Wednesday, 30 September 2015

What are the 3 Design principles that Form the Basic Building Blocks of an Effective Mass Customisation program?

Mass customisation is when a company works to create products or services that are highly customisable. The way to achieve this is by spreading out the task of customisation to the latest part in the supply chain. This requires rethinking and integrating product design, manufacturing processes and delivery and configuring the entire supply chain. There are three design principles that are used to create an efficient mass customisation program.

Principle One
The design of the product needs to incorporate different modules so they can be assembled into a variety of firms in a way that is easy to achieve and cost effective.

Principle Two
The manufacturing and other service processes need to be designed to have lots of modules that are independent from one another and that can be rearranged or moved in order to support different distribution network layouts.

Principle Three
The supply network all need to be designed so they’re able to provide two capabilities. The two capabilities are to supply the basic product to the locations where the customisation takes place and to be flexible and responsive to deal with the individual orders from the customers and to deliver the product quickly. The supply network includes:
  • Position of the inventory
  • Inventory location
  • Service structure
  • Manufacturing
  • Distribution

Tuesday, 29 September 2015

How to Measure Sourcing Performance

Inventory is at the centre of sourcing. Products are stored and often moved between storing locations until they reach either the customer or retailer. The products can be moved hundreds of times or just a handful, but each stage still has a cost and does tie up money and has costs for the company, so it is important to make sure all stages of inventory are in sync and to reduce the size of the inventories.

The relative total cost of the goods that move through the supply chain is used to measure the inventory investment. Additionally, there are two measures used to evaluate the efficiency of the supply chain, which are the inventory turnover and the number of weeks of supply. 

Inventory turnover is worked out as follows:

Inventory turnover = cost of the goods sold/average aggregate of the inventory value

The measure of how many weeks’ worth of inventory is currently in the system is worked out as follows:

Weeks of Supply = Average aggregate inventory value/cost of goods sold x 52 weeks

Both measures are effectively the same as they measure the same thing, but they are mathematically inverted. Companies see inventory as an investment as it is necessary for the future. The company might need to have their inventory investments financed in order to afford it and the inventory can hold up funds that could be required elsewhere in the company. Therefore, it is necessary to ensure the company establishes the necessary amount of inventory needed, in the best locations in the supply chain.

Monday, 28 September 2015

About Outsourcing and Why Companies Outsource

There are several reasons that companies decide to outsource, but what is outsourcing? Outsourcing is when the company decided to move some of the internal activities to providers working outside the company. Contracts are made to establish the terms of the agreement and the activities. Resources and responsibilities are transferred to the individual or company who acts as the outsourcer.

Here are some common reasons that companies decided to outsource rather than taking care of the activities in-house:
  • By outsourcing, the company is able to concentrate on their areas of expertise and their core competencies.
  • Some activities can be less expensive when outsourced as opposed to do them in-house.
  • Full or partial functions of the activities can be outsourced; it’s versatile, flexible and can be worked into any company with ease.
Logistics is commonly outsourced and outsourced logistics has grown dramatically in recent years. Logistics providers are adding a lot more services on top of the traditional service of transporting products from point A to point B. Some of the additional services include multiple functions that are required in material flow cycles:
  • Purchase and internal control of production materials
  • Shipping
  • Product distribution
  • Planning and controlling work in process
  • Inventory management
  • Purchasing materials and products
  • Trace and tracking
  • Electronic data exchange technology

Saturday, 26 September 2015

Chit Chat – Oil and Gas Trends 2015

There are always problems in the oil and gas industries caused by the volatility of oil processes and the energy business as a whole. It is not in the hands of the producers and refiners to manage the price fluctuations; instead they need to concentrate on how to lock in demand and how to ensure they are able to thrive in an oversupplied business environment. With this in mind, here are some of the 2015 oil and gas trends that are being witnessed by industry experts.
  1. Reducing costs in the industry.
  2. Using new technology including robotics and analytics to increase volumes while reducing investment.
  3. Increase efficiency and reducing costs by using lean manufacturing and confronting oversupply problems.
  4. Ensure each of the operations fit in with the customer demographics, preferences and the core strengths of the company.
  5. Improve margins by consolidating strongest assets.
  6. Guaranteeing buyers for products to combat demand challenges.
  7. Looking beyond localised borders for new customers.
  8. Establish and strengthen relationships with customers to combat strong competition.
  9. Avoid rivalries with companies that could result in damaging hits in profit margins.
  10. Identify niche markets.
  11. Not focusing all efforts on cost reduction and reducing spending.
  12. Perform logistics analysis to access markets that are available.

Friday, 25 September 2015

What is the Bullwhip Effect and why is it Important to Synchronise the Flow of material Between Supply Chain Partners

The bullwhip effect is when the supply chain is driven by forecasts. It is seen when there is a large variability in the inventory that is caused directly by the changes in customer demand. An example can be seen in the demand for disposable nappies. Retailer orders to wholesalers have more variability than the demand placed on retailers by the end customers. The wholesale orders to the manufacturer have even more variability than the retail orders. This means the orders that the manufacturers place with their suppliers is even more volatile.

The bullwhip effect shows that synchronisation within the supply chain is lacking. When there is even the smallest of changes in the consumer sales, a ripple effect is seen in greater oscillations up the stream and this resembles the flick of a bullwhip handle. Supply patterns fail to match demand patterns and so inventory can increase at different stages while delays and shortages are witnessed at other stages.  This is why it is so important to synchronise the flow of materials between all of the supply chain partners.

One of the ways that material flow can be synchronised is by using electronic data interchange links. The retailers provide the company with demand levels using electronic data transfers and the company is then informed of the inventory levels at the distribution centres. The firm is then able to forecast future demand with this data and decide where product replenishment is required based on upper and lower inventory limits that have been set by each supplier. Trucks can then be dispatched on the same day, carrying the right amount of products to the retailer’s distribution centres. As a result the retailer inventories are cut.

Thursday, 24 September 2015

Why is it Important to Have an Effective Supply Chain?

There is a strong connection between supply chains and financial performances of corporations. Leaders in the supply chain are rewarded with higher growth in the stock values of the stock market; the substantial growth is much more than what the companies with poor performing supply chains. This was observed by Accenture, INSEAD and Stanford University who performed a study including data from over 600 Global 3000 companies between the years of 1995 and 2000, including 24 industries.  In the study there were supply chain leaders and supply chain laggards, based on how their performance compared with the others, based on inventory turns, return on assets, the costs of goods sold as a % of revenue.

The study analysed the change within the stock market during the time period and how they compared with the other companies within the same industry. It found that the average annual growth of the leaders was between 10 and 30 points higher than the laggards. These results were seen in 21 of the 24 industries included in the study and showed that the supply chain leaders did have a higher stock value.

It is not easy to become a supply chain leader as it requires people, technology, processes, discipline and leadership. It is necessary to know what is required to create, run and maintain a supply chain. One of the ways of making the supply chain more efficient is built to reduce the need to carry inventory and match store requirements to the sale trends, restocking shelves quickly and reducing the amount of markdowns being made at the end of the season.

Wednesday, 23 September 2015

What are the Analytical Tools for Six Sigma?

There are eight analytical tools that are used in six sigma and these tools have been used in traditional quality improvement methods for many years. Unlike the traditional quality improvement methods, the tools used in six sigma are applied throughout the corporate wide management system.

  • Check Sheets – Check sheets are forms that standardise data collection and they are then used in the creation of histograms.
  • Cause and Effect Diagram – These diagrams show the relationship between the problem and the potential causes, they also go by the name of fishbone diagrams.
  • Design of Experiments (DOE) – The DOE is the statistical methodology that is used to determine the cause and effect relationship between the process (x) and output (y) variables. The DOE allows for experimentation to be made with many variables.
  • Failure Mode and Effect Analysis – This analysis is used to identify, estimate, prioritise and evaluate the risk of failures at each of the stages that are used in the process. A risk priority number is created for each of the failure modes that have been identified and this is then used to measure the rank of importance for the items that have been listed in the FMEA chart. A person or a department will then be given the job of solving the problem that has been recommended to remove the failure.
  • Flow Charts – Flow charts come in different forms, all depicting the different process steps to be used.
  • Pareto Charts – The charts are used to break down problems and are based on an empirical finding that many problems are caused by a small amount of issues.
  • Process Control Charts – process control charts are time sequenced to plot the values of a set statistic and one or more of the control limits and an average. These are used so the processes are in statistical control.
  • Run Charts – Run charts are used to show the trends that show up in data over a period of time. They help to understand how big a problem is at a particular stage.

Tuesday, 22 September 2015

What is the Six Sigma Methodology?

In six sigma methodology the tools are used systematically through the define, measure, analyse, improve and control cycle, the DMAIC cycle. The focus is to understand what customers want and to meet their needs as this is the key to making profits in the production process.

The DMAIC methodology approach is as follows:

  • Identification of who the customers are and what they consider to be their priorities.
  • Identify a six sigma suitable project that will be suitable for the objectives of the business and the customer requirements.
  • Identify the critical to quality characteristics that will have the highest impact on quality from the customers’ perspectives.
  • Decide how to measure processes and how the processes perform.
  • Establish the internal processes that have an influence on the CTQs.
  • Measure the defects that are generated due to the internal processes.
  • Identify the causes of the defects.
  • Have a clear understanding of what is causing the defects using key variables that cause variations in the process.
  • Work out how to remove the causes of defects.
  • Establish the key variables and the effects that they have on the CTQs.
  • Work out the maximum acceptance ranges of key variables and a system that will be used for measuring nonconformities of the variables.
  • Decide how to ensure the improvements are maintained.
  • Use tools so the key variables can remain in the maximum acceptance ranges.

Monday, 21 September 2015

What is Six Sigma Quality?

Six sigma is used to remove defects from processes and from the final products that are produced. A defect means that a component doesn’t fit into the specification limits of the customers. Each of the activities in a company creates opportunities for defects to arise. Six sigma quality works to reduce any variations in the activities and processes that could result in a defect occurring.

One of the benefits of six sigma is to allow managers to freely describe the performance of a processes relating to its variability and to also compare multiple process using a single metric. The metric used is defects per million opportunities, DPMO, and it requires:
  • Unit – The item that is being serviced or produced
  • Defect – The event or item that isn’t meeting the requirements of the customers
  • Opportunity – Chances for defects to occur
The formula that is used in the calculation is as follows:

DPMO – (Amount of defects/amount of opportunities per unit x number of units) x 1,000,000

Friday, 18 September 2015

What is the cost of quality in six sigma quality?

There are three assumptions that are used to analyse the cost of quality:
  1. Failures are caused
  2. Prevention costs less
  3. Performance is measured 
There are also four types of costs of quality that are generally used, these are:
  1. Appraisal costs, these are how much the inspection, testing and other tasks costs that are essential in ensuring the product or the process is acceptable.
  2. Prevention costs are the total amount of the costs involved in preventing defects. These could be how much it will cost to identify problems that cause defects as well as the cost of taking corrective action and so on.
  3. Internal failure costs are the cost for the defects that happened in the system including reworking, scrapping and repairs.
  4. External failure costs are the costs that go through the system such as warranty costs, loss of customers, product repairs and dealing with complaints from customers.

Thursday, 17 September 2015

Developing Quality Specifications in Six Sigma Quality

It is necessary to make decisions based on the quality of design and design conformance to come up with the quality specifications of the product or service.  The design quality that relates to the features of the product that are relative to the design challenges and that the product addresses a need of the market, is the inherent value of the product within the marketplace and so this is a strategic decision that needs to be made.

The company needs to design the service or the product using the performance characteristics and the features that the market for the product will be expecting and demanding.  The reliability of the product is impacted by the materials and the manufacturing processes that are used and the company also needs to ensure the product can be produced at a reasonable cost. An aspect that can have an impact on the cost is serviceability. Once the customer has purchased the product or the service and this can also have an impact on the warranty and how much it would cost the firm to carry out after sale repairs.

How consumers see the reliability and quality of a product is often associated with pervious products that were available from the brand. Firms need to remain consistent as they continue to release next generations of products and services in order to maintain a good reputation of quality.

Product designs need to meet specifications and this determines the conformance quality. Conformance quality requires tactical and day to day activities that are followed. Workers that are responsible for ensuring their part in the design process are accountable for meeting the quality specifications, for example, this responsibility could be in the hands of the manufacturing management or the branch operations manager.

Wednesday, 16 September 2015

The Royale International Group Becomes a Member of the X2 Critical Network

The Royale International Group is a global market leader in the specialist time critical, next flight out and hand-carry market for many of the world’s top Fortune 500 companies. We are happy to announce that we have become a member of the X2 Critical Network - a global logistics network of dynamic and independent specialists in the field of time critical logistics – representing international markets from around the world.  Royale International is now the official and sole HKG vendor for Time Critical Service in the Hong Kong market. 

At Royale International, we make it our business to solve our clients’ logistical problems.  This means understanding each customer’s unique needs and formulating the most efficient and appropriate solution – even if it means meeting a near-impossible deadline.  Our one‐stop integrated solutions combine personalized local service with the advantages of our extensive global network. As a vital link in your supply chain, we know you rely on us to deliver exactly as promised – and we make it happen. Royale International operates a global network of "On Board Couriers" guaranteeing a safe and prompt arrival for your international shipments. We are committed to provide a quotation and flight routing within 30 minutes after the initial request. Once approved, our OBC expert is able to board on a flight together with the shipment as fast as 4 hours with all the documentation cleared & ready. 
Click to enlarge

Our comprehensive network of strategically located offices spans the world’s major business centres on every continent:

  • Asia and the Middle East: Bangkok, Bangalore, Beijing, Busan, Chennai, Dhaka, Dongguan, Dubai, Fuzhou, Guangzhou, Hangzhou, Hong Kong, Hyderabad, Manila, Mumbai, New Delhi, Ningbo, Pune, Qingdao, Seoul, Singapore, Shanghai, Shantou, Shenzhen, Suzhou, Taipei, Tokyo and Xiamen.
  • Europe: Amsterdam, Dusseldorf, Frankfurt, London, Paris 
  • The Americas: New York, Santiago
  • Africa: Cape Town, Durban, Johannesburg
  • Australasia: Auckland, Fiji, Melbourne, Sydney

For more enquiries, please contact us at:
24/7 hotline: +852 2218 5682
24/7 email:

How to Design a production system – Part 2

Workcentres are focused on one type of operation that is used in the production process. This type of production system is often used in fabricating and the manufacturing of computer chips. The design development of a manufacturing cell requires establishing the optimum movement of the material. There are three steps that need to be completed to develop the manufacturing cell:
  1. Grouping the parts into groups, called part families, that will follow a sequence of steps. Parts need to be classified and this step may require the use of a computer system.
  2. The dominant pattern flow is now set up for each of the part families. This is necessary to establish the allocation of the equipment to the manufacturing cells.
  3. The final step is when the machines and the processes are physically move into the cells. If there are parts that are not associated with the part families they will be moved to a reminder cell. The machinery placed in the reminder cell is often required for general use.
The assembly line is essentially a layout design that has a set purpose of building a product by following a set of progressive steps.  The assembly steps are called stations and they are often linked by a material handling device. Each station will have a time limit allocated in which the assembly needs to be completed within. The continuous process is very similar to the assembly line, but the product moves along continuously.

Tuesday, 15 September 2015

How to Design a production system – Part 1

The layout of the production process is determined by lots of different techniques. Over the next two days we’ll be looking at the project layout and workcentres and how can be designed.

Equipment and workers are moved to the location of the product in the project layout structure. It is necessary to order the tasks and the production stages. The layout may be developed by the arranging of different materials in accordance to their technological priority. To develop the project layout it is necessary to visualise the project in the centre and arrange all of the production points and equipment around the product in the order that they need to be used and how difficult it is to move the product.

Ideally, any heavy machinery should only need to be moved once and therefore they can be located further away from the product, but items used frequently are placed closer to the product, such as cranes required to stabilise the product or building materials.

Return tomorrow when we’ll be looking at how to design workcentres.

Monday, 14 September 2015

How production processes are organized - Part 2

Last Friday, we talked about how the production process is organised, beginning with three of the five structured processes, project, work centre and manufacturing cell. Today we shall finish by examining the two remaining basic structures that are used to design to the pattern of the work flow

·         Assembly Line
Assembly lines are set up so many work processes can be worked through in the order that the product will be made. Effectively the paths for each of the work processes are in a straight line and the pa rts of the product move through the assembly line at a controlled time from each of the workstations. The sequence of the build is followed until the end of the assembly line is reached. The assembly line is usually used in the production of cars and toys.

·         Continuous Process
The continuous process works in a very similar way to an assembly line, except the flow of work is continuous. The continuous process relies heavily on automated machinery and often uses one large piece of machinery that is run for 24 hours, eliminating the expense of shutting down and starting up. The continuous process is used for drug production and petroleum.

Sunday, 13 September 2015

Chit Chat: Logistics Performance Indicators

These logistics performance indicators differentiate between what is important to transportation and logistics service users (service quality and cost indicators) and to those of the general public (safety, environmental impact).

Micro Performance Indicators
Macro Performance Indicators
Major Factor
Users of Transportation and Logistics Services
Service and Efficiency
Average transit time.
Cargo visibility
·          Logistics infrastructure
·          Track and trace capability
·          Modal interconnection
·          Multimodal usage
·          Information technology penetration
·          Load factor
·          Equipment utilization efficiency
·          Customs process efficiency
% of on-time deliveries
Transport cost as a % of total production cost
Logistics cost as a % of gross domestic product
General Public
Loss and damage rate
Accident rate
·          % of overloaded trucks
·          % of drivers with excessive on duty hours
Citizen compliant rate
Emergency services response time
Environmental and Health Impact
Reduction in emission and noise test violation of trucks
Fuel economy
Reduction of pollutant emission
·          % of power units failing to meet fuel economy targets
·          % of empty movements
·          Reduction in noxious gas emission
·          Reduction in greenhouse gas emission

Source: Asian Development Bank Consultant  2012

Saturday, 12 September 2015

Chit Chat – Industrial Trends 2015

The industrial sector is doing well at the moment, but companies will need to invest in digitalisation and expansion in order to prepare for the future and all that comes with it. The industrial sector has managed to do well despite the problems with the global economy. This is thanks to the introduction of cost efficient manufacturing techniques, reshoring factories and increasing the M&A activities. Continued growth is expected in this sector thanks to growth in demand from industries such as energy, building products and cars.  Here are the trends we expect to see in the industrial sector throughout 2015 and beyond.
  1. Digital Technologies. Many firms in the industrial sector don’t recognise the need for digital technologies and that is a mistake. Digital technologies are needed to create an accurate and a resilient supply chains that improves production and product design.
  2. Digital tools are already differentiators and they are helping manufacturers to collaborate with their suppliers to improve the supply chain. The tools are also being used in the co-development of the parts and the systems with the suppliers.
  3. Understanding trends in the market are a must and so the use of advanced analytics is critical for demand planning and ensuring the entire supply chain is aware of product changes.
  4. Field sales times and sales operators are being given mobiles and visual tools to use instead of using traditional printed materials. The digital tools are useful to ensure the sales teams are continuously updated with prices, lead times and products can be configured quickly based on the customer requirements.
  5. The Internet of things is a trend to jump on. It’s when digital advances are used, such as sensors and mac hine to machine technology. Firms using the Internet of things are able to perform real-time performance monitoring, rapid responses and quality management.
  6. 3D printing can bring opportunities and risk to the industrial sector but it cannot be ignored. Firms need to be evaluating the implications and the possibilities on how to use or work around the growth of 3D printing.
  7. Coming up with and adopting to new methods in reaching new markets and targeting customers, using tolls such as social media and online surveys.
  8. Continued investment in people, focusing on training on each of the stage of operations within the firm.
  9. Consider merging with firms to create a cost effective supply chain.

Friday, 11 September 2015

How production processes are organized - Part 1

Choosing the type production process that will be used to create a service or product is a strategic decision classified as process selection. A good example of process selection can be found in the production of laptops. Laptops can be manually assembled if there is a low volume of laptops, but when there is a high volume it would be easier to set up an assembly line.

There are five structures used in production facilities and these five structures to define the workflow. The five structures are:
  • Project
  • Work Centre
  • Manufacturing Cell
  • Assembly Line
  • Continuous Process
Over the next couple of days we shall be taking a brief look at these five structures.

·         Project layout
The project layout structure has the product located in a fixed location. The equipment that is required for the manufacturing process is relocated to the location of the product and not the other way round. A good example of this structure is when filming movies or when constructing properties.  There will be lots of different areas that each have a designated job and set up for different purposes.

·         Work Centre
A work centre is when all the functions or pieces of similar equipment are set up together. As the product is built it moves between the different work centres in the established order of operations.

·         Manufacturing Cell
A dedicated area that is set up to produce similar products is known as a manufacturing cell. Each cell has a set of processes to perform and will produce just a limited product range. Firms could have lots of manufacturing cells set up in one area and each focuses on similar or singular products. They are often scheduled to be used as required, depending on customer demand for the products.

Return on Monday for part two.

Thursday, 10 September 2015

British Chamber Annual 5-a-side Football Tournament 2015

The last Friday in August saw the return of the British Chamber Annual 5-a-side football tournament at the Hong Kong Football Club. 

Royale again entered a team for the 5th year running; ably represented by Phil Murton, Michael Charlwood, Lester Rosario, Nathen Hayward, Alan Leung, Andrew Archer and Victor Yuen. 

After a sparkling start in the group stages with 2 wins and a draw the team then moved on to the quarter finals where a 0-0 draw moved onto sudden death penalties, Royale coming out the victors with goalkeeper Lester scoring the decisive pen. 

The semi-final was a more aggressive affair against a skillful team from Savills. After another 0-0 stalemate the game went to penalties again, this time with Savills progressing through to the final which they eventually went on to win. A good evening was had by all and we look forward to joining again next year. 

What are the Differences in Capacity Planning between Manufacturing Firms and Service Firms?

Many of the same problems faced in capacity planning in manufacturing are also found in capacity planning for services. However, there are some differences as service capacity is more dependent on location and time. Time fluctuations are troublesome and the utilisation has a huge impact on the service quality.

Services are different from goods in terms of time as they cannot be stored to be used at a later date. Therefore, service managers must think of the services as supplies. The capacity needs to produce a service when it is required.

The service capacity needs to be located near to customers in face to face settings, which is unlike manufacturing as the products can be distributed to the customers.  Services, on the other hand, can be delivered to the customers physically or using another form of delivery such as phone.  Some service has to be with the customer when it is required, such as a rental car.

Volatility of Demand
Service demands are more volatile than demands in manufacturing. This is because services cannot be stored, the customers interact directly with the production system and the customers have different requirements. Finally, volatility is caused by the customer behaviour.  As there is greater volatility in the processing times it is essential to have more variability in the minimum capacity needed.

Wednesday, 9 September 2015

What are Capacity Focus and Capacity Flexibility?

Focused factories work better when they concentrate on a limited amount of production objectives. The factory doesn’t have to be concerned about excelling in each and every aspect of manufacturing performance, such as delivery speed, reliability and cost. It focuses down on the tasks that are the most important to meet their corporate objectives. However, with the introduction of the modern manufacturing technology these days, more factories are trying to succeed in every area in order to compete.

This isn’t always possible that a factory has the technology for achieving different objectives. In this case, the factory should make a narrow focus which would be a much more sensible choice for the capacity focus. The capacity focus could be used when having the full range of capabilities is not necessary due to the type of industry they are in. It is also used when a larger plant has lots of sub-organisations, each with their own equipment, policies, control methods and different products, even if they are all located under the one roof. The best operating level is determined for each of the departments and the focus concept is carried down to the operational level.

The capacity, flexibility is when a plant is quickly able to increase or decrease the production levels or switch between product types.  Flexible plants, works and processes and the use of strategies that utilise the capacity of other organisations to allow for such flexibility in production.
  • Flexible PlantThe ultimate flexible plant is one that is able to reduce the changeover time to zero. They may use equipment that can be moved and have utilities that can be rerouted and easy access so the plant can adapt quickly to any changes.
  • Flexible ProcessesFlexible process is when the manufacturing systems and the quick and easy set up of equipment come together. This is a technological approach that allows the low cost switching between products enhancing economies of scope.
  • Flexible WorkersFlexible workers are employees that come with many skills so they are able to adapt to different tasks. Unlike specialised workers they have a broad level of training and they need to have managers and other staff members who are able to facilitate fast changes in their work tasks.

Tuesday, 8 September 2015

What is the Impact of Economies of Scale on the Capacity of a Firm?

As the size of a production plant gets bigger and increases the volume, the average cost per unit of an output decreases. This is the basic notion of economies of scale. The reason for the reduced unit cost as a result of the increased volume is because the operational and the capital cost are reduced. Equipment that is able to produce twice the capacity as another piece of equipment doesn’t cost twice the cost to operate or to purchase. The production plant can also become more efficient when they are able to fully make use of the dedicated resources for material handling, admin support and information technology.

There will be a point when the plant becomes too big and this is where the diseconomies of scale come in to cause a problem. The diseconomies of scale could appear in a number of ways, one of which is the maintenance of the demand to keep the plant busy could result in the reduction of the cost of the product to the consumers.

The plant size could be determined by many factors and not only the equipment and the labour along with other capital expenditures.  One of the alternative factors could be the cost of transporting raw materials to the plant and the finished products from the plant.

Monday, 7 September 2015

What Does “Capacity Planning Concepts” Mean?

Capacity is the amount of output that can be attained but it doesn’t include how long the output rate can be sustained for. Therefore, it is impossible to know the period of time that the output rate can be attained. For example, the capacity might be 480 cars per day, but this doesn’t tell us if the 48 cars per day are for the peak period of the year or an average taken over a six month period. This problem is avoided by the best operating level concept.

This concept is the level of capacity that the process has been designed for and therefore the volume of the output for the average minimum unit cost. It is difficult to determine the minimum unit cost as it requires a trade-off between the fixed overhead costs along with the other costs, including defect rates, over time and equipment wear and tear.

The capacity utilisation rate is an important measure that is used to show how close the firm is at reaching its best operating level.

The capacity utilisation rate = capacity used/best operating level

To work out the capacity utilisation rate of a plant that has the operating level of 500 cars per day but that is actually producing 480 cars is as follows: 480/500 = 0.96. So the capacity utilisation rate equals to 96%.

Saturday, 5 September 2015

ChitChat – Toy Trends in 2015

2015 is seeing the rise of open ended play forms as seen in toys that allow children the ability to customise, build and create while developing skills through play. There are other trends that have continued to grow during 2015. Here’s a look at the top seven trends currently making waves in the toy industry.
  1. Dinosaurs – Dinosaurs have become popular once more mainly because of the release of Jurassic World. You will find plenty of dinosaur toys hitting the shelves as the year continues, including books, plushies, scientific toys and licensed toys.
  2. Maker Movement – These are toys that give children a sense of pride and of ownership. The children are able to create items that are unique while also developing cognitive and physical skills while playing.  These types of toys include construction toys, programmable toys, arts and craft kits, cooking and playthings that are generated by the users.
  3. Mini Madness – These toys provide plenty of play opportunities at a low cost and are often used as stocking stuffers or in party bags. These are often novelty toys and can include miniature versions of high quality toys along with collectable toys.
  4. Open Ended Play – These toys promote problem solving, creativity and resourcefulness in children. The kids are able to play how they want and the play is altered depending on their own creativity and skill levels. There are no rules and the children can simply have fun and play as they wish. Open ended play toys include marbles, dolls, balls, craft play along with innovative toys such as electronic pets.
  5. Sea Life – Aquatic themed toys are proving to be popular and the types of water themed toys vary from simple outdoor or bath time splashy fun to scientific toy and more traditional toys including collectables, dolls and games.
  6. Smart Play – These are toys that are innovative and teach children topics such as technology, science, maths, the arts and engineering. They are toys with a clear educational aim that promote social and cognitive skills such as pre-school toys, science kits, activity books, educational board games and so on.
  7. Top in Tech – New technologies are used to create electronics that appeal to the tech savvy children. They offer traditional play while being open ended and the latest top in tech toys also allows the children’s customisation options. The toys in this trend as RCs that work with smartphones, apps that work with physical toys, smart tables, wearables, augmented reality and robots.