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ALLAMA IQBAL OPEN UNIVERSITY, ISLAMABAD (Commonwealth MBA / MPA Program)

Case study
Problems In Sustaining The Operations Of The

Pak Elektron

Limited (Pel)

ASSIGNMENT No. 2

11/15/2011

Abstract
The use of technology has become an essential part of the strategies of companies to increase production and to check the quality of the product. Similarly, with the role of technology in their development and growth, companies can properly evaluate the performance of their employees and the opinions of their consumers regarding their products. As such, this essay aims to discuss and analyze the problems of the Pak Elektron Limited, PEL Appliances, particularly of Mr. Naseem Saigol (CEO), Mr. Murad saigol, Mr. Zeid Saigol, the president of the company. It also provides recommendations or possible solutions for the problems to be discussed based on the situation and the concepts in operations management.

Introduction Operations management has its origins in the study of production or manufacturing management. People can initially think of operations management as being part of a distinct function producing a product and service combination, just as people have marketing and accounting functions in many organizations. Every organization that offers goods or services has an operations activity. As far as the organization structure is concerned, some firms will have a discrete operations function. This might be called a manufacturing department, an operations system, or have no identifiable name at all. However, like marketing and accounting, it is a fundamental function of the firm with professionally trained operations or production managers responsible for conversion of resources into the required product and service combinations. In some organizations such managers will have different titles, a store manager for a retailer, administrative managers within a hospital or distribution managers in a logistics company Improving organizational productivity and quality are issues that have been showing for some time and will continue to be important to any business and production organization. All types of organizations need to be as productive as possible to best utilize their important resources, to meet the needs and demands of their consumers, and to stay competitive with similar business organizations. In todays fast-changing and dynamic way of life, many organizations come up with different strategies and ideas to improve and develop their products. The development of science and technology has led to the improvement of many companies in terms of product development and research.

The operations of an organization are all of the activities directly related to accomplishing the main purpose of the organization, whether it be producing some product or providing some service. In either case the operations system will provide the conversion of certain inputs, such as materials and labor, into certain outputs, either products or services. Thus, the operations function can be distinguished from the other main functional areas of an organization, such as marketing, finance, personnel, and accounting, which are no less vital for the firms success but which are less directly related to the organizations day-to-day pursuit of its main business. Of course, all main functional areas of an organization are intricately entwined; all interact with and provide support for the others, and the boundaries are not always clear between them ( 1998). The paper will discuss about the company Toyota Corporation. The paper will also discuss about the behavior and choices made by Toyota.

Company introduction Pak Elektron Limited (Pel)


14 - KM, Ferozepur Road, Lahore.

PEL was founded in 1956 and has since been serving the Power utilities, industries, individual customers, housing and commercial projects by providing reliable, customized and cost effective solutions. Backed by the innovative genius of Saigol Group, PEL is now technology forerunner and market leader in providing new products and services to meet ever changing and technology intensive needs of its customers. Our EPC contracting division delivers custom designed and built HV and EHV grid stations, electrification of housing projects, industrial parks and optimum solutions for power utilization to all kinds of industries and commercial customers. We aim to maintain this competitive edge and at the same time keep striving to improve it further by continuous R&D, creating new knowledge and adapting to global developments in technology and product design. Ever increasing local market share, growing export orders, numerous successful power projects and greater than ever base of satisfied customers are evidence to these aspirations. Works of PEL are spread at two facilities in Lahore, the historical city and cultural hub of Pakistan. The two facilities cover an area of 1,033,200 Sq ft and 614,252 Sq ft respectively. Both are equipped with latest technology, state of the art testing facilities and environment friendly production process. At the heart of our operations is our human resource. PEL invests heavily on professional development, skill improvement and well being of its human resource. Our employees are our most valuable asset and we keep them very dear.

Case Study

Problems of the Pak Elektron Limited, PEL Appliances


The Pak Elektron Limited, PEL Appliances manufactures printed circuit boards to the specifications of its different customers, the electronic manufacturers. It employs new designs and prototype production techniques that enable the company to become more adept in anticipating and resolving the problems of its consumers, over its competitors. However, despite the effective maintenance of the companys workers over its operations, several problems have been encountered in sustaining the operations of the company, which become the source of its loss of profit and sales. The problems identified and described by Mr. Mohsin Qayyum include problems related to operations, productivity, quality and delivery. Primarily, the operation of the company is declining, due to production bottleneck. The shifting of workload from one operation to another without pattern causes this bottleneck. The company is having a hard time anticipating the workload pile up in the shop daily because individual orders from clients impose varying workloads on each operation. The variation in the workload depends upon the differences in the size of the order that bypass some operations and from the differences in circuit designs. In addition, the company entertains four-day rush orders, which require rework at one or two operations, thus, delaying the process of delivering artwork modifications of a client. This is because the companys workers are shifted from one work operation to another depending on the demand of the operation. In this sense, some workstations are left vacant, while some workstations are overloaded. Moreover, disturbance in the operations of the company is may be attributed to telephone calls from the customers engineers who had encountered a design problem. As a result, the customer would be requiring redesigning and rework on the products. Another problem of the company can be encountered in terms of its productivity, as some machines are left idle more often that expected. Another source of this problem is that the standard labor hours do not include time spent in reworking parts that have failed inspection or have been returned by clients. In addition, the time used for moving from one station to another adds to the idle time used by workers, thus, further lessening their time for production. I also believes that the job strategies used in the company are far from ideal, thus, not reflecting improvements in its operations. This leads to the realization that operations and productivity 4

method improvements are not being implemented due to the pressure for output, the constant shifting of workers from one job to the next, and in inhibiting experimentation with new ideas. Furthermore, the introduction and implementation of new ideas and methods has led to further confusion, as the increase in the production of a particular station resulted to the piling up of work in another, thus, rescheduling orders and reassigning workers. This further impeded the productivity of the company. Aside from operations and productivity problems encountered, the company also encounters problems and failures in maintaining the quality standards of products and in meeting promised delivery dates. The companys sales manager, reported that since August, the company has been receiving customer returns, which increased from under one percent to about 3%, and delay in product delivery, which averaged 9 days late. This would result to the continuous loss of sales, as the companys competitors are able to promise four-week deliveries on small orders. In addition, the company fails to inspect the quality of their products more effectively, thus, resulting to increase in returns and reprocessing. The problem occurs as the president feels that a more strict inspection system would not be possible, as product standards vary from customer to another and from one order to another. In September, the companys reshipments reject rates increased, resulting to a 6% total loss due to incomplete operations and subsequent reworking and reprocessing of circuit boards. Moreover, due to the delay of production and the increase in the reworking of products, the company has fewer shipments, with actual deliveries delayed with an average of 9 days. This forced the company to hire an addition of eight employees assigned in the production force. However, it would still take some time before making the additional employees skilled in the business.

Possible Recommendations on the Problems


Possible recommendations must be made in order for the company to regain the loss of their sales. Primarily, as a solution to the problem of the company regarding the production bottleneck and the work pile up and run out in its operations system, the company should only be accepting orders that are feasible to do and to deliver in time. In this way, the company would be able to focus on the project and the specific demands of the client. Accepting feasible orders from clients would also allow the production line of the company to focus on the quality of the products, with due consideration of the amount of time required by the client. With this, the idle time of employees would be reduced, because all of them have a particular task to do, enough for the time and resources provided to them. This would also reduce the shifting of workers from one job to the next, as each worker in the production line would have something to do, given the enough number of orders compensating the enough time and resources provided to them.

Another possible recommendation that can increase the productivity, quality and delivery of products is by separating the production line into two departments, where one department would be responsible for processing new orders from client, while the other department would be responsible for the rework and the redesign of previously done or accomplished projects. More workers would be assigned to the department that would be responsible for processing new orders, and less workers would be assigned to the department that would reworking and redesigning the previously done products. The separation of the production line into two departments would be hitting two birds with one stone, as both departments would be simultaneously doing their jobs. This also reduces the idle time of employees, the piling up of work, and the run out of things to do. This serves to be beneficial for the company because employees would be more focused in doing their jobs, thus, ensuring the quality of the products, the increase in productivity of the company, and the on-time delivery of products to clients. The companys expediter is in-charged of tracking orders in process and the initiation of action if a particular order failed to progress through manufacturing. he is also responsible for the investigation of delay, in determining the number of rush orders, in securing missing supplies or instructions, and in calling the clients to advise them of possible delay in delivery.. Thus, in this regard, it can be recommended that the company can hire or pull out an employee who would be assisting her in accomplishing her responsibilities

Conclusion This recommendation would be most effective if the company would be able to divide the production line into two, as discussed previously. In relation to this, the company can also assign someone to assist Production manager, who is responsible for the products quality control. Having two individuals to be assigned for the inspection of quality of products, it would be easier for the company to detect mistakes in production and to comply with the requirements of the clients, given the separation of the two production lines. They can divide their tasks between them, thus, one would be responsible for inspecting the quality of the new processed products, while the other one would be responsible for inspecting the quality of the reworked or redesigned products based on the requirements and demands of the clients. Moreover, the company can also assign an assistant for, the companys supervisor, and who is responsible for the manufacturing and shipping of products. Supervisor and his assistant can divide their tasks between them, thus, one would be responsible for the manufacturing and shipping of new processed products, and the other would be responsible for the manufacturing and shipping of the reworked or redesigned products. Once these has already taken place in the company, then this would be the proper time to implement and introduce method improvements, including employee training and development 6

programs that would further enhance and develop the skills and talents of workers. In terms of organizing, the company can introduce the strategies under Total Quality Management (TQM) or Six Sigma. Total Quality Management is a management approach that improves the effectiveness and flexibility of businesses by involving every department, every activity, and every single person at every level of the organization. It creates a quality culture where the aim of every member of the organization is to delight their customers, and where the structure of their organization allows them to do so, thus, moving with changing customer expectations, to fashion and design products that meet and exceed their demands . On the other hand, the Six Sigma approach can also be inculcated in the employees, wherein it is defined as a disciplined, data-driven approach and methodology for eliminating defects in any process, from manufacturing to transactional and from product to service (, 2007). With such approaches, the employees of Pak Elektron Limited, PEL Appliances would be able to adopt the strategies under them, which could increase their productivity, creativity, quality of work and delivery. Moreover, because the problems of the company have already been determined, it can be recommended that the company can have its SWOT analysis, which aims to identify critical strategic factors and to build on core strengths, to eliminate undermining weaknesses, to take quick advantage of significant opportunities, and to circumnavigate or mitigate threats (, 2003). The SWOT analysis would give the company relevant information on the strengths and weaknesses it has and matches it with the competitive environment it engages in. It would help the company create strategic plans that would help the company once it had encounter any problem or threat from competitors. These possible recommendations would be helpful in addressing the operational problems of the Pak Elektron Limited, PEL Appliances. However, it would still be essential if careful study and planning would be done, depending on the changes that are continually happening in the company.