Business Operations Module Winter Term 2016
Assignment (100 marks, equating to 30% of the module grade)
This is a (2-person) team assignment, and must be an original piece of work.
This assignment provides a formal opportunity to explore review, reflect upon and apply Operations Management concepts to the operational aspects of a business. It is based on a review of operations at Farmac Plc from the attached case material.
Read the case study about Farmac Plc on the following pages, and answer using relevant conceptual frameworks, these questions. The assignment submission should be in report format, as an audit of Farmac Plc’s operations.
Questions / Marks Allocation
1 Classify the previous and current operations of Farmac Plc’s manufacturing using the 4V model. Discuss the major differences. (15 marks)
2 Classify the operations of the manufacturing plant in terms of: process type, and process layout. (10 marks)
3 Explain the “production policy” and the factors of Capacity used at Farmac Plc. (20 marks)
4 Discuss the management of materials at Farmac Plc. (10 marks)
5 Identify and discuss aspects of the operations activities which Farmac Plc needs to review and/or will need to adapt to meet the on-going demands of its customers. (35 marks)
Ten (10) marks are allocated to the quality of the report, including: (reporting structure, ease of accessibility, and appropriate referencing).
Write your answer in report format (maximum 3000 words).(Cover page, Contents page, Introduction etc. References; Note – an Executive Summary is not required)
Submit two copies of your work to the Business School Administrator by:
Week 7 – Monday 29th February 2016 before 10:00 a.m.
All coursework must be accompanied by an Assessed Work Cover Sheet/Receipt Form.
Students must submit their assignment through Moodle/Turnitin [ONE Submission per 2-person team] and one paper copy of the coursework, for which you will be given a receipt. Once the coursework has been marked, this copy will be returned to the student together with the top copy of the form which will contain the tutor’s comments on the piece of work. A copy of the work will be retained by the Business School for external examination and auditing purposes.
Operations Audit at Farmac Plc, the Pharmaceutical Company
A recent review of operations at pharmaceutical company, Farmac Plc, reported that the tablet manufacturing plant produces more than 140 different items, ranging from mineral tablets and sweeteners to potent pharmaceuticals. In total it has an annual output amounting to over 150 billion tablets and capsules. (1 billion = 1,000 million).
Previously, until the last few years the manufacturing plant had been operating in a relatively stable environment, across a range of 50 different items. Production for the plant’s main customers was on a make-to-stock basis via a central warehouse facility which aimed to keep at least six weeks’ stock. This provides a buffer (of stock) which insulates the plant from changing market demand. This, together with the existence of a small number of large-scale, long-term contracts for third parties, permitted long production runs (batch sizes typically between 250,000 – 1 million). In terms of floor space the warehouse facility, which holds material inputs and finished goods, covers 40% of Farmac Plc’s factory.
More recently this stability has begun to be undermined, and manufacturing has been exposed to an increasingly competitive environment, thus Farmac has had to adapt its operations. The large scale, long-term third-party contracts have reduced; but there is an increase in medium volume production runs (batch size up to 250,000) from third-party contracts for own-label health care products for retail chain stores. This is reflected by not only the growth of the major retail chain store groups such as Sainsbury’s and Tesco, but also Farmac increased use of own-label products and extended product ranges covering a wide variety of health care products.
Manufacturing contracts for other pharmaceutical companies have increased but these tend to be small or medium scale, because such firms seek to acquire additional manufacturing capacity on a short-term basis. For example single production runs of 10-20,000 or 100-500,000 to meet the company’s demand fluctuations, or as established products are displaced by new items. As these orders often come to Farmac at quite short notice they have some difficulty responding to the customer lead-times.
The Sales Manager stated:
“The processing of customer orders was, previously, quite straightforward: orders were received on a monthly schedule, and deliveries were arranged through the Transport Dept. With the increase in customers, and their orders, communications between Sales and the Production Operations Dept has become more frequent, detailed and complex. Similarly communications between Sales and the Transport Dept are now more necessary to ensure appropriate distribution schedules are planned to meet customer delivery date requirements”.
The company’s own requirements have also changed. Line extensions to existing products increase as the company endeavours to extend the market through greater precision in meeting customer requirements. Typically these take the form of low dose products for the paediatric market, soluble derivatives of conventional tablets and sustained release derivatives for greater consumer convenience. The effect of an increased number of line extensions is a broader range of pharmaceutical and health care products and in many cases increased value-added products.
“It seems that pharmaceutical and health care products are being pushed in the same direction as the manufacture of other consumer products such as electronic goods”, said the Manufacturing Manager. He continued:
“The Manufacturing Dept. at Farmac has been brought much closer to the marketplace demand levels. This means increased product variety, so the tablet manufacturing plant is required to exhibit a much higher degree of flexibility than in the past, with smaller order sizes (15,000 – 500,000 units per production run) and a more varied mix of products”.
To help manage the operations Farmac have classified their products into 5 groups based on batch size; (in thousands) these are 500, 200, 100, 50, and 15; see Table 1.
|Farmac Product / Production Profile|
|Group||Production Quantity/ Batch size (in thousands)||Number of Products in group
| || || |
Table 1 Farmac Product / Production Profile
The company has 3 production lines. An example of a production line would be to – produce the tablet, perform quality checks, following the route of the conveyor system the tablets are placed into blister packs then into an outer sleeve or packet, or loose in a container (box or plastic bottle), and then shrink-wrapped (in multiples) in cellophane or plastic. At the end of the line the multiple packs are taken to the warehouse/distribution area. The Engineering Manager outlined:
“These three production lines were installed over the last 20 years (Line 1 – 12 years, Line 2 – 5 years and Line 3 – 8 years). Whilst the 2 newer lines are reliable with very few (in production) breakdowns, the older line (Line 1) needs more maintenance time and is the least reliable of the three. The breakdown figures for Line 1 are 8 % of available running time. Line 1 is normally allocated to the larger batch runs to reduce the level of disruption in the production plan”.
From a different perspective the Manufacturing Manager explained:
“As for changing production from one product to another then on Line 1 changeover times vary between 2 half hours and 6 hours; as for the newer lines these typically vary from 1 hour to 3 hours depending upon which line and which product has just been completed and the next production product. This is because the cleaning and resetting of the fillers and tablet compressors is crucial in the pharmaceutical industry; cross contamination of products is seen as extremely serious, and even potentially life-threatening”.
The materials used in manufacturing products are – the tablet/formula itself, immediate packaging (e.g. blister pack, box or carton, bottle), labels, shrink wrap plastic, size of multiple box for the distribution process, and including where necessary instruction/information sheets on how to use the product.
Adapted from: M. Gilmore and D.J. Smith (1996) “Set-up reduction in pharmaceutical manufacturing” International Journal of Operations & Production Management, Vol. 16, No. 3 pp. 4-17.
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