Supply Chain and Functions of Inventory: Fletcher Building Company
1. Executive summary:
In this assignment, the issues related to the capacity management and strategies to mitigate the issues have been discussed. In addition, various location factors like the supply of materials, infrastructure availability and a few more have been discussed. Various principles of plant layout have also been described with challenged while implementing those strategies for better understanding. In addition, deals with the techniques which can be applied for the continuous improvement in the Fletcher Building Company.
In the first portion, the issues related to the capacity management and strategies to mitigate the issues have been discussed. In addition, various location factors like the supply of materials, infrastructure availability and a few more have been discussed. Various principles of plant layout have also been described with challenged while implementing those strategies for better understanding.
The second section deals with the techniques which can be applied for the continuous improvement in the Fletcher Building Company. There are certain elements of Total Quality Management which need to be focused by the organization for fulfilling customers’ satisfaction by serving quality services. The required organizational structure has to be developed by the Fletcher Building to ensure continuous improvement of the organization.
The third section of the report consists of an explanation of key components of the supply chain, functions of inventory with illustration using examples and principles of material handling and its impact using illustrative examples from the organizational case study of Fletcher building.
In New Zealand Fletcher building limited is one of the largest companies. The company build their reputation in the field of construction. 18 years ago In the year of 2001 the company Fletcher building limited was founded and it was a part of Fletcher challenge group. From the company expand their business across the globe and countries like Australia, America, Pacific island and many other Asian and European countries are being served by the Fletcher building limited construction company. The number of employees of the company is 20000 approximately with a revenue collection of NZ$9,004 million. Building products and construction services are the basic fundamentals of this company.
3.1 Capacity management
Maintaining quality performance is very much important and not only that different factors are related to it such as capacity management, general location factor, plant layout and many more. This portion of the assignment will discuss all these factors with various issues and strategies to increase the quality of the organisation.
There are various issues and challenges related to the capacity management but two main challenges of the capacity management described below:
1. First challenges that the Fletcher building limited need to align their goals and capacity management properly unless extra storage can cause huge loss for the company (Ning & Sobel, 2017). Proper utilisation of the storage needs to be understood properly and as a construction company, Fletcher building limited faced this issue much time because their storage like a steel rod, cement and many other storages remain unused.
2. In the construction industry various technologies emerged and trends of the customers change accordingly which hampering the capacity management of the Fletcher building limited. When the demand of the customer changes then it is difficult to use the storage materials and due to this they incurred the loss.
Two strategies to mitigate the risk:
Capacity straddle strategy: This is the most important strategy that Fletcher building limited applied where they store the material as per the demand of the customers. This strategy helped the company to minimise the risk of changing trends because they first understand the demand of the customers and store ahead of the requirements which enables them to mitigate the loss (Yoon, Yildiz & Talluri, 2016).
Capacity lag strategy: this is the strategy where capacity has been increased when demand increases. This strategy helped the Fletcher building limited to increase their capacity only when the demand of the customer raise and this helped in mitigating excessive storage. This also helped in aligning the organisational goal to the capacity management by understanding the demand of the customers.
3.2 General location factors:
There are some factors which are the basic requirement for location of the plant in case of construction business organisations like Fletcher building limited. The factors can be divided into two parts one is controllable factors and another one is uncontrollable factors. Among those two factors 5 important points are discussed below:
- Supply of materials:
In a construction procedure supply of building materials is one of the key aspects. If the construction location is very far from the source of the building materials then it will hamper the continuity of the construction and the whole process will be very slow and time-consuming. If Fletcher building limited to build a construction project in Queenstown, south New Zealand then it could be a huge problem while supplying martial from Auckland.
- Infrastructure availability: For conducting the construction work the basic requirements of infrastructure like water, the supply of power, waste material disposal facilities must be available properly (Cannon & Hillebrandt, 2016). Water supply and supply of power is one of the key aspect and basic aspect of construction work because without water and power no Worker can work in a construction site. Fletcher building limited need to select a proper site for their construction project where they can get all these important components.
- Labour and wages: For the Fletcher building limited company the adequate number of skilful labour is the most important subject to conduct the construction business. If there is a lack of skilful labour it is difficult to conduct a construction procedure within a specific location. In addition due to the lack of labour, there will be the import of labour for the construction work which will lead the wages of the labour very high. Fletcher building limited already have 20000 employees and all are well trained and potential enough.
- Transportation facilities: Transportation facilities are the most important factor for speedy supply process of raw materials and other useful tools for the Fletcher building limited company (Cannon & Hillebrandt, 2016). They used an advanced GPS system to track the exact location to reduce the time of transportation.
- Government policies: The policies of the government and other local bodies regarding labour laws, building codes, safety and security is one of the most important factors which is to look forward by the Fletcher building limited company.
There are some challenges at the time of determining these factors by the Fletcher building limited company and those are as follows:
- Sometimes the location of the construction site cannot be decided according to the will of the company because the company needs to function according to the demand of the customers therefore, the location cannot be decided and the company have to function according to the demand of the customers in a location where the transportation facilities are not good enough (Kerzner & Kerzner, 2017). This is one of the most furious challenges faced by the company while determining the factors.
- Another challenge faced by the company is that huge transportation tax and labour cost with various other taxes can hamper the whole process of the business environment of construction. Near about 15% GST increases the cost of the raw materials which hampering the location factor.
3.3 Plant layout:
There are various kinds of principles of plant layout among them, two important principles are discussed below:
- Principles of safety, security and satisfaction: Availability safety security and satisfaction of the workers and employees is the basic fundamental of this principle. Good company always gives due consideration to their workers and employees. Safety and security refer to the precautions provided by the companies to their workers at the time of their work. Fletcher building limited also provided huge benefit like the proper working hour, satisfactory wages and this is the reason they have 20000 employees.
- The principle of integration: This principle states that combination of workers, useful materials, useful tools, machines other supporting services related to the construction includes the appropriate utilisation of resources should be provided by the company (Hosseini-Nasab et al. 2018). They also have a proper inventory management system for providing sufficient products to the customers as per the demand of the customers and they provided advanced training to handle the advanced technology in their construction site.
There are some challenges faces by the company at the time of the implementation of these principles and those are as follows:
- When the workers and employees are provided with the safety and security precautions for the work they generally ignore those precautions and as a result, the safety, security principle failed to meet the appropriate stage.
- Lack of skill of the workers and employees sometimes fail the principle of integration. Because due to the lack of skill, the workers cannot use the technological machines and tools therefore unknowingly they waste the useful resources allotted for the sake of the principle of integration.
3.4 Continuous improvement
Total Quality Management is the desired structural approach that a Company like Fletcher Building should have for continuous improvement. The Company should focus on the different elements of the total quality management for enhancing the improvement of the quality of the products as well as services.
The Fletcher Building Company needs to formulate effective strategies to ensure the continuous improvement of their organization. There are various elements of Total Quality Management such as continuous improvement, employee empowerment, competitive benchmarking, Team approach, knowledge of tools etc (Ross 2017).
Fig 1: Total quality management
Source: (Ross 2017)
By focusing on the team approach the Company has achieved a notable success. The bonding among the employees had been improved and the opinions were shared among them which eventually enhanced the productivity and the organizational benefits. The team leaders were also very responsive to control the employees so that they could perform their specific duties to enhance the profitability of the organization (Chadha, 2017). Due to the proper team effort, the quality of the products increases and Fletcher Building Company have different sector and big construction project in their name.
The team approach basically refers to that situation where the employees of the company could share their motivation to work with each other to achieve the desired goal of the company and if the company will able to take this approach then the concept of continuous improvement also felicitated properly.
The company will able to achieve the goal of the company within a specific timeframe and as an evidence the positive relationship among the employees can also be established. Thus, an effective tem work as a method of continuous improvement would enable the construction company to increase its productivity and thereby increasing the profitability in the process.
Through capitalizing the strength of the employees the company could achieve much success and their weaknesses have been minimized. The employees can do better performances if they get empowered. Fletcher Building Company provided regular training and hires potential employees to maintain their work quality (Ross 2017). The Fletcher Building Company has an organizational structure where every employee can perform specific duties in a project. These lead to the growth of the organization. There are 20,000 employees in the Fletcher Building who have enough job satisfaction leading to the profitability and quality production.
Employee empowerment is a powerful tool for felicitating the continuous improvement inside the Fletcher Building Company. If the company will able to empower the employees then the employees will feel valuable and they will invest their time and resources for the improvement of the company. Through the employee empowerment approach the company will able to conduct more training programs for the employees and this will help the company to enhance the knowledge of the employees.
As evidence from the analysis, the empowerment would enable the employees of the company to perform at their optimal level and thereby, increasing the productivity and quality of the construction projects in the process.
The Fletcher Building Company must ensure the continuous improvement effort for satisfying their customers’ needs. The roles and responsibilities of every employee are the vital factors. Hence, they need to get motivated through employee empowerment.
3.5 Supply Chain
Operational and logistics business planning ensures effective performance by a business organization covering areas like supply chain management, inventory management and material handling. These areas of function when executed appropriately results in appropriate operations
A supply chain comprises the range of products and services gathered from the provider of the raw materials as well as wholesalers, retailers and distributors. It is related to the transport and storage procedure. The Fletcher Building Company needs to manage supply and demand wisely for the growth of the company.
Figure 2: Supply chain management
Source: (Christopher 2016)
Raw material manufacturing is one of the components of the supply chain. The supply chain activities of the company are dependent upon the raw material manufacturers and final product manufacturers as well as wholesalers and distributors etc. The company sources the raw materials and their parts and assembles them to distribute through all channels. Due to proper manufacturing continuous flow of the material helps the company to continue their production which increases their efficiency in the market.
Wholesalers and distributors and Retailers are the other components of the supply chain. The company has been able to design and manage this supply chain management process to satisfy the customers’ need (Christopher 2016). The company performed each and every operation ranging from manufacturing, distribution, and retail very wisely. This retailer and whole seller help the company to make the distribution channel active and due to these customers getting the products or information about products more easily.
The major infrastructure projects and contractions are handled by the company regulating the supply chain properly to meet the customers’ need.
The inventory refers to the physical resources that the companies like Fletcher Building hold in stock for sale. The raw materials, work-in-process, finished goods all are included in the inventory. The role of the inventories is going to be discussed below.
To meet anticipated customer demand:
An inventory was required for Fletcher Building to reduce the time lags in the supply chain. To remove the uncertainty in the movement of the supply chain of the products an inventory was required. The inventories in Fletcher Building were successful to meet the demands of the customers (Wild 2017). The requirements of the productions have been much smoother in the Fletcher Building for the inventory.
To smooth production requirements and decouple operations
Different patterns of the demands are faced by the company at a different season. The operations have been decoupled and stock outs have been protected well leading to the better productivity of the organization. The order cycles of the company are getting advantages for the contributions of the inventory. The numbers of the units to order are determined by the inventory management. The storage of the products and demand of the customers could be managed by the help of the inventory (Wild 2017). The basic economic order quantity or EOQ tends to make smoother the demand of the specific products over a particular time in Fletcher Building Company.
3.7 Material handling
Material handling involves the movement of goods or materials in the storage area in short distances including tasks such as loading, unloading, palletizing, de-palletizing. This movement of goods is done by using conveyor, cranes or elevators, industrial vehicles and control equipment (Azizi, Yazdi &Humairi, 2018). In the company, Fletcher building material handling is guided by two key principles as follows.
Minimizing manual handling by using mechanical handling equipment
Under this principle, the manual handling of materials in a storage area or in work area is eliminated by using handling equipment such as conveyor, cranes or elevators, industrial vehicles and control equipment (Gue & Furmans, 2018). For example, when building projects are concerned where the company is involved in the construction of housing or other types of building, a lot of raw material movement is required. Here the company uses convoys and industrial vehicles for moving cement, sands, and other raw materials. To carry the materials like steel bars and other materials in heights the company uses cranes and elevators. This eliminates movement of goods handled by the labours. The key importance of this principle is that it saves time in movement, makes work faster, carry and move higher amounts of loads per turn and avoid unnecessary delays and accidents during manual handling.
Using the right handling equipment
The second principle is using appropriate handling equipment for avoiding damage and reducing cost. As mentioned earlier, there are many handling types of equipment is at disposal but not types of material handling can be done using all types of handling equipment (Björnsson, Jonsson, & Johansen, 2018). For instance, handling steel bars at higher levels require using crane while lifting cement sacs at height is done using elevators. At Fletcher, this principle is followed so that damage to the materials can be restricted as well as damage to life is restricted. This also values the work by reducing the costs associated with damage and risk control and management thereby adding overall value to the business and operations management.
These principles thus ensure efficient and effective performance of the organization by adding value to the material handling functions. In not only increases the speed but also reduces costs and increases safety during work.
In conclusion, it can be said that all the identified components of the supply chain have individual functional importance that with regard to operations and logistics the importance of material handling is immensely high. Appropriate implementation of material handling principles helps in successful supply chain and inventory management.
In this segment, the operational as well as the logistical business planning and their contribution have been focused thoroughly. For enhancing the effective performances of the entity all these factors are important to be handled efficiently. The role of the supply chain, inventory and proper material handling cast a great influence on the business and its profitability. The Fletcher Building Company has been able to handle all these factors quite satisfactorily and it gained much trust and reputation of the customers. In addition capacity management, general location factor, total quality management, plant layout and various other factors have been described also for better understanding of the project. From the above discussion, it can be stated various issues like excessive stock, failure in understanding the demand of the customers, general location factors and strategies have been described properly in this portion. In addition, various principles of plant layout and issues in implementing this principle have been described for Fletcher building limited.