Operations Management – Case Study (Andina Bottling Co)
1. For operations management to be effective suggest THREE areas which need to be focused on and improved to align operations in Chile, Brazil and Argentina. (20 marks)
All areas in the stream of operations are extremely necessary including: production area, sales area, distribution area and logistic area. The whole supply chain is connected to each other. Any bottleneck in these operation processes can hinder business profits and create hurdles in the operations management.
A company must ensure that it is able to generate and increase the demand for its product. For this purpose, the sales and marketing area is very important. At Andina, the selling and distribution process started with taking orders. The sales force went out daily to take orders from customers, which were delivered the next day after going through the whole process of distribution and logistics. If the system was made online and orders were made through virtual presence rather than physically meeting every customer, then the supply chain would become more efficient and the process can be faster. Deliveries can be made on the same day it was ordered with the completion of the task of marketing and taking feedback at the time of actual deliveries. This will improve the process and operations to a large extent along with a reduction in the lead time.
The company must also ensure that the supply-demand match is achieved. Having an oversupply situation can be wasteful and costly whereas under-supply will result in missed opportunity situation; as a result potential customers will be lost. For this purpose, the production department should be closely aligned with the department that generates sales orders. Usually any inefficiency in gauging the correct demand figure and keeping the safety stock at each level creates the bull-whip effect that is not good for the company because the product will expire in the line with oversupply and production excess becoming evident. If the sales department is focused and linked with the production department, and receives timely information then the company will be able to follow pull-strategy rather than push-strategy for its production. This will help to eradicate the bull-whip effect and the number of rejections will also be reduced. At the Brazilian production, similar issue arose because the distribution rejection resulted in increased freight cost of the company. Although, it was because of managers’ unethical practices that the company was paying high cost, otherwise the firm could have avoided it if it did not have un-aligned system.
Last but not least, the timely production and elimination in the bottlenecks of the process line will not matter much if the distribution is not timely, proper and cost-efficient. In Argentina, the unavailability of concrete data from the distribution department created a lag in the company’s operational system and it could not identify that a large number of clients were just resulting in 3% of sales and distribution costs were increasing highly because of this. Thus, improving the distribution area will benefit the company to achieve operational efficiency.
2. If overall strategy comes from Coke, what should Andina look at as a bottler to achieve operational success? (20 marks)
The overall strategy does come from the TCCC but there are certain things that have to be handled by bottlers. Firstly, fixed assets are owned by bottlers along with the inventory management and credit risks that are passed on to the them by the TCCC. Andina can use these factors in their favour. First of all, the organization has to improve its marketing and research department.
The company should be able to estimate demand figures and should adjust the inventory accordingly. The proper inventory management can lead them to eliminate much of its operational inefficiency. The real time data from customers can be used to estimate inventory levels and the past data trend of the company will help to identify seasonal fluctuations, if any.
If the inventory is properly maintained and optimization level is known then, the capacity utilization of fixed assets can be achieved. The excess fixed inventory that is causing additional cost with no value addition can be discarded. This will help the company to streamline operations and eliminate redundancies in the system.
One of the most important factors is to manage the credit risk. It is crucial because loosened credit policies will result in cash flow mismanagement and tight situations for the organization whereas rigid credit policies will reduce sales and competitors will be able to attract customers through their policies. At this point, it is evident that the credit management of Andina was very poor. Some customers were never called for the collection while others were visited more than once. Thus, improving the credit collection system will ensure operational success of the company.
The research department also plays a direct and indirect role in the operational efficiency of the company. Bottlers have the option to present proposals to the company about certain things like packaging. Hence, if they manage to do a proper research about the needs and wants of the target market then, they can present ideas to the management about better advertisement and packaging (bottling techniques). If the sales of the product increase, so will the margin of the bottler because of achieving economies of scale in their plant......
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