Leola Milling Company

Base on the information of this situation, the identified problem that Leola has faced to is all about operation management problems, specifically ineffective production planning. The ineffective planning that only based on past history (no forecasting) of Leola has led to negative outcomes in both the past and present. First, in the past, lacking of good strategic, tactical and operational plans (Swink.M, Melnyk.S, Cooper.B, Hartley.J, 2014) that could cope with emergent issues (milling operations) and control marketing activities (sales promotion), had resulted in stockouts for its products. Second, in the present, the production planning department only bases on the stockouts situation in the past without consideration for consumers’ demand and capacity of company’s warehouse; and then design an excess production, so that lead to overstocking at the DC. This overstocking status requires Leola to use outside overflow storage that will increase costs for the company. In addition, too much inventory will decrease the company’s inventory turnover, and that will influence significantly to liquidity and the cash flow of Leola.

For this case, a more reliable production planning is recommended. Specifically, the production of Leola has to be planned based on analyses of historical and simultaneously forecasting data that includes evaluation and adjustment with factors influence the company’s operation in the future. Moreover, in terms of determining demand and consumption of customers, it should be measured by buying-orders, not open orders to ensure that the number is accurate and the risk of canceling orders is controlled. Finally, the information system should be improved to guarantee that the information flow will work effectively and efficiently, which can provide timely and accurate information for departments in the company, especially the production planning department.