Empire Communications Products Eliminates Excess Cost

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Table of Contents

Background
Force Field Analysis
Approaches to Reducing Costs
Conclusion
References

Background

Empire Communications Products is a communications equipment production company. The company’s annual costs are about $4.6 million above the yearly average of other similar companies. The company intends to eliminate excess costs and transform them into before-tax profit.

Force Field Analysis

Forces for change (total 5)	How to strengthen them
Need to improve financial performance	Engaging stakeholders and encouraging them to support the change
Need for cost reduction to improve profitability	Making projects that are key to the strategy a priority
Process improvement and standardisation	Use of quality information systems
Need for improved product quality	Making quality a performance indicator
Reduction of risk through improved inventory management	Communicating the importance of effective inventory management
Forces against change (total 3)	How to weaken them
Perceived threat of redundancy	Retaining employees for new roles
Insufficient employee skills in implementing the change	Establishing training programs
Insufficient management skills in implementing change	Outsourcing of leadership training services

The total weight for change is 5 while that against is 3. The factors considered are in favour of effecting the change. The most significant factors for change are improved financial performance and cost reduction while those against change are fear of redundancy and lack of skills.

Approaches to Reducing Costs

Just-In-Time Manufacturing

The just-in-time system leads to a reduction in wastage and improves productivity and efficiency. It contributes to a smooth flow in the production process. This approach shortens the production cycle leading to reduced financial, inventory and labour costs. Just-in-time manufacturing streamlines manufacturing from the reception of raw materials from suppliers to the final delivery of finished products to customers (Hou, Chan, & Wang, 2013). It helps the organisation to avoid fluctuations in production rates that cause delays and excess work-in-process inventory.

The JIT approach ensures that enough raw materials are bought and finished goods are produced as per market demand. It prevents the storage of excess inventory for future orders. The approach eliminates the need for storage facilities used to keep finished products and raw materials. It also leads to a reduction in the time spent waiting for the delivery of large amounts of raw material and final products. Additionally, JIT promotes a quicker setup of production equipment. This is because producing small quantities of finished products to meet specific demand requires a faster set up of machinery leading to improved efficiency and lower costs (Jose, Sijo, & Praveen, 2013). This will help Empire Communications Products to reduce its expenditures on production control and assembly. The reduced volumes of materials required in the production process will translate into cutting costs of assembly.

The approach employs the pull method that ensures that goods are produced at every stage only when required at the next phase of the production process. This eliminates work-in-process inventory that results in traditional manufacturing between the various stages of the production process. It reduces waiting time and related non-value-added expenditures. This approach will help Empire Communications Products to reduce its costs in warehousing, material control and material preparation. By adopting the plan, there will be no need for warehousing since there will be no excesses in the production process, no need for material control and minimal expenditure on material preparation. The approach also improves the production quality to almost zero product defects. This will help Empire Communications Products to reduce costs due to incoming inspection and in-process inspection.

Kanban System

The Kanban system is composed of a signal that initiates the replacement of items that have been consumed during the manufacturing process. Actions are taken during the production process once authorisation to execute them is given. It is an effective means of controlling inventory (Ramnath, Elanchezhian, & Kesavan, 2009). The system serves to provide information on the transportation of raw materials and finished products and information on the production process. It prevents excessive transport and overproduction by serving as a work order that is attached to goods. By adopting the system, the company will reduce costs in warehousing, material control, material preparation and production control.

The company can adopt Kanban systems to introduce efficiency to the production process and reduce costs (Billesbach, 1994). Types of Kanban cards that can be used include move Kanban, production Kanban and supplier Kanban. Move Kanban allows a production process to get parts or production materials from the previous process. Production Kanban allows the previous production process to produce its product. Supplier Kanban allows an external supplier to deliver materials to the production process. This system will result in reduced costs in warehousing, production control and material control.

Conclusion

Empire Communications Productions is a manufacturing company that has experienced operation costs that are $4.6 million higher than the market average. The force field analysis supports the change. By adopting the just-in-time manufacturing and Kanban systems of production, the company will improve the production process resulting in quality goods and reduce the cost of storage. In this way, the company will reduce its overall operating costs and achieve more profit.

References

Billesbach, T. J. (1994). Simplified flow control using Kanban signals. Production And Inventory Management Journal, 35(2), 72-75.

Hou, B., Chan, H. K., & Wang, X. (2013). An account for implementing Just-In-Time: A case study of the automotive industry in China. International Journal of Engineering and Technology Innovation, 3(3), 156-167.

Ramnath, V. B., Elanchezhian, C., & Kesavan, R. (2009). Inventory optimization using Kanban system: A case study. The IUP Journal of Business Strategy, 6(2), 56-68.

Jose, T. V., Sijo M. T., & Praveen. (2013). Implementation of JIT in industries- A case study. International Journal of Science, Engineering and Technology Research (IJSETR), 2(2), 396-399.

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