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ACE INSTITTE OF MANAGEMENT BANESHWOR, KATHMANDU

REPORT ON CASE ANALYSIS: THE MORRISON COMPANY


Submitted to: Mr. Rabindra Silwal Instructor, OSM Ace Institute of Management

Submitted by: GROUP IV Group Members Bikash Bhattrai Jeevan Kunwar Nishes Pokharel Prabin Hayanju Suraj Pd. Rouniyar

MBA Evening Trimester V

Company Background: The Morrison Company was established in 2003 by Jason Robbins in Denver as a sole proprietorship. The idea for venturing the company came after, listening the presentation on emerging supply chain management trends including the use of Radio Frequency Identification (RFID) technology to track pallets and cases of goods after they left the shipping dock en route to downstream supply chain positions. The company has mainly focused its core business (developing and manufacturing RFID or Smart tags) to pharmaceutical and retail line. Company started its operations producing smart tags for pharmaceutical in the summer of 2004. The companys sales has boomed over past year, and the production levels has also been increased dramatically to meet the market demand. Also in the second half of 2007, Morrison expanded its product line to attract retailers. At present the company is competing against approx. 150 other manufacturers in the highly competitive market. The biggest competitors include Avery Dennison- one of worlds largest manufacturers of self-adhesive technologies and applications- and Cenveo, the third largest graphic company in North America. So to differentiate, Morrison tries to add value by emphasizing responsiveness and speed. So the company manufactures four varieties of smart tags to carter with market demand and customized its offerings to the clients. RFID Technology and Smart Tags RFID technology: RFID technology combined transponders (i.e., tags), with varying capabilities to store, transmit, and receive data wirelessly, with devices known as readers, which received and transmitted the data via readers antenna. Readers could be handheld and mobil e or fixed and stationery. The use of RFID is to enable automatic identification, monitoring and authentication of the objects to which it has been attached. Data generated by RFID also helps the company to process information, analyze and store in the companys information system. Company can also be able to change, update and erase the information. Talking about the market of RFID, the global market has been reached to $ 4.9 billion in 2010. Forecasts believe that the market will increase to an 11.5% compound annual growth rate to $ 8.5 billion by 2015. Also analysts believe that RFID revenue would rise 10% within five years. it is so only because of tagging the smart tags it will help to improve inventory visibility, accuracy, loss prevention, operational efficiency-including reduced stock outs. Also the market is highly competitive and fragmented, and many suppliers or players are providing supplemental manufacturing capacity to larger ones.

Questions and Answers section 1. Identify and access the operations problem occurring at the Morrison Company? Before dealing with the operations problem lets look on the manufacturing process. In the process, it includes 60 hourly production employees. The manufacturing process consists of six typical activities: 1. 2. 3. 4. 5. 6. Receiving, inspection, and inventory Parts picking Inlay fabrication and testing Tag assembly and testing Personalization ( optional ) Packaging

Morrison fabricated inlays with two fully automated RFID inlay assembly systems. Also setup require special operator to handle dedicate ICs. Four of the tag assembly machines had printing capability that enabled personalization. Production employees were responsible for quality assurance at each step of the manufacturing process.

Even though companys manufacturing process has been increased dramatically, there was problem in the manufacturing units; the assembly line could not function as expected by the management. The company was achieving remarkable performance in the pharmaceutical lines but majority of the problem was occurring in the in retail line. The major operations problems occurring at Morrison Company are: The first problem in was in the production planning, where there was no use of Enterprise Resource Planning (ERP) system. In the absence of computer terminals, production list was hand-written changes posted near each machines. In the absence of information system in the organization it becomes difficult to work and plan the production process. Significance increases in sales and shortage of raw materials especially a problem with ICs. Due to the economic recession, chip makers upgrading their equipment, so they are were unprepared when the economy improved. Due to this, Morrison delivered orders as late as 10 weeks beyond the originally schedule date. Workers received their assignment at the start of each shift, which makes difficult to specify a task for the worker, especially when the parts shortage. Stocks outs had tripled in the past six months due to parts shortage and picking. It means that when the stocks out the order are incomplete or partially complete. Personalization has subsequent effect on the production plant which actually slows the production process. Mechanical problems or when defects required rework slows the operation. Return order rises from 1% to 3% because of the error in the content of deliveries rather than malfunctioning tags. More than 70 % of customization and personalization is done in retail line where the problem occurs. And also only 4 out 10 assembly lines are used for the personalization. These are some of the major operational problems occurring at the Morrison Company.

2. Explain the difference between the production process for pharmaceutical product line compared with those of the retail product line. Why are they different?
The differences between production processes for pharmaceutical product line compared to those of the retail product line are:

Nature Competitive Production Customization Type of RFID Offers

Revenue

Pharmaceuticals line Retail line Less More Make to stock Make to order 15% 70% HF ( Expensive) UHF ( Cheaper) Standard tags regulated by Colors, finishes, cut- toDEA order sizes and other specifications as per order Two third of total revenue One third of total revenue

They are different because the nature of business and product differ in their respect. in pharmaceutical products there is more of government regulations. Company cannot customize it accordingly it needs to follow the guidelines circulated by DEA (the U.S. Drug Enforcement Agency). Also in the pharmaceutical industry operational efficiencies matters a lot for the reason of counterfeit drugs, reduction the risk of tampering and tracking the expiration dates. In context to retail line, customization and personalization matters a lot so that they can meet the specifications ordered by the company. Also there is greater competition in this line and if not cope with the market could trend then the company may be wipe-out from the markets. The volume in the retail is high so if company able to capture it then, they can be dominant player in that market.

3. What recommendations would you offer Shauna Breen about how to address those issues? Be specific about any policies or organizational changes you propose. The company measure problem lies in the production process and day-to-day operation management. After reviewing and analyzing the case we came with many possible recommendations. Some of them are discussed below: Supplier base management : The company should be able to manage its suppliers through possible ERP systems installation in the organization. The lead time for placing the order should be increased so that order can be arrive at specified day. Also the company is purchasing ICs only

from one supplier, which makes them more dependent to suppliers. So they should look other more suppliers for ICs chips. Company made higher than expected production in their retail lines which reduced the revenues to below their target due to obsolesces cost and holding cost. So proper inventory management should be done. A package order re-checking department should be added after the packaging process to ensure the correct delivery. The error in the content can be avoided like in retail line. Modular design process can be one possible solution for the company so that they can response accordingly to market demand and reduce the production cost. It will also helps in putting less stress to assembly line and employees. Material Requirement Planning (MRP) should be done properly and be communicated to the workers and employees. There must be participate and commitment in such planning.

We as a group found that, there is severe problem in the production and operation process of the company. So we think that the company should redesign its production and entire supply chain management. Because the major problems in assembly line, inventory management, no information system (ERP), forecasting of raw materials.