Order from us for quality, customized work in due time of your choice.
Introduction
Coffee Maker Supreme (CMS) is a company that has produced coffee machines for three generations. The company has acquired a positive reputation due to the constant growth in demand for its products. Initially, the company started operating in the Canadian market, and in the process of business development has moved to conduct sales worldwide. This company has expanded its business in several regions, including Japan and Mexico, by utilizing its web-based support services. The challenge for the company was the complex system of manufacturing facilities located in different geographical regions.
In addition, the company had a problem with the product model range, as the number of unique products amounted to 17, and the manufacturing network was complex. In 2010, the company rationalized production by closing two plants and increasing the number of different products. Thus, currently, CMS manufactures 30 products at two plants. The company has also changed the components and materials quality control and procurement policy. CMS stopped using the practice of planned inspection and substituted it for the system of random checks.
Root issues
The root issue of the undesirable variance in operating income is the introduction of changes to the business due to the companys desire to increase revenue levels. The data on CMS revenues and expenditures up to year T demonstrates a lack of positive dynamics in quality control costs and customer satisfaction levels. Thus, a decision was made to reduce quality control costs and improve product quality significantly. The closure of two plants is a change that requires a considerable amount of time for proper implementation. The rapid transition to a new quality control policy is a potential risk factor in the context of customer satisfaction levels. Renovations implemented by CMS are substantial, so the lack of gradual introduction and review of the rationality of new policies and processes is critical. According to the statistics, manufacturing and quality control changes have improved a large part of the companys performance but caused a crucial deterioration in several aspects of the business.
Analysis
Significant variances in company income and declining customer satisfaction indicate a range of issues caused by production renovation. In this regard, the reduction in the number of plants and the transition to a new product line was made incorrectly, resulting in a discrepancy of $18.8 million in budget and operating income. In addition, the adoption of random quality inspections resulted in a critical increase in external failure costs of $6.7 million, compared to $0.2-0.6 million in the previous five years. Therefore, due to the rapid adoption of a new quality control policy, issues regarding the necessity of reinspections, retesting, and product reworking emerged (Dale & Plunkett, 2017). A misguided approach to technology upgrades and business policies resulted in two problems negatively impacting revenue.
The rapid transition to producing new products led to a significant increase in production expenses due to a substantial increase in manufacturing overhead. An increase in customer satisfaction level with the product features with a deterioration of other indicators means an inadequate focus on product renovation. Under these conditions, the company must promptly solve problems caused by improper upgrade implementation to avoid critical financial losses and bankruptcy.
Recommendations
In order to eliminate financial losses, it is necessary to consider the fundamental aspects of the renewal of production. First of all, it is crucial to define the production stages that impact financial losses. CMS needs to assess the quality of materials and components and ensure that the plants function correctly. Furthermore, the company should analyze the upgrades rationality in product diversity and quality control.
In this aspect, it is necessary to determine the optimal lines required to introduce renovations without financial losses. The product range should be fully compatible with the requirements, which makes it necessary to test all 30 coffee machines appropriately. In terms of quality control, it is necessary to gradually transition to new inspection methods since the improper implementation of new control methods leads to a considerable increase in external failure costs (Dale & Plunkett, 2017). The study shows a decrease in customer satisfaction, indicating a product quality deterioration after the introduction of random inspections. Thus, CMS can reduce unwanted operating costs through a more rational implementation and analysis of new technologies and policies.
Conclusions
Coffee Maker Supreme is a company with significant experience in doing successful business in the global market. Before introducing several fundamental upgrades in production and quality control aspects, the company was characterized by a lack of dramatic changes in revenues. After implementing the renovations, CMS has incurred significant financial losses due to production overheads, quality control costs, and reduced customer satisfaction.
These factors indicate that the company made several critical mistakes when introducing the innovations. Incorrect renewal policies led to a significant decrease in revenues compared to the period before the implementation of the radical changes. The level of cost increases in this regard is critical and poses severe risks to the development and existence of CMS. Given the scale of the problems encountered, the company needs to take a range of prompt measures to eliminate the negative consequences of using new technologies and policies. Thus, the improper implementation of renovations has led to problems that require immediate solutions.
Reference
Dale, B. G., & Plunkett, J. J. (2017). Quality costing. Routledge.
Order from us for quality, customized work in due time of your choice.