Looking at the operational system at Delta Rice Mill Operations, there are obviously some problems existing there. Firstly, they are having problem in their equipment of production. As it is mentioned in the case study, the Delta Factory was acquired in 1976, it is a long period of time and slowing down in capacity is an unavoidable thing. The old and unreliable equipment would lead to the breakdown in production frequently. Moreover, the old system would cost the company high in maintaining. Hence, the old and unreliable equipment lead to inability of meeting the demand, it therefore lead to overtime production issue. A solution for equipment problem is inevitable. In order to improve the performance of Delta factory, there are some options that should be considered. It is clearly that there are many overtime works which cost 50% more comparing to the regular time paying.
Looking at the data of sales of the past three years, we see that the total sales of rice products have been increasing by 3% from year 1 to year 2, and 7% from year 2 to year 3. This is the reason that explain why the productivity needs overtime working since the six months of the last year they worked overtime to meet the schedule. Thus, it is estimated that the demand will increase year by year. Moreover, the capacity is overwhelm to serve the demand in the market. In the other hand, the infrastructure is up to date so the productivity is not so good in to compatibility with other factors. For more detail, we also have a bottle neck in the packing line for the performance by 90 cases per hours in work. For the issues in this case, we found out four main problems. First off all, like I we mentioned above, the Delta Rice Mill’s infrastructure is up to date and it also reduces and make negative effects to total production system via its bottle neck.
Secondly, the forecast in demand is not suitable and that is the main reason to increasing cost for overtime work hours, as a result, the cost for every hours in order to produce also leap significantly as well. Moreover, the arbitrary set of rules and corporate policy has been further modified at Delta Rice Mill due to old, unreliable equipment. For the next reason, the problem bases on worker’s willing to work on or dedicate one line to each size. Actually, it may decrease the productivity in some cases. Last but not least, the Delta Rice Mill want to increase their sales and remain the product’s quality as well as ensure to be on time for every shipments all time of year. For those mentioned reason above, if Delta Rice Mill wants to rise their performance in production and reduce the cost, they have to deal with those dilemmas as well. Solutions:
In the first solution for up to date infrastructures, we found out that there are two ways to deal with. Replacing the production system is he first way. In this case, we just replace the parking line but not processing line. However, as a result it will rocket the cost in investment and it may need a longtime to get the money back. Thus it is just suitable for a long-term solution planning. The other key for this issue, we should make a comparison between the total cost of the current production system with overtime work hours with the total cost of the regular work hours however Delta Rice Mill will tend to produce a same amount of production for every months with no overtime work hours.
On the other hand, the second solution will increase the cost of the holding cost and the capacity of the storage. For this comparison, it is not possible to make it real because the total production is not enough to serve the demand in market. For the forecasting method that the company is applying, it is not suitable because the actual and the estimated sale are significantly different. This is the reason why there are many peaks and valleys in the inventory of production schedule for the last three years. Therefore, a new approach for the year four is necessary so we want to create a new schedule for year four. The above table shows that the three years total sales has a trend which increases year by year.