TK1402 Bachelor of Applied Management

TK1402 Bachelor of Applied Management TK1403 Graduate Diploma in Project Management TK1404 Graduate Diploma in Operations & Production Management

Operations Management

Assignment 1

Learning Outcome 1 & 5

Semester 1 2020

Due Date: 22 June 2020

Contribution to your final grade: 50%

This case study will require you to research gold manufacturing techniques.

Goldcorp investigates New Zealand Otago Site

Goldcorp are a vertically integrated gold and precious metals organisation based in Russia. The company takes gold ore from large open cast mines in virtually unpopulated areas of Siberia and produces gold ingots in various product sizes for the wholesale market. The Wohlwill process is used as the primary gold extraction method.

A recent prospecting of land in the Otago region (just outside Ben Lomond Scenic Reserve, Queenstown) in New Zealand has highlighted an opportunity for a joint partnership with the New Zealand Government. This is considered an exciting opportunity for Goldcorp as New Zealand is has not used the Wohlwill process and this is seen as a key competitive advantage.

Goldcorp also has a fledging relationship with New Zealand Gold Merchants (NZGM), a wholesaler of gold and precious metal products. This company has a long standing, well established and respected with the domestic market based on honesty, reliability and responsibility. Goldcorp intends to use this relationship for wholesale and retail sales both domestically and internationally.

Learning Outcome 1: Understand the primary role and functions of operations management within the organizational and external environment.

39 Marks Total

1. Describe using a diagram the inputs, transformational processes and outputs of gold mining that Goldcorp would use?

6 Marks

2. Define who the internal and external customers are in the process.

3 Marks

3. Describe the core process considerations must Goldcorp take into account?

4 Marks

4. Outline at least two support functions that will have special significance during the establishment of manufacturing in Otago and why?

4 Marks

5. Show in a diagram, in general terms the supply chain for Goldcorp. Include in your diagram, examples of roles, departments or organisations listed in each part of the supply chain.

7 Marks

In order for the mine to be successful, two key considerations must be taken into account.

1. The mine must be able to extract a minimum of 1-5mg/kg of gold to gold ore and
2. The processing equipment must be able to extract gold at least as fast as at the Siberian site.

After successfully being granted permits for initial exploratory work, Goldcorp recovered 145g of gold from 32 ton of gold ore. The current recovery rate through chemical extraction at their Siberian mine is 12 kilograms per 24 hour day. It is projected that the Otago site will take 21 hours to produce the equivalent amount of gold.

6. Apply calculations to determine if the extraction amount make the expedition viable? Please show your calculations.

3 Marks

7. What is the productivity of the Otago mine compared to the Siberian mine as a percentage? Which mine is the most productive?

3 Marks

Goldcorp Corporate Strategy

Goldcorp has decided to commence due diligence process in setting up operations in New Zealand. Goldcorp business development team have determined via environmental scanning that this country has a very stable economic and political climate which makes investment in the long term attractive.

Goldcorp’s domestic wholesaler NZGM has agreed in principle to initial orders of 5 ton of gold products per annum provided Goldcorp’s operations meet local and its company’s principles and values. Goldcorp wishes to retain high standards of competitive capabilities.

8. Outline three challenges do you foresee Goldcorp will face setting up in New Zealand?

3 Marks

9. Outline which of competitive capabilities is Goldcorp focusing on the most?

2 Marks

10. Outline the core competencies which Goldcorp will find challenging?

4 Marks

Learning Outcome 5: Evaluate resource planning, sales forecasting and production planning techniques and apply the principles of capacity management.

26 Marks Total

Five independent samples were taken during the due diligence process resulting in five gold recovery amounts shown below.

Sample	Tons of Gold Ore Mined (tons)	Gold Recovered (g)
1	2.4	16
2	9.5	35
3	5.5	36
4	3.6	18
5	11	44

11. Using linear Regression to determine r² and the regression equation.

3 Marks

12. What does r² tell you?

1 Mark

13. A final sample of 7 tons of gold ore was taken from the test site. How much gold would the test team expect to recover? Please show your workings to determine answers.

2 Marks

Four Years Later …

Goldcorp have successfully overcome the barriers necessary to commence production at the Otago site. Initial sales to NZGM has been given to the demand planner shown below. Due to the short sales history, the Demand Planner is only using four week moving averages for all forecasts.

Week	Actual Sales (kg)
1	120
2	90
3	80
4	100

14. Calculate the four week moving average for estimated demand in week 5. Please show your workings to determine answers.

1 Mark

15. If week five was actually 110kg, what is the forecast error? Please show your workings to determine answers.

1 Mark

16. What is the forecast demand for week 6?

1 Mark

17. During the S&OP process, the supply manager indicates that it is acceptable to use anticipation inventory to ensure demand is met. Using a year to date average of sales, and given that production is a 24hour/ 7 Day a week, calculate the output of gold per week from the Otago site. Will production exceed, match or be less than demand? What does this mean for Goldcorp? Demonstrate how you draw this conclusion.

(Note: This question will require you to take information from all parts of the case study).

5 Marks

18. Gold demand internationally fluctuates cyclically every 7 years. At low points in gold demand, production will effectively grind to a halt for up to two years. However the market is volatile and demand can sometimes switch back on almost overnight. The cost of labour is about 5% of total operational cost. As part of Goldcorp’s long term contingency planning process, the HR department are attempting to determine what kinds of contracts should be set in place for workers. Two options are available:

1. Hire all workers as contractors (Chase strategy) or
2. Hire all workers as employees (Level strategy).

What strategy do you think Goldcorp should use and why? What ideas could be used to mitigate costs?

3 Marks

19. Concerns have been raised over the last couple of weeks that the Elution process has been slowing down production. This process is considered the bottleneck process in the gold extraction process. An analysis of production throughput rate is shown in the table below:

Calculate the current utilization of the Elution process step. Is this step slowing down gold extraction?

4. Marks

20. The Elution process consists of 4 large tanks each of which is running at full capacity. Each tank costs $450,000,000. The long term sales forecast indicates that growth is likely to occur to the tune of 40% in the next 10 years. Using a systematic approach to long term capacity decisions, list the considerations that you would make? What is likely to be the best decision in terms of capacity expansion?

5 Marks