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Value of Information Sharing Between and Among the Functional Departments: An Insight*

CASE STUDY, OPERATIONS MANAGEMENT
ET Cases, 11 pages
AUTHOR(S) : T. Radha Ramanan (Assistant Professor, IIM Indore)

Case Preview

Value of Information Sharing Between and Among the Functional Departments: An Insight

 

The General Manager – Operations (GM) of a small scale company M/s XYZ Company had was employing most of his working hours resolving conflicts between various functional departments than to focus on planning for the capacity addition, modernizing of the shop floor and identifying ways of improving the competitiveness of the company. Apart from the conflicts the other problems that he was facing was long lead time, delay in deliveries, customer complaints regarding the quality, high inventory
of raw materi.

XYZ Limited: Company Background

M/s XYZ Limited was an ISO certified small scale manufacturing company. The company had ten departments namely, Marketing, Design, Personnel, Finance, Purchase, Production Planning and Control, Production, Stores, Quality and New Product Development. The firm produces products in a made-toorder environment. The lead time for delivery ranges between 45 days and 10 months depending upon the type of products. The production of the company can be divided into three divisions. There was a fabrication shop that includes painting and plating, a machine shop that had manually operated machine tools and an assembly shop. There were 80 shop floor employees and around 40 administrative employees. Currently the firm M/s XYZ Limited had multiple suppliers and the company had decided to prune the number of suppliers.........

Organization Structure and Information Sharing

Organization had a structure with five levels, was more of hierarchy (Exhibit I). The top management of the Board of Directors had reposed full faith on the capability of the general managers and especially the General Manager (Operations). The interest of the top management lay in Finance and Marketing. The operation part was left to the discretion of the GM............

Personnel

The role of the personnel in the company was preparation of payrolls, disbursement of salary and initialization of the recruitment process for the 80 shop floor employees and the administrative employees. The selection of the candidates was through references followed by interview. The company employs regular shop floor employees and also had employees on contract.............

Marketing and Forecasting

The Marketing Department was headed by General Manager Marketing. He had four Marketing Executives to assist him. The company works in an environment of make-to-order. All the work orders received from the customers have sufficient lead time to deliver and were booked in advance. Lead time to delivery of the work orders ranged from 45 days to 10 months.............

Design

The technology of the switch and panel assembly was licensed from a Swiss firm for which the company pays royalty. The Marketing Department after obtaining the customer’s order passes on the customer’s specifications to the Design Department.............

Production Planning and Control (PPC)

The department was headed by a manager. The department received the information from the Design Department regarding the part drawings and bill of materials. The Marketing Department provided delivery date of orders to the Design Department which on receipt of the date of orders prepared the part drawing according to the customer’s specification and............

Purchase

The Purchase Department received information regarding the requirements of the assembly shop from the PPC and also from the foreman of the machine shop floor. Around 95% of the components used in the assembly shop were bought out items. The PPC Department on arrival of the BoM from the design marked a copy to the purchase stating the components to be bought outside. Some components were both bought outside and also made in house.............

Production Department, Product and Production Process

The department was headed by the Production Manager. He had three Production Engineers to assist him. One looks after the fabrication, shop, and two engineers working on shift supervise the switch and panel assembly, along with painting shop and plating shop. The fabrication shop consists of six workers. The switch assembly consists of two groups that consist of three members...............

Quality

The Quality Department was headed by a Quality Manager which had a team of four members. They were required to carry onsite inspection of the fabricated components and inspect the incoming raw materials that were critical in nature. They inspected the work-in-process of the machine shop and fabrication shop also..........

Finance

The interaction of the Finance Manager within the firm was limited. His role was confined to checking the documents received from the purchase after approval of quality and entry of stock in the stores for payment. The Finance Department received the transport bill from the security gate and processed the bill for payment separately, since the transport payment had to be settled immediately unlike the raw materials, the bills of which were paid after a month.............

Assignment Questions

I. Which of the inventory policies would you suggest the company? Why?
II. What would be the decision of the Purchase Department with respect to the purchase of steel rod?
III. What would be the decision of the Finance Department regarding the standard cost?
IV...................

Exhibits

Exhibit I: Organization Structure

Exhibit II: Demand Data for Stand-Alone Switch Assembly

Exhibit III: Demand Data for Panel Assembly

Exhibit IV: Backward Scheduling

Exhibit V: Master schedule – Month-wise Schedule

Exhibit VI (a): Demand Data of Connecting Levers

Exhibit VI (b): Demand Data of Contact Levers

Exhibit VII: Frequency and Quantities of Order of Connecting Levers

Exhibit VIII: Price Details of Connecting Lever

Exhibit IX: Demand of Product X

Exhibit X: Steel Rod Specifications

Exhibit XI: Specifications of the Suppliers

Exhibit XII: Quotation 1 Price Details

Exhibit XIII: Quotation 2 Price Details

Exhibit XIV: Quotation 3 Price Details

Exhibit XV: Bill of Materials of Switch Assembly

Exhibit XVI: Panel Assembly Bill of Material

Exhibit XVII: Process of Panel Assembly

Exhibit XVIII: Demand Data

Exhibit XIX: Freight Rates

Teaching Note Preview

Value of Information Sharing Between and Among the Functional Departments: An Insight

 

Synopsis

The case study provides snapshot of the various activities, and also various problems in the process, carried out by the different departments of a hypothetical company. The firm produces panel assemblies and switch assemblies that are used by HT and LT consumers. Their order position is quite comfortable. The marketing department is doing a good job and so is the planning department. The Production Manager utilizes his resources well with redeployment of labor among his sections.

Marketing department which is in interface with its customers has seized the GM about the problems that customers face. Apart from the customer side delivery problems, GM has a gut feeling that the inventory in the stores/shop floor is high and hence the cost. As a first step to identification of the cost the GM has instructed the finance department to work out the standard cost. He has also asked the Purchase Department to identify the nature the procurement, go for the lowest quote, and to estimate the cost of moving to a newer type of procurement method.

The data for the calculations of the ordering cost, carrying cost are provided. The previous year demand and the price details are provided for analysis. The case study illustrates the problem regarding the non-sharing of information among the departments, the errors that may occur in calculation of the capacity requirements, the need for inventory policies and the approaches of evaluating them.

Requirements

A technical note is required on Inventory management and Lot sizing techniques. The focus of the technical note should be on economic order quantity, and other lot sizing methods. Rough cut capacity planning and introduction to capacity calculations are also required to be addressed in the technical note.

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Abstract



Executive Summary

The General Manager (operations) was seized with the perennial problem of facing conflicts among the departments. All the departments individually seem to work well but collectively there seems to poor service level with respect to the delivery delays, high quality complaints, higher level of inventory, etc. The case was to be seen from the perspective of how the GM can analyse the problem and where could be the potential solution.

The case provides snapshot of the various activities, and also various problems in the process, carried out by the different departments of a hypothetical company. The firm produces panel assemblies and switch assemblies that were used by HT and LT consumers. Their order position was quite comfortable. The Marketing Department was doing a good job and so was the planning Department. The production manager utilizes his resources well with redeployment of labor among his sections.

Marketing Department which was in interface with its customers had seized the GM about the problems that customers face. Apart from the customer side delivery problems, GM had a gut feeling that the inventory in the stores/shop floor was high and hence the cost. As a first step to identification of the cost the GM had instructed the finance Department to work out the standard cost. He had also asked the Purchase Department to identify the nature the procurement, go for the lowest quote, and to estimate the cost of moving to a newer type of procurement method.

The data for the calculations of the ordering cost, carrying cost were provided. The previous year demand and the price details were provided for analysis. The case illustrates the problem regarding the non-sharing of information among the departments, the errors that may occur in calculation of the capacity requirements, the need for inventory policies and the approaches of evaluating them. The case could be used for discussion as a part of operations management and supply chain management introductory sessions.


Abstract


The objective of the case was to drive in the point each of the department within a firm try to optimize its own activity and the decision taken by them was restricted to information that each department possess. In the process of individual department optimization, the case wants to illustrate that the synergy was lost and also the optimization of the cost incurred by the company. The case had been developed with the scope for discussion about the need and importance of information sharing among intra company interdepartmental interaction. The case would help in understanding the capacity planning; lot sizing and importance of information sharing. The areas where the case can be discussed were Operations Management and Supply Chain Management.


* GSMC 2014, IIM Raipur



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