Assignment on Operations Management and Organisation

ABSTRACT: We live in modern era which is being developed day by day and all over the world a lot of construction work is going on. For construction work, we need cement, rod, ready-mix concrete, aggregate and other building materials. My company named Mia Enterprise, will produce cements and ready-mix concrete in Mexico and later my plan is to expand my business all over the world. My main target will be Asia because in late 21^st century Asia will rule the world and they will be heavily developed specially India, China, Thailand, and Malaysia.
  My initial investment is around $800 millions in Mexico and total number of employees will be around 10000 and my target is within 2025 my company will operate more than 50 countries in the world and the total number of employees will be around 50000 and total turnover will be $10 billion and total assets will be around $50 billion.

INTRODUCTION:

            Operations management is an area of management concerned with designing, redesigning and overseeing business operations in production or service of goods. It also involves the efficient use of all resources even the quantity is very small and meeting customer requirements very effectively. It also focused on managing process which converts input (in the forms of materials, energy and labour) into outputs (in the form of service or goods). In operation management highest-level officers make the policy and revise or change it over time, on  the other hand line officers make intentional decisions in support of carrying out the strategy. It aims to increase the substance of value-added activities in any predefined process.

            Mia Enterprise will be one of the greatest and prominent building materials company with very high class products and trustworthy service to customers and communities throughout in the world in near future. First of all it initiates its market in Mexico but later it will operate on other part of the world like America, Europe, Africa, the Middle East and Asia. First it will sell cement then it will produce, distribute and sell cement, ready-mix concrete, related building materials and aggregates. It will do its operation more than 50 countries and maintain trade relationships more than 100 nations by the year 2025. 

            I will make a portfolio of assets with sustainable, lucrative, long-standing growth potential. I am focusing on

·         The core business of cement, later ready-mix concrete and aggregates.

·         Provide my customers with the best value proposition

·         Gain my financial flexibility

·         Maximize my employees operating efficiency

·         Foster my sustainable development

BUSINESS IDEA:

            My company name will be Mia Enterprise and I will start my business in Mexico but near future I will spread the business all over the world. My main product is cement but it will make ready-mix concrete, aggregates and other building materials in near future. Those products normally pollute the environment, so I need to give more concentration to reduce the carbon and some other effects which is responsible for the contamination. Before initiate the business I will importance those matters like :

·         Sustainable construction

·         Housing and Infrastructures

·         Carbon Strategy

·         Environment and Biodiversity

·         Health and Safety

·         Strengthening Local Communities

·         Stakeholder Engagements

·         Present Economic Condition of Mexico

·         Other Construction Companies of Mexico

Mexico is relatively big country which stand for 15^th regarding the area. On the other hand, it has huge population around 112 million which is 11^th in the world. Mexico has the 13^th leading nominal GDP and the 11^th biggest by purchasing power parity (PPP).[1] It has the second largest economy in Latin America and is expected to become the seventh largest economy in the world in the next 50 years. Construction is an important sector in the Mexican market, representing 6.8% of the country’s GDP. Mexican Government has produced the National Infrastructure Programme. Between 2007 and 2012, the government plans to spend $226 billion USD on infrastructure (of which, $26 billion will be allocated to highways) and an additional $ 200-250 billion USD on housing.[2]

            At the moment there are almost 4 million home shortages in Mexico for growing population. Maximum demand for low income housing with proper social, physical and commercial infrastructure, which calls for experienced and qualified regional, urban and transportation planner. There are projects for the improvement of 20 new satellite cities to house communities between 50000 and one million. Tourism is an important sector of Mexico and it contributes 8% to Mexico’s GDP. Government announced new plan to built new tourist resorts like Costa Lora or expand existing Ensenada. For improving this sector Mexico need adequate road networks, airports and developments which cost around $20 billion USD. For growing population need more shopping centre and large fashion malls in many of the main cities. Highways construction is also going on all over the Mexico. At the moment 12 new highways construction work is going on which cost around $25 billion USD. So a lot of construction work taking place at the moment and in near future a vast infrastructure work is waiting to accomplish.[2]

At the moment there are some cement and building materials companies like Cemento Cruz Azul, Cemex, Concretos de Oriente, Cprporacion Moctezuma and Apasco. In 2010 annually 63.7 million metric ton cement is produced in Mexico and this is the production capacity of the cement companies:

[3]

The selling price of cement per ton is $110 USD. So my company target is to produce around 10 MMT which will be 20% of domestic market share and I will initiate 5 plants and my selling price will be $108 USD per ton.  

OPERATIONAL ISSUE:

            Mia Enterprise will be one of the largest companies in Mexico within 15 years. For achieving the goal we need to provide good service and product with reasonable cost and quality. We need to ensure that we will achieve customer focus and good relation with all suppliers, employers and clients. We need to provide flexibility in operations, more creative in commercial offering, need to be sustainable to use our resources, need to be innovative to conduct in global business and efficient in capital allocation. I will discuss some important factor for operation in following part.

·         Demand forecasting: the total national production of cement for domestic use is 42.31 MMT in 2010 and it is increasing day by day at a growing rate of 2.89%. It is only the domestic production but total production is higher than that.  

[3]

So every year production is increasing for heavy construction work. My initial target is 20 MMT in 2012 and 2015 it will be 25 MMT. In 2020 the production will be 32 MMT and 2025 it will be 40 MMT. A lot of planned engineering and construction works are going on and a vast industrialization is waiting for near future. At the mean time my company will launch its operation outside of Mexico and most probable time is end of 2020.

·                     Facility location and layout: A facility is something built or established to serve a purpose, here our facility is to producing and distribute cement in Mexico. Facilities management is a location of that choice for that capacity and the masterpiece or domestic layout of the facility once situated. Currently those construction works are going on in Mexico.

[2]

So we need to make our plants near those places and for choosing the places we need to consider those factors like market, raw materials, power, transportation, climate and fuel, labour and wages, laws and taxation, community service and attitudes, water and waste. As we are initiating our company with five plant so we choose the places like Durngo Mazatlan, Libramiento Norte to Mexico City, Tuxpan-Tampico, Oaxaca-/salina Cruz and Compostela-Puerto Vallarta.

·                     Scheduling: Scheduling is very important for launching a new product because we need to produce product according to the customer demand. Before launching we need to do some product development tests. We need to do promotional schedule, with press release, advertisement, free samples, direct mailing and any other tools. Before launching, cement quality must be good as it can. We need to promise to the customer about launching date. We will do our production plans like for the first 4 months we will produce 8 MMT of cement. After observation of first quadrant, we will determine our next second quadrant production and it will be ±6 MMT, and next quadrant ±6 MMT of cement. For the next year we will examine previous year’s sell and schedule the production for current years. This is an ongoing process of scheduling a new product.      

·                     Capacity planning: it means the procedure of determining the manufactured goods capacity by a business organization to meet varying demand of the product. Here my target for first year to produce 20MMT of cement, but if the sell is not up to the mark of my target value, then I will reduce the product. If the demand is higher than my expectation I will increase the product. I am starting with five production plant but all the plant will vary according the demand and plant capacity. Like Durngo Mazatlan plant will be the biggest of all the plants.  If the demand is increasing rapidly I will increase the number of plants. In future, when we expand our business outside of Mexico, I will choose such a place where all the raw materials are easily available and labour cost is low. 

·                     Inventory Management: effective inventory management means all about knowing what is in stock, where it is in use and how much completed manufactured goods results. It is really important to oversee the actual market demand of the product. Sometimes there are shortages of goods and sometimes the productions are over, if we do proper inventory management at regular basis we can minimize the risk. In my company we will do regular inventory check for placing an order how many MMT of cement must be ordered to keep production running efficiently. I will always maintain the buffer stock. We need to do the inventory in every sector including collecting raw materials to shipments of the finished product otherwise we lose our customers and reputation.

·                     Supply chain management: supply chain management is the plan, development, and implementation, organize and monitoring of supply chain activities with the goal of creating net value, building a reasonable infrastructure, leveraging worldwide logistics, harmonizing supply with order and measuring performance internationally. We will provide our products to the customers in a very easy way whenever they need or wherever they want. We will make a cement distribution network to provide customers a large number of brand-name products at very competitive prices.

·                     Design, planning and control: for smooth running we must give emphasis on products/ services/ markets (42%), operations (30%) and business models (28%). So Mia Enterprise has a very good opportunity because most of the cement companies revenues going down for global recession and scarcity of raw materials. We are stating our business just before the world economy retrieves its actual position. Demand of building materials and the present economic condition make the ideal situation to inaugurate the business.

Company operational risk analysis:

            Risks are classified in two sections like internal and external risk. I am discussing now both of the risks.

External Risk:

·         Location: we choose the places where the most contraction work is going on and continue for developments for the next 3-5 years, but if the government change their mind to build mega city in different areas then company will face big loss

·         If the world recession become worst or the GDP of the country become less or they purchasing capacity of people become less then company will face great threat.

·         If any natural calamity occur which has direct impact on raw materials, company will face great loss.

·         Carbon emission is a big factor for cement companies, we need to mitigate the emission as much as possible

·         If government impose more taxes then company has to face great financial difficulty

·         Technological improvements sometimes cause productivity threat.

·          If other competitor reduce the price of the cement suddenly or a big amount which cause a great loss.

·         Sometime customer loyalty causes loss.

 Internal Risks:

·         Stock is very vital issue for the business, if we can’t provide customer demand at right time, then we lost our clients.

·         Efficiency of the employees sometimes causes less production, so regular monitoring is needed to check employee’s activities.

·         Sometimes trade unions create unusual problems.

·         Lack of collaboration among the employees.

·         Not having a good network between supply chain management.

·         Not having good customer relations which cause business loss.

Mitigation of risks:

            We can handle the internal risks but most often we can’t handle external ones because if we want to mitigate external risk we have to spend a lot of money. Like for this business we can handle carbon emission for a certain label or we can use new technology for less emission. To mitigate the internal risks we can take those steps:

·         Just in time production or manufacturing. If we want to improve our business we always pay attention about JIT production.

·         Material requirement planning: we need to regular inventory to maintain the MRP

·         Enterprise resource planning: we need to have good collaboration of information of our internal and external management, supply chain and customer relation systems.

·         Process technology will be modern, quick and efficient by employing skilled persons and changing technology with time being.

·         Effective supply chain is needed to distribute our product at various locations and reach our products to customer in time.

·         We need to have good customer relation because otherwise we lost customers and for that reason we will provide training for CRM employees.                          

ICT management can provide modern CRM and supply chain management through their technical support. I am discussing some of them:

·         24/7 load which provide customer demand whenever it was and supply effectively

·         ATM-like Bulk Cement Dispatch System which gives customer greater efficiency and flexibility

·         Construrma: which give extensive training to the employees including product promotion, inventory management, and sales force programs and sourcing logistics.

·          Customer related Education and Training Services

·         Construction financing services

·         Mobile solution: we will give customer SMS for his order, dispatch or pending invoice payment.

·         Online service for e-Selling and commercial promotion

·         Technical support for any kind of customer complain or inconvenient.

Job opportunities:

            Its operation will be massive so we need a lot of employees for various kinds of tasks. For ITM students they have some opportunities in various sectors like international logistics, quality management, process methodology, supply chain management, CRM, and other IT sectors. I am discussing the opportunities in following part:

International Logistics: for international business we need to conduct the customer through email, phone or internet, so ITM people are needed when they set up the network infrastructure and maintenance its operation. Here work related skills must needed.  

Quality management: for quality assurance we need some skilled person who can operate the machines and very accustomed with modern technology. People must be aware about technical term; here professional and academic experience is mandatory.

Process methodology: In this section less ITM people is needed only for monitoring task and regulation. Work related skill is get preference.

Supply chain management: for supply chain, some ITM people are required for smooth supply and delivery by providing technical and communication support.

CRM: in CRM section we required more ITM persons because for communicating to the customer through phone or sending SMS or showing their product through projectors and so on. Here academic people are enough to run this job.

Some ITM people is required for customer care services, ATM base documents, internal operation and so on.

Conclusion:

Launching a new product in a competitive market is very challenging and tough because of so many risks are involved. Mia Enterprise will launch new cement in Mexico market in this year where some giant companies already run their business very profoundly. We are sure if we provide good product with good quality at a very reasonable price, we can hold the market position very quickly. Later when we do good profit we will extend our business all over the world. With the time being, we will introduce some new building materials. ITM people are necessary for running the business because they provide technical support and make internal and external, domestic and international communication very ease. For improving the quality and quantity, making profits, booming the productivity we need to concern about skilled persons. ITM can provide skills persons for smooth operation in a business organization or institute.

   Reference:

1.      Wikipedia, Mexico, last modified: 7^th May,2011, Available at: http://en.wikipedia.org/wiki/Mexico, [Accessed on 7^th May,2011]

2.      Sector based approaches case study, Last modified:29/07/2009 Mexico, Available at: http://www.ccap.org/docs/resources/696/Mexico%20Cement%20Sector%20Case%20Study.pdf, [Accessed on 7^th May,2011]

3.      UK Trade & Investment: Construction opportunities in Mexico, [Accessed on 7^th May,2011]