Activity Analysis Report - Production

September 5, 2012[

]

320LON - GLOBAL BUSINESS SIMULATIONActivity Analysis Report: Production

9/5/2012Renata Ltd.Muhammad Tanvir HossainStudent ID: 4325352

Table of Contents1. Introduction:...................................................................................................3

2. Individual Activity: Production.......................................................................3

2.1 Product supply chain:...............................................................................3

September 5, 2012ACTIVITY ANALYSIS REPORT: PRODUCTION

2.2 Product life cycle:.....................................................................................5

2.3 Efficiency:.................................................................................................6

2.4 Kaizen process:.........................................................................................7

3. Conclusion:.....................................................................................................8

4. References:.....................................................................................................9

1. Introduction:This activity report is a significant assessment report of Renata Ltd., written based on the verdicts provided by me, as a production manager for the decision area in round 5. This business productions are in the pharmaceutical industry in the major markets in USA and Finland.

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In this round five, the market condition was both positive and negative in condition of demands compare to round four. The demand for painkillers (Rubbana) decreasing by 10% all around the world and demand for antioxidants (AndyOx) are doing strong and expected to rise 10% in all markets. Consequently, I have an opportunity to help gain competitive advantages by analyzing product life cycle for both Rubbana and AndyOx. Renata Ltd., objective is to gain 60% global market share by the end of this round. As the objective is expand global market share by 60%, it is also my responsibilities to know current market sales globally to calculate exact production to maximise production capacity utilization.

The market condition for machinery prices are decreasing by 20% and raw materials prices for Rubbana are increasing and AndyOx materials prices are declining in their individual trends. These conditions has both negative and positive factors for me as a production manager in a respective way, where Rubbana will increase the product per price and AndyOx product per price will be less which has effects on profitability. My objective is to reduce production cost 2% in this round by using allocative efficiency, technical efficiency, cost efficiency and measuring efficiency as well as improving production efficiency.

2. Individual Activity: ProductionProduction is the methods and processes which involves to transform tangible inputs (i.e. semi finished goods, subassemblies, or raw materials) and intangible inputs (i.e. knowledge, information, or ideas) into goods or services (Business Dictionary, 2012). As a production manager I set production target for Rubbana and AndyOx to meet Renata's objectives as well as my objectives to reduce production cost by 2%.

2.1 Product supply chain:Previously, production cost and supply chain have not been the major key method in achieving a competitive lead in pharmaceutical industries. However, these factors carry important potential for a cost and capital optimization, which allows in an increasing competitiveness.

To discover the potential in supply chain and production, I must follow a holistic approach which contains of four dimensions:

Production strategy and supply chain Network organization Capacity utilization and managing the difficulty of process and products

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A plan-do-reflect-review cycle around these four dimension will be cornerstone for production and supply chain excellence. See Figure 2.1:

Plan-do-reflect-review cycle:

Source: London Deanery

My communication with my sales and finance manager clear and transparent to ensure on time production planning and maximise the capacity utilization to increase products margins. In this round, my capacity utilization in USA 98.0, which is same as Finland. As this below supply chain model (figure 1.2) shows, I have to manufacturing plant in USA and Finland and I have customer in three different countries France, Finland and USA. I am sending my finished goods in France from Finland as logistic cost if less Finland to France than USA to France, transportation cost 3.10 (EUR/Units) and 5.00 (EUR/Units) respectively.

Figure 2.2: Product supply chain

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source: World trade group.

2.2 Product life cycle:Product life cycle first introduced by Theodore Levitt in 1965. The concepts of this model is to analyze the maturity stage of products and industries. This model allows managers and consultants to have and understanding the stage of a product and provides information about expected future sales growth and what kind of strategies need to be implemented.

Figure 2.3: Product life cycle

Source: Tom Spencer (tomspencer.com)

According to the market analysis Rubbana(painkillers) sales in decreasing by 10% all over the market and Rubbana as from the product life cycle is in declining stage.

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My strategy is to reduce production of Rubbana compare to round four in USA and Finland. My target production of Rubbana in Finland and USA is 111.71 (K units) and 98.46 (K units) in that order.

The demand for AndyOx(antioxidants) are still growing strong in all markets. By product life cycle curve AndyOx still in growth stage, therefore Renata Ltd. has an opportunity to capture growing market by producing more quality AndyOx. As a production manager I have invested in machinery and buildings to improve total production capacity in Finland and USA, 90 (K units) and 20 (K units) respectively. Renata's objective is to gain 60% market share by the end of this round, for that reason the production of AndyOx in Finland and USA is 162.5 (K units) and 165.94 (K units) correspondingly.

2.3 Efficiency:Efficiency refers to the global relationship between all outputs and inputs in a production process (Speelman et al., 2008). As a production manager my concern with efficiency to gain my production objectives as well as Renata's objectives. There are several efficiency related to production which has significant impact on resource saving, which can be valuable effect on policy formulation and farm management (Bravo-Ureta & Rieger, 1991).

Technical efficiency Allocative efficiency Cost efficiency and Measuring efficiency

Technical efficiency is the combination of inputs with minimum uses of labour and capital to produce a certain amount of goods. Production wages is rising in Finland and USA than previous round. Current wages rate in Finland and USA is 49.00 (K EUR) and 51.00 (K EUR) respectively. As a production manager I have invested in production efficiency (k units/person) in Finland and USA to person in production to cope with current wages rate. Graph 1.1 illustrate that:

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Graph 1.1 Production efficiency in Finland:

Phar-mateam

Renata Ltd.

Ecolab Pharma

Ltd.

0

0.5

1

1.5

2

2.5

3

3.5

4

Rubbana (k units/person)AndyOx (k units/person)

Source: Cesim Sim Firm

I have invested 3.72 (k units/person) and 3.12 (k units/person) in Finland for Rubbana and AndyOx correspondingly to improve cost efficiency and technical efficiency to save capital investment on wages and gain competitive advantages over competitors.

2.4 Kaizen process:Kaizen means continues improvement. In this process it has never ending efforts on improvement engaging managers to workers. Figure 1.4 illustrate Kaizen process:

Figure 1.4 Kaizen Process:

Source: Business Coach (insbeco.com)

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I have applied Kaizen continues improvement process to avoid wasting my resources. I have invested to improve quality control for Rubbana and AndyOx by 1600 (K EUR) and 1550 (K EUR) respectively, which allowed Renata to provide quality products to the customers and earning satisfaction and loyalty which is valuable for the organization. I have also invested to improve cost of investment to achieve Renata's objective to acquire 60% global market share by the end of this round and reduce production cost by 2%. However as an organization we have failed to achieve our target market share. At the end of the round 5 our market share is 51.20 % for Rubbana and AndyOx but we have reduced our production cost 1.8%.

3. Conclusion:In conclusion, I would like to say for organization production is a very important sector. As a production manager I have to reconsider some of my decision which I took during this round. The opening inventory I had from last round is increased 89.20 (K units) and 91.38 (K units) for Rubbana and AndyOx in that order which is more costly for Renata Ltd.

I would recommend sales and finance manager to discuss with me for setting up sales target for round 6 so that I do not have to hold bulk number of units in storage. I have experience tough time with maintaining machinery as they have 25% depreciation and at the same time building has only 5% depreciation.

Finally, I have developed few important skills during this business round which I had lacked before, for example: the importance of efficiency. Although I have not fully understand what is profit efficiency, revenue efficiency and economic efficiency which I would like to improve during next round where I will be a finance manager.

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4. References:1000 Ventures. [online] available from <http://www.1000ventures.com/design_elements/selfmade/kaizen_culture_8elements_6x4.jpg>

Ajibefun, I.A., & Daramola, A.G. (2003). Determinants of Technical and Allocative Efficiency of Microenterprises: Firm-level Evidence from Nigeria. African Development Review, 15(2-3): 353-395.

Allocative Efficiency, Agency for Healthcare Research and Quality. [online] available from <http://www.ahrq.gov/qual/efficiency/hcemappa.htm> [2012]

Business Dictionary. [online] available from <http://www.businessdictionary.com/definition/production.html> [2012]

Business Coach. [online] available at <http://www.insbeco.com/1000ventures/products/bec_mc_cif.html>

Capgemini Consulting. [online] available from <http://www.capgemini-consulting.com> [2012]

Cesim Sim Firm. [online] available at <http://sim.cesim.com/results/se/ProductionPage/wicket:pageMapName/wicket-0>

London Deanery. [online] available from <http://www.faculty.londondeanery.ac.uk/e-learning/assessing-educational-needs/when/view?portal_status_message=Error%20creating%20PDF%20file>

Speelman, S., D’Haese, M., Buysse, J., & D’Haese, L. (2008). A measure for the efficiency of water use and its determinants, a case study of small-scale irrigation schemes in North-West Province, South Africa. Agricultural Systems, 98(1): 31-39.

Tom Spencer. [online] available from <http://www.tomspencer.com.au/2009/01/25/product-life-cycle-model/> [25.01.2009]

World Trade Group. [online] available from <http://www.wtgnews.com/2010/08/the-supply-chain-strain-is-changing-the-way-manufacturers-do-business/> [2012]

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Activity Analysis Report - Production