Material cost

Doubt in the amount of actual demand that they will receive makes planning and controlling more difficult, their operations are subject to independent demand, which means they supply demand without having any firm forward visibility of customer orders (Bridgefield Group, n. d. ) they don’t know what the demand is going to be until its customers (the supermarkets) tell them, and they can’t give accurate estimates because they can’t predict when its customers will come in store or even what they will buy.

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The year at Sizzling Stir Fry is quite seasonal, the beginning of year is busy, because of Chinese New Year; they have to plan months in advance for promotions, checking their capacity etc and their quieter months are July, August and September, because the supermarkets are using more salad type mixes during the Summer period. But they also describe their weeks as seasonal, Saturdays and Tuesday are quiet for them, Thursday is the heaviest, their busiest day of the week, as the orders are wanted by supermarket for the weekend and any products that are reduced to sell are considered by the supermarkets as waste.

At the moment Sizzling Stir Fry assumingly operate using due-date sequencing, work is sequenced according to the date when it is due for delivery, the benefits of this is that it usually improves the delivery reliability of an operation and improves average delivery speed. (Slack, 2007, p300) it also uses forward scheduling, (Slack, 2007, p305) although they do have some products made using the sales estimates, they begin producing to order as soon as it arrives in the evening, this is helpful for Sizzling Stir Fry because they have already produced an ‘x’ amount of finished packages, making it easier to finish the final order.

Unfortunately for Sizzling Stir Fry, the estimates they receive at 10am are not always accurate enough, and often still have problems despite forward scheduling, because when the actual order arrives at 8pm, they simply haven’t ordered enough raw materials to complete the orders. In the interview with the director he points out that empty shelves result in a loss of business, because supermarkets need to meet the needs of their customer, and it is easy for the supermarket’s customer to go elsewhere, equally, the supermarkets can choose to source their fresh cut vegetables elsewhere.

Sizzling Stir Fry could benefit from having ‘buffer inventory’; this is known as inventory which compensates for unexpected fluctuations in supply and demand (Reference for Business, 2010) this would help them cope when they get a larger order than forecasted. The problems with this are that they could have storage problems with this, including the cost of keeping the inventory and because their goods are perishable, the shelf-life might run out before it even reaches the shelves, because it hasn’t been needed, once any vegetables have been cut, this instantly reduces its shelf-life.

Sizzling Stir Fry often have to make sure they a sufficient number of staff to be able to operate at different points in time, also known as rostering, (Slack, 2007, p305) it currently has around 186 staff in total, with its core staff fluctuating between 20% and 40%. Their labour turnover for core staff is at around 10%, with agency staff at around 50%.

In the past, the firm used to recruit for the peak times of year but are now using an agency, in the interview with HR, she describes the advantages of this as the speed of being able to turn the labour on and off quickly, and the fact that the agency ‘kind of’ keep track of which people have worked at the company before, she also explains how it actually cost less once considering pension contributions etc. In the same interview she describes its disadvantages; there can be problems with quality, as the agency are more prepared to substitute the quality of the workers, even though the agency does the induction training.

Now the firm also has a training instructor, if not then a supervisor or line leader, teaching basic Health & Safety. Because the jobs aren’t highly complex, it allows employees to pick it up in a short time, this is helpful for Sizzling Stir Fry as it means they don’t have to spend too much on training, and if new starters can learn quicker and gain more experience, the quality of the work done is improved. Sizzling Stir Fry have just launched a business improvement programme, supported by regional and government funding. It involves a 12 week workshop, looking at lean production, and specific areas within operation.

All employees which take part in this gain an NVQ level 2 in business improvement techniques. One business improvement team looked at how noodles were being fed into bagging line and how the differed lengths perform in the factory, they found that the shorter the length, the better it will perform but then more expensive material. Changing to an 8 inch noodle from 12 inch noodle, incurred a 8-10% price increase of doing so, the team then carried out a 3 week trial of only using 8 inch noodles, their conclusion was to just use 12 inch, as there was not an appreciate difference to support increase in material cost.

Another group looked at a problem with feeding clean trays into wash lines, they decided to put saddle bars on side of conveyer to straighten them, and this saved some labour cost for the company. This works on the theory that there is a stable foundation of quality, upon which you build layers of dependability, speed, flexibility and then cost, therefore once content with the quality, you then move on to dependability and so on. By using this theory, the firm could identify whatever issues it is having with each performance dimension stage by stage and work to solve these issues before moving onto the next dimension.

The problem with this is that Sizzling Stir Fry might value each performance dimension differently, for example, they might want to solve dependability issues first, rather than quality, because they value this more. There is also the ‘kaizen’ Japanese approach, (Value Based Management, n. d. ) meaning continuous improvement; constantly striving for improvement is a good way of trying to meet objectives and targets. They could analyse why they regularly underestimate the sales forecast, or like with the noodles, find a way of making the process more efficient.

They may also wish to look at alternative ways of doing things that could make the products last longer without introducing the use of chemicals. If they could do this, it would allow them to manufacture more orders before the order comes in, without the worry of wasting materials. Sizzling Stir Fry should also consider the PDCA cycle (Plan, Do, Check, Act) (ASQ, n. d. ). They could try carrying out different methods and seeing which has the best outcome, one option could be to buy in more inventory than estimated, and keeping it as buffer inventory.

They could trial this for a couple of weeks and check the cost of keeping buffer inventory, seeing if it has been wasted or if it has been worth it, and if it has meant they have fulfilled orders and helped them be more efficient in delivering it to their customers. It will take some strain and they will be less under pressure when meeting deadlines for orders. It was mentioned in the director’s interview that they currently have an issue with the prices the supermarkets sell them at.

It is costing Sizzling Stir Fry more out of season to supply the ingredients through an agency but the increase in cost isn’t reflected in the increase in price, therefore Sizzling Stir Fry are making less out of season as it is costing them more to supply the product. It has been stated that they will be starting to put the prices on theirselves, rather than allowing the supermarkets to dictate, but they need to do this while still remaining competitive in the market.

The company need to address its issues between the estimated forecast and the actual orders, research needs to go into finding a better balance, not producing so much more that there is too much inventory left around and it gets wasted, and not less that they don’t fulfil orders, as this could affect Sizzling Stir Fry’s reputation to deliver, and since it is considered lucky enough to supply 2 of the top 5 supermarkets, as well as some smaller ones, they need to show they are reliable suppliers. This also has to be done without letting the quality of their products disintegrate.