the period which the factory should be closed or should have been closed.

(3) Information flow for machine operator need to be improved since the workers in this department are using a lot of their time moving from office to office and carrying bulky materials from the store to the factory. These results to them losing a substantial amount of income since they are paid based on production. The production orders should be delivered to the employees by the factory supervisors at the workplaces instead of the employees going to collect them. This will reduce waste of time and hence improving productivity. Alternatively, if it were during the modern technological era, the production orders would be sent to the workers electronically through the use of emails or social media platforms and hence reducing movement within the organization. The semi-finished goods store should be relocated to a more strategic place where carrying of the materials is less tiring and less time consuming. The store should be located on the ground floor of the building. A room for storing bulky raw materials should be situated within the factory so as to make it easy for the workers to obtain the raw materials easily.

(4) Production planning is very important in manufacturing. This is because; it helps organizations to maximize productivity. Effective planning is complex and it involves a variety of aspects such as materials, processes and people. Production planning involves ensuring that all the materials and human resources required for production are available all the time. It also ensures that unexpected demand is met and hence a company does not have or depend on orders so as to produce.

Royal Navy can improve its production planning by identifying all the materials needed in production. The raw materials used in production by Royal Navy include, exotic wood (Lignum vitae), oak tree and brass ‘coak’. Once these are identified, plans can be made to procure raw materials needed on time and hence ensure that production is not affected by absence or delay in supply of raw materials. Planning of production will enable to operations manager to plan processes from the beginning of the processes until the end. All the steps to be followed in the production process are determined and hence planning is made easier. Factory workers can then be distributed to operate various machines within the factory depending on the labor requirements. Proper production planning will help Royal Navy to optimize use of equipment and optimize capacity of the industry to meet the demand. Inventory control should also be improved at Royal Navy so as to improve production planning. Finally, production planning for Royal Navy should be improved by making individual employee work schedules and planning future work activities before orders arrive. This is achieved by forecasting future demand.

Conclusion:

The paper analyzes the major strategic decisions that operations manager are required to make in an organization. The case study on Royal Navy manufacturing plant is evaluated and analyzed. The factory manufactures parts used in building and repair of war ships. The production processes at the factory are evaluated together with the management of labor and a product at the factory.The objective of this assessment is to identify the major manufacturing accounting issues at Royal Navy. The management of processes and production is also analyzed to determine the level of efficiency at the factory. After 1803, the factory was mechanized and the capacity was increased. The effect of this increase in capacity and mechanization on production is also evaluated in this paper. Mechanization helped to reduce costs by approximately 50 pence per year. The management of facilities at the factory is also not impressive since it results to wastage of a lot of time since moving around the factory. The report suggests that the work-in-process store should be located to a more strategic location and technology should be used for communication within the company. Methods of improving production management include identification of required raw materials, designing time schedules for all employees and forecasting future demand so as manufacturing can be completed on time.

References:

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