Assignment 01 – Case Analysis of “Ranpath Tools”

Table of Contents

01 Introduction 01

02 Problem which was detected by Pawan 01

03 Suggestions on how Kithsiri and Pawan can explain to higher management 03

their difficulties in completing the Silco Order and improving the
manufacturing and planning control system.
04 Winning the confidence of Silco to secure future orders 05
 01. Introduction

Ranpath Tools is a small engineering company making garden tools such as spades and
forks. It is a partnership between Thusitha Ranasinghe and Kamal Pathirana, the
organization has evolved in a way where Thusitha concentrates on the customers and
procurement and Kamal concentrates on manufacturing.

The organization has grown and therefore got new personnel and positions to manage the
complexity of the business. Some of the new positions have been filled by family
members of Thusitha whilst others are external.

Ranpath Tools has just secured a trial order from a major Super Market Chain it is
estimated that this customer is over 30 times the size of Ranpath’s current customers and
has a very professional system in handling business. Ranpath Tools is working towards
satisfying this order 100% to ensure future prospects with this customer.

02. Problem which was detected by Pawan

Question (a): What problem became evident to Pawan during his calculations in
satisfying the Silco trial order?

Pawan had used the knowledge gained from a course done on Manufacturing Planning
and Control at a technical college in working out the material requirements to satisfy the
Silco order. The product structure of the ordered spade (part number 00289) is given
below,
With the above product structure and bill of material the Material Requirements Plan had
been worked out, it is assumed that the planning horizon considered for this process is
starting from week 21 (with reference to given ‘Annex C’) this is shown in Appendix A
attached, from this working it was evident that part number 10992 which is a blade
required 4 weeks leadtime and due to this leadtime it was not possible to have the net
requirement ready on time to fulfill the second part of the order scheduled to be
completed in week 25 for 200 units. The MRP calculation for the part number 10992 is
shown below, (Assumption : the order quantity mentioned is the MOQ for any process
internal or external and any quantity above the MOQ also can be ordered if required.
Ordering in multiples of the MOQ is not necessary)
 03. Suggestions on how Kithsiri and Pawan can explain to higher management their
difficulties in completing the Silco Order

Question (b): How will Kithsiri and Pawan explain to higher management, their
difficulties in meeting the Silco order requirements and request the necessary resources to
upgrade the manufacturing planning and control system?

Kithsiri and Pawan should consider the following areas when trying to communicate the
problem to higher management.

• The company had grown from a supplier of small spades and forks to a company
manufacturing larger garden tools and building tools as well with a LKR 80
million annual turnover. Therefore management will want to have control over
every single operation and will be reluctant to accept anything else.
• This is a new order from the largest customer they have ever got through too,
therefore it could become a forerunner for the organization.
• Marketing Director has requested 100% confirmation of order to get more
business, the marketing director had been taken for this specific task of targeting
large customers and this is his first order. Therefore the management will be eager
to see performance. Marketing Director seems to be not interested in going
through the integrity of production planning and to understand the complexities of
the planning process.
• Ranpath tools is trying to market to the big super market chains, these super
market chains are well organized in their operations and has structured systems to
plan and control. Ranpath also needs to be of the same frame of mind when it
comes to operations, and from the evident problem it is being shown that although
management wants to go into bigger markets the company is not prepared for the
complexity that comes with it.
• Kamal Pathirana had made the calculations for the raw material requirements, sub
assemblies and Economic batch sizes to cover setup-costs, failure to perform
could cause management issues between marketing and manufacturing.
• Family ties exist between management individuals (Chandani / Thusitha and
Asiri) therefore decision making can be less objective. This is further highlighted
by the comments of Chandani Ranasinghe on the usage of the computers in
relation to Production Planning whilst allowing for Sales Work.
 • This is a partnership business and has family members in the organization
hierarchy, the company has been there for over 10 years with same top level
management, therefore an attitude of management could be as follows,
o “What made us successful in the past will make us successful in the
future.”
o “Before you make a decision, run it buy your boss so that he or she is
never surprised.”

This is usually a serious obstacle in getting new ideas or process changes

introduced to the organization.

However after considering the above points it is recommended that Kithsiri and Pawan
take a very objective and facts based approach in explaining the situation to the higher
management.

Action plan

• Marketing the idea internally is important to any proposal to be accepted by

management all stakeholders need to be convinced of the need for the system.
They should concentrate on getting the idea through to the Finance Director first
as he is having prior experiences in computerizing the finance operations of his
previous organization, it would be easier to convince a person who has done it
before to the benefits of the system.
• Showing the importance of having a computer based MRP system as against the
current method of handling orders.

Current manual method Computer based MRP

Uses a statistical reorder point this is done System is updated regularly and
by experience and is manually checked by information is readily accessible.
bin cards.

Customer orders are accepted without Customer orders can be accepted

considering the lead time considering lead times of components

Stocks arrive in more or less quantity rather Stocks arrive at right quantity, right time.
than the required amount and not on time,
either late or early.

High inventory cost. Low inventory cost.

Unreliable delivery dates to customers Realistic delivery dates to customers.

 • What could have been avoided by having a computerized Bill of material / MRP /
purchase order management and work order management system, and the
potential benefits to the organization as a whole?
o Prior to confirming the Silco order the marketing director or the
management could have checked the system by simply entering the
requirements of the customer whether it was possible to complete the
order.
o Misfiled invoices would not occur as the system will track the invoices and
will be available at any time.
o Purchase orders placed by Telephone could be logged into the system and
made sure that written confirmation is taken before processing.
o The marketing director would have flexibility in marketing the products as
constant updates are available for him any time he needs.
o Management will find it easier to monitor the progress of orders and have
an accurate track of the order book, this will make sales and operations
planning decision easier and less costly as data processing to get
historical data and trends are easier.

Question (c) : Possible courses of action that can be taken by Ranpath tools to overcome
the problem that was evident to Pawan, to win the confidence of Silco to secure future
orders.

There are several things that can be attempted by Ranpath Tools in this situation, some of
them would be from the customer point of view, some from the supplier base point of
view and some with internal processes.

1. The Management of Ranpath Tools can negotiate with the Customer on a differed
delivery plan as at present Ranpath can meet the first requirement of 300 units and
is failing only on the second delivery. Therefore customer satisfaction is met in
the first instance and opens up a sense of confidence about Ranpath.

2. Ranpath can attempt to outsource the blades from other suppliers. At present they
have only one supplier of this type of item therefore they need to expand their
supplier base and strengthen the supply chain, by which they will get alternative
options in satisfying the Silco order as well as to expand the business.
3. Ranpath tools can consider a discount to be offered against the second delivery. A
rate of discount to a price of breakeven or at loss could be considered. A discount
is a good tactic to attract the customer and to win the customer confidence large
supper market chains usually have central sourcing units independent of the
distribution and sales outlets. These sourcing units often concentrate on price
advantages therefore giving a price advantage will definitely give them something
to loot at with Ranpath Tools.

4. Ranpath can negotiate with the supplier on a premium price for a shorter lead
time. Here since the idea would be to get whatever quantity that can be produced
by the supplier into the assembly process. Since the quantity actually required to
fulfill the order is only 170 from the supplier as 30 is already in stock. In this
option Ranpath will have to forgo the efficiency of recovering the setup costs for
the sale of 200 units. The opportunity of getting the new customer with potential
benefits of long term orders of multiples of current the current customer base.