Operations Management of Fonterra: Capacity, Location, Layout, Improvement, Supply Chain, Inventory and Material Handling

RUNNING HEAD: Operations Management
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Fonterra
Operations Management

Operations Management
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Executive summary
The operations management is the administration of business practices in order to create
higher efficiency within the organisation. In this report Fonterra is taken as manufacturing
company to explain operations management. Fonterra is a New Zealand company which
produces dairy products. It is a global nutrition company which is owned by the 10,000
farmers. Fonterra is one of the top six dairy companies in the world. This report includes the
capacity management, general locational factors, plant layout and the continuous
improvement of Fonterra. Further, the analysis of Fonterra is made by describing supply
chain, inventory and material handling.

Operations Management
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Contents
Executive summary...............................................................................................................................1
Introduction...........................................................................................................................................3
Analysis.................................................................................................................................................3
Capacity management........................................................................................................................3
General locational factors..................................................................................................................4
Plant layout........................................................................................................................................5
Continuous improvement...................................................................................................................7
Supply chain......................................................................................................................................7
Inventory...........................................................................................................................................9
Material handling.............................................................................................................................10
Conclusion...........................................................................................................................................12
References...........................................................................................................................................13

Operations Management
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Introduction
Fonterra is a dairy manufacturing company. It is owned cooperatively by 11,000 New
Zealand dairy farmers. Fonterra represents 30% of international dairy trade. It was
established in 2001 by the merger of two diaries, New Zealand dairy group and Kiwi
cooperative diaries. The vision of the Fonterra is to be the origin of dairy nutrition for all
young and old. The company offers the dairy products that meet the need of customers such
as health and wellness. The company carries the practice of goodness to generate customers
around the world. This report has made an analysis of Fonterra. The analysis is made in the
terms of capacity management, general locational factors, plant layout, continuous
improvement, supply chain, inventory and material handling.
Analysis
Capacity management
The capacity management is the procedure of planning resources which are required to meet
demands of the company. It comprises capacity planning, forecasting, monitoring and
performance analysis. The capacity management strategies enable the company to increase
and decrease capacity to meet demand. The capacity comprises the factors like labor and
equipment which can be scrambled to increase the output of a company. The capacity
management strategies adopted by Fonterra are:
Lead strategy: The lead strategy is the most aggressive strategy adopted by the Fonterra. As
per this strategy, the company increases it’s production capacity in advance to meet expected
increase in demand. It is also used to appeal to customers away from the competitors. This
capacity management strategy is more effective when the competitors are exposed to the
inventory shortages and the demand rises steeply. It is an upfront investment in the capacity
more than needed (Kazerooni, et. al. 2015).
Dynamic strategy: The dynamic strategy is the most effective strategy used by Fonterra. It
maintains the capacity of production based on the forecasts. It adds or reduces capacity as per
the demand of customers. It is the ability to assimilate and reconfigure internal and external
capabilities to address changing environment. The dynamic strategy concerns development
while maintaining capability standards to ensure competitive survival (Manzini, Bozer &