1) Analyse the Potential Operations Management Problems That May Result from Accepting the Chinese Department Store’s Order.

In: Business and Management

Submitted By charliewright
Words 292
Pages 2
Operations management is about the transformation of production and operational inputs into outputs, that when distributed meet the needs of the customer.

One problem from accepting the Chinese department stores order is a risk of a fall in product quality the department store wanted a large order of an ‘exclusive range of products’. In the Chinese factory in 2010, the percentage of defective products had risen to 7.5% compared to 5% in the UK factories in 2005, an increase of 50%. This can be seen as a significant problem as there is a larger than previous risk of poor quality products which would go against the Chinese stores specification of an ‘exclusive range of products’ and could damage the relationship between the store and Burkinshaw. It could also result in no more orders from the store due to a lack of trust and reliability.

Another problem of accepting the offer would be the rise in cost levels due to the large order of the products related and diseconomies of scale. In the Chinese factory in 2010 the total output had increased to 10 million units compared to the UK factory total of 6 million in 2005, an increase of 4 million. This can be seen as a problem for the business as due to the move to China there has been a significant increase in costs. Such as the marketing budget rising from £15million to £25million from 2005 to 2010. This therefore suggests that the business will have to find an acceptable balance between the quality of their produced products in order to satisfy the department stores needs and ensure that the business has enough money to be able to continue to develop and grow in the new Chinese…...

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