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My main discernible problem this week was that of my team performance in MikesBikes, this sounds like a major issue but for me this feels not as bad as some previous weeks as all the team members banded together and worked really hard. We took on lessons we have learned in the past and all actively contributed, which is progress from last week. However. The big however. Our Cost of Goods sold is just way too high for our retail price so that we can't make a profit, for me this boils down to quality and production issues (particularly as this is my department). To reiterate: main problem this week is our production costs being way too high.

High production costs is not always a problem but as we have high costs and perceived low quality, resulting in low prices- we have a problem. 'Low quality' in itself is not actually a problem, obviously many companies such as WalMart are highly successful in running a low cost approach as customers accept that a lower price means that a product will likely do less or be less aesthetic. The problem for us is that this wasn't our strategy aim and we were not prepared or aligned to go down the low cost road. We had agreed initially that high quality would be our differentiation and yet we couldn't produce this. For me this is due to our take on theory, such as Total Quality Management, just not being reflected at the end of each year. For example, we had really good internal quality which should mean we only need a lower percentage of inspections, in reality- we had a really low rework and internal failure rate but were still perceived as being really low quality. 

We've had this low quality problem since early on so- why not just spend more on quality and fix it? We tried! We really put loads of money on it, brainstormed and tried loads of combinations but we still have the lowest quality. We tried accepting that and then spending more on marketing our products so that customers would hopefully forget the quality aspect. As our prices are generally in the lower end of the market, in real life this would likely influence a number of customers into believing we are low quality because we are low price- not too sure if this can happen in MikesBikes but either way, our starting strategy should have  been raise prices as this in line with a high quality product. 

To me, much of this analysis (as per Daudelin, 1996). is valuable in hindsight but how much could I genuinely have fixed in the past by making better decisions? I think not much, but all I can do is try to not make the same mistakes twice. So, what to do for next week? 

1. Accept the inevitable and clear signals from the market that we are the low quality producer and adopt this- this would mean slashing our expenses such as marketing and merely producing as many as possible to sell for as low a cost as we can. However, our prices are already low and every market is fairly saturated so a huge influx of low cost products would likely not be successful...

2. Issue shares/ check under the couch for change and raise all the money we can for a major upheaval in strategy and maybe only produce one or two kinds of bike and hope we can recover some SHV.

 

References

Daudelin, M. W. (1996). Learning from experience through reflectionOrganizational Dynamics, 24(3), 36--48

 

2 Comments

  1. Hi Matthew, I am also in charge of the ops for our team and I totally understand where you are coming from. I think we invested quite a lot on quality no matter what we set the price at as the demand rises for higher quality products. Perhaps try looking at your reports and charts to find out which part of your quality needs to be updated - i.e. is it the batch, raw materials, supply relations etc. and look at the after figures in the next rollover - see which one is making the most impact. I agree that just spending loads of money doesn't work, and spending loads on your marketing doesn't work either - just because it has a barrier to the effectiveness of the quality - if you know what I mean. I can't tell you exactly what is wrong with the quality since I don't have the figures and cannot see your charts, but it's a good idea to keep looking at the reports and seeing what your competitors are doing. In terms of your journal, I think there could be more of an improvement - use the readings, analyse and apply to this week's reflection. Best of luck.

     

  2. Hey Matthew,

    You clearly state the problem in your open paragraph- hence the 'reiterate' part. Something so straight forward and simple yet effective as I have read so many journals that I almost have to decipher what exactly their problem is according to Daudelin's theory.

    Your journal proved to be a very interesting read for myself as you discuss this aspect of quality and how your teams strategy was focused around quality. Perhaps you should focus more along the lines of what tactics you can pursue to boost quality up in order to achieve this strategic goal your group originally set out. You mentioned your main problem was 'high costs' but your main analysis of your problem seems to be a heavy focus around quality. For me that is your problem. If you spending so much money trying to achieve a good quality (if your company is not in the correct financial situation) you are always going to have high costs. Quality is a variable cost, so lower that cost, which will lower your high cost of goods. Once your cash-flow improves, then focus on the quality later, not the other way around.

    I too believe you need to provide a recent reading to cover the part of your 'Formulation and testing of a tentative theory to explain the problem'. Your reflection is excellent and detailed, but the theory is lacking and would help to bolster the body of your reflective journal piece.

    I enjoyed how you broke down your decisions to take action into two separate points/ alternative options. It would have been even better if you further expanded on this, or emphasised which one was your first line of strategy.

    Overall I enjoyed the read and wish you and your team good luck for the remainder simulation rounds.