Operations Management Report: Analysis of Friendly Couriers Inc.

This report analyzes the operational challenges faced by Friendly Couriers Inc., a courier service company in Toronto, due to declining revenue and high maintenance costs related to their truck fleet. The analysis examines data on brake and suspension repair costs, comparing the East and West Toronto teams, and evaluates various options to address the issues. The report identifies that the increasing maintenance costs, especially in the East team, are linked to mileage and driving conditions. The report dismisses the options of switching trucks between teams or buying lifetime warranties as unfeasible, given the financial constraints and data analysis. The recommended solution focuses on improving operations management through driver training to reduce wear and tear, route optimization, and potentially leasing trucks during peak seasons. The report emphasizes the importance of an inclusive approach, involving all stakeholders, to ensure successful implementation of the proposed strategies to improve the operational efficiency and maximize profits for the company.

Running head: operations management
Operations management
Professor
Word count

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Operations management
Contents
Background................................................................................................................................. 3
Introduction.................................................................................................................................. 3
Data analysis............................................................................................................................... 4
Operations management............................................................................................................. 6
Options available......................................................................................................................... 7
Recommended option.................................................................................................................. 8
Conclusion................................................................................................................................... 9
References................................................................................................................................ 10

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Operations management
Background
Friendly couriers inc is a business company dealing with courier services in Toronto Ontario.
The company has registered a decrease in its revenue by 10%. This is worrisome for Joe
Sebarian, the owner and president of Friendly Couriers Inc. He heard from his dispatcher that the
main reason for this loss is the mismanagement related to trucks. The operational cost of services
is high because the maintenance cost for the trucks used for services is high. The services are
given to the east and west part of Toronto by east and west team respectively. The company has
been using these trucks for the last 8 years (Secchi, Roth, & Verma, 2018). The company faces
financial losses due to suspension repair and brake repair costs related to trucks. There must be a
prudent operational strategy to reduce the operational cost and supplying the services to
customers at a competitive rate. This paper aims to identify the feasibility of many options which
the company has (Kumar, Mookerjee, & Shubham, 2018). In the end, the most feasible option is
recommended after carefully analyzing the previous year's data present with the company.
Introduction
An increased truck breakdown is leading to the loss of revenue. The maintenance cost is high
because of suspension and brake repairs of trucks. In addition to this Joe is worried about the
workers strike in the postal department. The peak season of business is passing without any
major income. In order to further investigate the issue of truck breakdown, Joe consulted his
dispatcher. Joe already knows that services of existing trucks are not economically viable due to
their high maintenance cost (Netland & Aspelund, 2013). In order to find a solution to the
problem, there is a need to have a sound operations management strategy that can reduce the
maintenance cost as well as increase revenue for the company. The decision is to be made soon
so as to take benefit of peak season. Joe was considering that the repair cost should be directly

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proportional to the mileage given by trucks. However, his dispatcher told that mileage may have
a different impact on brakes as compared to suspension. In addition to this, the dispatcher told
that driving habits of driver and conditions of the road also influence the truck maintenance.
Hence, these are directly related to revenue generation for the company (Stefania Boscari,
Netland, & Rich, 2018).
The operations management need to be taken into consideration. The operational management
strategy must be such that input cost is reduced and revenue is generated for the company. The
company needs to fix the problems related to maintenance and depreciation cost. the company
should reach a decision only after a thorough analysis of the data provided in the table. There
must be a reduction in operational cost if the company has to survive in the market of cut-throat
competition. It cannot increase the services charges to pass on the consumer as competitors will
be able to provide the services on reasonable rates. Thus, customers will be lost to competitors.
To prevent this, the Friendly couriers inc must adopt the sound operation management strategy.
Data analysis
The table provided regarding the operational costs of the organization is carefully analyzed. The
number speaks; the sound numerical analysis will be able to yield positive results (Bendig,
Strese, & Brettel, 2017). Thus, the president of the organization, Joe Sebarian will be able to take
benefit of the peak season. There must be short term and long term goals for the organization so
as to reduce the financial losses. The numbers revealed that the maintenance cost is high for East
Toronto team. The west Toronto team has comparatively less maintenance cost, therefore,
switching the truck between the two teams is not the solution to the problem. After careful
analysis of data, it is found that brake repair cost of the east team’s trucks has increased from
approximately $ 310 in 2012 to $ 472 in 2018. It attained the peak value of approximately $ 508

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in the year in 2017 (Anand & Gray, 2018). The cost related to suspension in the east team
increased from $243 in 2012 to $ 445 in 2018. The peak value of suspension cost in east team
attained in the year 2018 itself. In addition to this, data findings reveal that trucks of an east team
have also traveled more from year to year with the largest mileage traveled in 2018.
EAST TEAM
The maintenance cost in the year 2012 related to east team= suspension repair cost + brake repair
cost
Thus, it was $ 243.54 + $310.80= 554.34
Average mileage traveled in the year 2012= 2171
So average maintenance cost as the per mileage was 2171/ 554.34= 3.91
The maintenance cost in the year 2018 related to east team= suspension repair cost + brake repair
cost
Thus it is 472.44+445.76= 918.2
Average mileage traveled in the year 2018 is 6130
So average maintenance cost as per the mileage is 6130/ 918.2= 6.6
These numbers clearly suggest that maintenance cost is increasing in an east team with each
passing year.
WEST TEAM
The maintenance cost in the year 2012 related to east team= suspension repair cost + brake repair
cost

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Thus, it was $79.74+ $113.16= 192.9
Average traveling mileage is 1702
So the maintenance cost as per the mileage is 1702/192.9= 8.8
The maintenance cost in the year 2018 related to east team= suspension repair cost + brake repair
cost
Thus it is $ 213.36+ $ 228.42= 441.78
Average traveling mileage is 2753
So the maintenance cost as per mileage is 2753/ 441.78= 6.231
Thus, it can be concluded that the average fleet mileage has an effect on the overall repair costs.
Along with this, mileage traveled has different impacts on repair cost related to brake in
comparison to suspension cost. While in the case of east team the suspension repair cost is lower
than brake repair cost, it is otherwise in the west team in which suspension repair cost is more as
compared to brake repair costs. The East team does more work at a comparatively efficient rate.
The maintenance costs of trucks in the west team are very high that must be reduced to again
gain the lost space in the market (Ketokivi, 2015). There must be a prudent strategy to maximize
the profit and reducing the operational cost.
Operations management
Operations management can be defined as using the most efficient method related to men and
material cost to maximize the profit of the organization (Lu, Ding, Peng, & Chuang, 2018).
Operations management is a vital part of the policy of every organization. The operational cost
cannot be higher than the competitors, especially in the globalized world of the 21st century.
Having least operational cost gives competitive advantage; at the same time, if the operational

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costs are higher, the company can lose the competitive advantage leading to loss of market to
adversaries or competitors (Hitt, Xu, & Carnes, 2015). The demands of the customers are
exponentially high in this era of globalization; so the organizations aspire to give the quality
services to consumers without deteriorating the financial health of the company.
Options available
The president of the organization is provided with some options of solutions which are as
follows:
a) Switching the trucks between two teams
Joe considered different options like switching over the trucks between east and west team. But it
was found from the data of previous few years that there is the difference between the wear and
tear cost of trucks with respect to the team. The mileage of the trucks of the west team is
comparatively poor, though in both the teams the maintenance cost is rising with each passing
year (Bromiley & Rau, 2015).
b) Buying a lifetime warranty
Dispatcher of Joe has suggested him to buy lifetime warranty related to suspension and brake
repair cost at the rate of $ 4500 per truck. This would lead to one-time payment but lifetime
solution according to the dispatcher
c) Buying new trucks
Joe has another option of buying new trucks altogether but this needs to be kept in mind that the
company is already facing the issue of loss in revenue.

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Recommended option
Switching the trucks between two teams will not yield the intended result as there is lots of
difference between average mileage and related maintenance cost of East and west teams.
Buying lifetime warranty is also not the feasible option as it cost more than per year expenditure
did on maintenance of trucks (Ta, Esper, & Hofer, 2018). This huge amount cannot be afforded
by the company in situations of financial loss. Plus, it will not be a prudent decision to buy
lifetime warranty at such a high rate (Meredith & Pilkington, 2018). The best solution is to do
certain changes in the operation management of the organization. The short-term measure can be
taking some trucks on lease and recruiting new drivers for the peak season. Recruiting new
drivers does not mean that old drivers should be fired or ignored. They must be there but should
be provided training to deal with efficiency issues related to operational costs (Barratt, Kull, &
Sodero, 2018).
The drivers need to be provided training so that they can reduce the wear and tear cost. In
addition to this, the threshold can be set up, above which, if wear and tear cost goes, the driver
will have to pay for that. Where needed, new and efficient drivers can be hired. There can be the
installation of Real-time positioning technology to track the location of the truck, thus
monitoring the working of drivers. This will bring the efficiency in the working of the
organization (Villena & Gioia, 2018). The condition of roads cannot be corrected by the
organization, but definitely, the routes can be changed. It will also reduce the total delivery time
along with providing fuel efficiency. Moreover, the company should implement any change
keeping in mind the unique needs of the organization and taking every stakeholder into
confidence. There must be an inclusive approach with giving respect to people from different
backgrounds (Udenio, Hoberg, & Fransoo, 2018). This will ensure the smooth implementation of

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change. Diversity management and knowledge management are the subsets within operations
management. These aspects must be heeded.
Conclusion
It can be concluded from above mentioned numerical figures and the explanation provided over
operations management that the organization is facing the issue of bad operations management
strategy (Hitt, Xu, & Carnes, 2015). The organization needs to concentrate on its daily operations
and strategies related to it to bring efficiency in the working of the organization. There is a need
to provide training to drivers so that they can ply on the roads with difficult conditions (Udenio,
Hoberg, & Fransoo, 2018). In addition to this, the transportation route can itself be changed to
reduce depreciation cost. Buying a lifetime warranty is not a feasible option for the organization
as many new trucks can be bought in the mentioned amount of warranty. The issue of operations
management cannot be left in limbo. There must be a sound strategy to maximize the profits by
reducing the operational costs of the services provided by the company (Stauffer, Pedraza-
Martinez, Yan, & Wassenhove, 2018). The operations management strategy must address the
unique needs of the organization and there must be effected in the working of the company
(Udenio, Hoberg, & Fransoo, 2018)

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Operations management
References
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Journal of Operations Management, 24-27.
Barratt, M., Kull, T. J., & Sodero, A. C. (2018). Inventory record inaccuracy dynamics and the
role of employees within multi-channel distribution center inventory systems. Journal of
Operations Management, 56-59.
Bendig, D., Strese, S., & Brettel, M. (2017). The link between operational leanness and credit
ratings. Journal of Operations Management, 354-367.
Bromiley, P., & Rau, D. (2015). Operations management and the resource based view: Another
view. Journal of Operations Management, 50-60.
Hitt, M. A., Xu, K., & Carnes, C. M. (2015). Resource based theory in operations management
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Ketokivi, M. (2015). Point–counterpoint: Resource heterogeneity, performance, and competitive
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