Journal Of Quality Maintenance Engineering -Myassignmenthelp.Com

Question: Discuss About The Journal Of Quality Maintenance Engineering? Answer: Introduction The automotive industry covers a wide range of organizations and companies which involve designing, development, manufacturing, marketing and selling of motor vehicles. It is considered as one of the worlds most important sector of the economy by revenue (Friedrich Schumann, 2001). However, it does not include automobile repair, filling stations and delivery of products to end-users. It basically deals with the designing and development phase of the motor vehicles. An investigation on assessing the impact of the production cost on the profitability of car manufacturing companies-A case study of Ford. Background The present study is based on the Ford Motor Company which is an American multinational automaker which offers several kinds of commercial vehicles and automobiles. The organization is operating across the world with joint venture strategies and serving millions of customers. Ford is listed on New York Stock Exchange. Jaguar and Land Rover were the UK subsidiaries of the Ford which were sold in 2008 to Tata Motor. In the current financial year's company adopted a strategy to cut its global workforce for the purpose of addressing the issue related to declining share price. However, the higher production cost is the major issue which affects the overall rate of return of the business and other related activities (Sturgeon, Van Biesebroeck Gereffi, 2008). The profitability of business relies on the cost associated with the production procedure. This indicates the lower profitability is the major issue which is being faced in the Ford. Research problem The major problem associated with the research project is the lower profitability of the business which has a direct impact on the growth and development. Every business generally suffers from lower profitability due to the increased cost of production. This tends to threaten the competitive edge of the business and accordingly, all related stakeholders cannot get the benefit out of the same (Cavalieri, Maccarrone and Pinto, 2004). For this purpose, present research aims to assess the impact of production cost on the profitability of the business. This would be effective to carry out the in-depth analysis and work upon the issues which are being faced by the Ford. It leads to create a competitive edge and retain customers for longer time span. Rationale of the study The study under consideration is based on production cost and profitability of the business. However, the profitability is the main purpose of all businesses and all activities are dedicated to it. For an automotive sector, it is crucial to have proper control over direct and indirect expenses otherwise operating cost will be increased and negative impact of the same will be seen on entire performance (Hill et. al., 2006). In case of business does not focus on the cost aspect then continuous increase in the cost ruin the overall performance. For this purpose, the current study is being conducted to assess the impact of the cost of production on profitability so as to take corrective action in case of requirement. This facilitates to create the competitive edge of the business in the marketplace because appropriate strategy will be implemented to reduce the indirect cost and raise overall rate of return. Project Aim And Objectives To assess the impact of the production cost on profitability of the car manufacturing companies-A case study of Ford Objectives The objectives of the current research project are stated as follows which are framed in accordance with the research aim. In this regard, overall research aim has been broken down into small portion to make the objectives- To understand the concept of production cost and profitability To evaluate factors affect the profitability of automotive industry To analyse the impact of production cost and profitability of Ford To suggest different ways for decreasing cost of production and increasing profitability of the business Understanding the concept of production cost and profitability Shepherd (2015, p.3-12) stated that production cost consists of all direct cost such as labour, material and other stuff actively contribute towards producing the product. Further, in economic theory production function is considered as the mathematical statement which indicates the technological relationship between the input and output process. At this juncture, necessary inputs or aspects which are applied in the production procedure are considered as the factor production. This shows that cost of production varies as per the factor of the production and its volume. For example, if Ford plans to manufacture 100 cars in the month and 200 cars in the second month then the cost in both cases will be different. On the other hand, Salonen and Deleryd, (2011, p.63) carried out a study on Cost of Poor Maintenance (CoPM) where he stated that manufacturing system must look over the CoPM concept. It facilitates to identify the deficiency and performance of the corporation over a given time span. It enables companies to plan their other production related activities in the right manner. Apart from this, Ramcharran (2001) explained that profitability plays a crucial role and serves as the motivating factor in the entire automotive sector. The rate of return of reduced with the continuous increase in the cost of production. Owing to this, it is important for the business to reduce the cost of the production by applying suitable strategies. Evaluating the factors affect the profitability of automotive industry Ramcharran (2001, p.11) asserted that profitability and auto parts suppliers have positive or significant linkage. This is because in case the firm is applying suitable and effective supply chain management strategy leads to growth and development of the business. However, Ceschin and Vezzoli (2010) argued that uncertainty related to the demand is the crucial threat for the auto parts suppliers which reduce the income of automotive industry. For this purpose, effective management of information facilitates to apply the profit-maximizing strategy. This proves to be effective in creating the competitive edge of the business. Heath Norman (2004) delineated that profitability of the business is affected from the corporate social responsibility also as it provides long-term benefits. This influences corporation to incur the cost for the short term but the long-term benefits are provided to the firm. At the same time, effective corporate governance is important to which appropriate accounting policies comply for the purpose of increasing overall benefits and serving all related stakeholders in an effectual manner. In the similar fashion, Seitz (2007) reflected that product recovery operations such as remanufacturing affect the profitability of the business to a great extent. At this juncture, closed-loop supply chain management facilitates to cater the requirement of the business whereby recycling and re-use are made possible. Analyzing the impact of production cost and profitability of Ford Blocher, Chen and Lin (2002) explained that cost of production has a direct impact on the profitability of the business because as the proportion of expense increases the volume of profitability goes down. For this purpose, management of the business ensures to promote employees so they can put their extensive efforts for maintaining better performance in the marketplace. This enables the corporation to ensure that employees are retained and they better contribute towards the growth and success of the business (Blocher, Chen Lin, 2002). Hill and et. al., (2006) explained that profitability of the business goes down with the low volume of production. It is because generally fixed cost decreases the rate of return. Owing to this, companies or automotive industry should focus on increasing volume of production to gain the advantage of huge fixed cost. Yet, the variable cost will significantly increase the volume of production. Therefore, the automotive sector should carry out the research to assess the demand for products and services in the marketplace and in the same way production can be planned. This proves to be effective in utilizing limited resources in an effectual manner. In addition to this, Cavalieri, Maccarrone Pinto (2004) strategic cost management is beneficial for the return of the company. This is because management decides in advance that how the cost will be reduced and long-term advantages will be derived. For example, manpower is replaced with the technological innovation at many places that give r ise to short-term cost but leads to the long-term profitability of the business (Seitz, 2007). Research Methodology The research methodology is the most important aspect of the research which assists the researcher to conduct the in-depth analysis and helps scholar to reach the solution of the study (Neuman, 2002). It consists of type of investigation, research approach, data collection methods and data analysis approach which are explained as follows- Type of investigation There are two types of research investigation such as qualitative and quantitative. The first aspect is qualitative one which assists scholar in conducting the in-depth analysis out of the collected information (Creswell, 2002). This derives the deep insight about the topic under consideration. On the other hand, quantitative research is useful where scholar seeks to assess the impact of one variable on another. The current study is based on assessing the impact of production cost on the profitability of the Ford. Owing to this, application of quantitative approach is more suitable to accomplish the aim. This would be effective to apply the statistical method in the analysis of the collected information. Research approach There are two types of research approaches deductive and inductive where the application of the suitable method is based on the nature or requirement of the study. The deductive approach starts by observing the general information and reaching to the specific outcome. On the other hand, inductive approach begins with the specific information and accordingly researcher moves to general information (Creswell, 2013). Owing to this, present study applies deductive research approach in which normal causes behind the reduced profitability are assessed and in the same manner, the impact of the cost of production can be assessed on the profitability of the Ford (Creswell Clark, 2007). It would be effective to reach the specific research issue. Therefore, selection of deductive research approach is justifiable. Research philosophy There are two types of research philosophies positivism and interpretivism. The interpretivism research philosophy allows the scholar to apply own knowledge and insight in completing entire study. Generally, interpretivism research philosophy is applied under the qualitative type of investigation whereas positivism research philosophy is useful for the quantitative type of investigation (Bernard, 2011). Owing to this, positivism research philosophy has been applied in the current research whereby scholar can analyse the collected information on the basis of derived outcome. However, interpretivism philosophy cannot be applied as it allows the scholar to perceive or interpret the information from the socially constructed environment (Mertens, 2014).Therefore, selection of positivism research philosophy can be justified in the right manner. Research design There are different research designs such as exploratory, explanatory and descriptive. The descriptive research design is applied where the researcher considers the population selected for the study (Cavana, Delahaye Sekaran, 2001). For this purpose, characteristic of a population which is being studied is explained. On the other hand, exploratory research is used to explore something new whereas explanatory research provides the cause and effect relationship by defining the problem in a more precise manner. However, the study under consideration is based secondary data only. Therefore, application of explanatory research philosophy is suitable as the impact of the cost of production is being assessed on the profitability of the business. Therefore, selected research design can be justified. Data collection Data collection is the procedure of collecting the primary and secondary for the purpose of meeting the specific research purpose. The present study is based on the secondary data only, owing to this primary data have not been collected (De Vaus de Vaus, 2001). However, there are different methods used for the collection of both primary and secondary data. For example, questionnaire, interview and observation methods are applied for the collection of primary data. On the other hand, secondary data are collected from the sources such as journals, books and online articles (Ritchie, 2003). Therefore, journals, books and online articles such as the annual report of Ford are used for the collection of secondary data which would be effective in assessing the impact of production cost on the profitability of the business. Data analysis There are two methods used for the data analysis procedure such as qualitative and quantitative. The qualitative method consists of thematic analysis in which themes are constructed and that is supported with the help of detailed analysis. On the other hand, the quantitative technique is based on the statistical measures such as regression, correlation and descriptive analysis(Pausas Lavorel, 2003). It assists the researcher in understanding the impact of one variable on another so as to accomplish the research aim and objectives. In this regard, the current study applied such kind of aspects correlation and descriptive to carry out in-depth analysis from the collected information. It helps in meeting aim and objectives of the research in the right manner (Holsapple Joshi, 2002). Thus, the qualitative method cannot be applied as it will not help in assessing the impact of production cost on the profitability of Ford. Findings from the secondary data analysis In order to carry out detail analysis, financials of Ford are referred to collect information about the profitability, cost of production and sales revenue generated in the last 10 financial years. At this juncture, cost of production and profitability for ten years are analysed by using descriptive, regression and correlation method. The below-mentioned graph is showing profitability and cost of production from the financial year 2007 to 2016. Table 1: Cost and profit Year Cost of production ($) Profitability (Net income) ($) 2007 142587 -2483 2008 127102 -14766 2009 98866 2712 2010 104451 6557 2011 113345 20222 2012 115693 5665 2013 12094 7155 2014 126215 3187 2015 126495 7373 2016 126584 4596 (Source: Ford Motor Company, 2009; Ford Motor Co, 2017) Table 2: Descriptive of profitability and cost of production Cost of production Profitability (Net income) Mean 109343.2 Mean 4021.8 Standard Error 11520.0593 Standard Error 2770.193 Median 120954 Median 5130.5 Mode #N/A Mode #N/A Standard Deviation 36429.626 Standard Deviation 8760.12 Sample Variance 1327117654 Sample Variance 76739704 Kurtosis 6.94167161 Kurtosis 2.907666 Skewness -2.4802463 Skewness -0.53072 Range 130493 Range 34988 Minimum 12094 Minimum -14766 Maximum 142587 Maximum 20222 Sum 1093432 Sum 40218 Count 10 Count 10 The above-mentioned table shows that average cost of production for 10 years is 109343 whereas average profitability for the same time was 4021. Further, the standard deviation for the cost of production is 36429 but for profitability, it is 8760. It indicates that both variables have significant variation and they little less correlated to each other. Table 3: Correlation between cost of production and profitability Cost of production Profitability (Net income) Cost of production 1 Profitability (Net income) -0.252325083 1 Table 4: Regression output Regression Statistics Multiple R 0.184460137 R Square 0.034025542 Adjusted R Square -0.103970809 Standard Error 9424.460653 Observations 9 Table 5: Anova df SS MS F Significance F Regression 1 21900319.99 21900319.99 0.246568418 0.63471349 Residual 7 621743210.2 88820458.61 Total 8 643643530.2 Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0% Intercept 9520.65963 10118.47348 0.940918573 0.378074237 -14405.728 33447.04741 -14406 33447 142587 -0.045207091 0.091041172 -0.496556561 0.634713486 -0.2604853 0.170071072 -0.2605 0.17007 With the analysis of correlation table, it has been found that cost of production and profitability of the business are negatively correlated. This shows that in case cost of production is increased that profitability will go down. It reflects the consistency of collected information. Furthermore, a value of R square 0.03402 variations of the cost of production is explained by profitability. Moreover, regression analysis reflects that 0.63 or 63% variation is brought into the profitability. In addition to this, .37 regression coefficient indicates that there is only 37% chance that result occurred only in chance or outcome of the chance. Therefore, it can be said that cost of production has the negative correlation with the profitability. Table 6: Cost and sales Year Cost of production ($) Sales ($) 2007 142587 154379 2008 127102 129165 2009 98866 105893 2010 104451 119280 2011 113345 128168 2012 115693 134252 2013 12094 146917 2014 126215 144077 2015 126495 149558 2016 126584 151800 Table 8: Descriptive of cost of production and sales Cost of production ($) Sales ($) Mean 109343.2 Mean 136348.9 Standard Error 11520.0593 Standard Error 5001.7234 Median 120954 Median 139164.5 Mode #N/A Mode #N/A Standard Deviation 36429.626 Standard Deviation 15816.838 Sample Variance 1327117654 Sample Variance 250172368 Kurtosis 6.94167161 Kurtosis -0.288579 Skewness -2.4802463 Skewness -0.724943 Range 130493 Range 48486 Minimum 12094 Minimum 105893 Maximum 142587 Maximum 154379 Sum 1093432 Sum 1363489 Count 10 Count 10 The above-mentioned table reflects that average cost of production is relatively less than the average sales of the corporation in the last 10 financial years. On the other hand, a standard deviation of the cost of production is 36429 whereas sales are deviated by 15816. Table 9: Correlation between cost of production and sales Cost of production ($) Sales ($) Cost of production ($) 1 Sales ($) 0.081752315 1 Table 10: Regression between cost of production and sales Regression Statistics Multiple R 0.08175 R Square 0.00668 Adjusted R Square -0.1175 Standard Error 16720.1 Observations 10 ANOVA df SS MS F Significance F Regression 1 15048110.2 15048110 0.05383 0.82236 Residual 8 2236503203 279562900 Total 9 2251551313 Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0% Intercept 132468 17544.1492 7.550539 6.6E-05 92010.9 172925 92010.9 172925 Cost of production ($) 0.03549 0.15299027 0.2320071 0.82236 -0.3173 0.38829 -0.3173 0.38829 The above-mentioned table indicates that positive correlation between the cost of production and sales. The value of correlation is 0.0817 which indicates that perfect correlation which reflects that when the cost of production will be increased then the sales turnover will be also increased. It is because when the additional material will be added as the input then sales turnover will be increased automatically. In addition to this, P value indicates that there is 82% chance that result occurs by chance. In addition to this, a value of R square .0066 and F value are showing that there exist the perfect correlation between the sales turnover of the Ford and cost of the production. Discussion of findings The collected information reflects that as the cost of the production increases the profitability of the business will be reduced. However, the continuous increase in the cost of the production facilitates to increase the sales turnover because a volume of products go hike. It represents that cost of production is the crucial aspect for an automotive sector which tends to affect the profitability and sales turnover. This would have the direct impact on the entire performance of the business. On the other hand, uncertain demand and ineffective management of the production activities leads to consuming the higher cost. This shows that effective measures can be taken by the business so as to increase the sales turnover but with the continuous hike in the sales turnover also. Recommendation According to the collected information, it can be recommended to the management of Ford that strategic cost management should be applied whereby the company can effectively increase the profitability along with a large volume of production. This proves to be effective in bringing necessary changes and creating the competitive edge in the marketplace. Furthermore, a business can easily integrate all the resources in order to accomplish long as well as short-term objectives in an effectual manner. Apart from this, a volume of production should be large so as to get the advantage of the fixed cost and reduce the overall cost of the production. Apart from this, technological innovation and integrated supply chain should be adopted which help in anticipating demand of the production and accordingly manufacture the desired product. It would be effective in reducing the cost of production to a certain extent and increase the volume of profitability of the Ford. Future scope of the research The future scope of the research is to cover another aspect such as factors affecting the profitability and aspects associated with higher cost of the business. In this regard, industry data can be referred to understand the trends in the industry and its direct impact on the cost of production. Apart from this, future research can be conducted to assess the impact of corporate governance on the profitability of the business. Limitations The study has been completed by considering the important aspects associated with the same. However, of lack of secondary data was the limitation but still, appropriate sources were referred for the collection of data. In addition to this, only secondary data was collected so the addition of primary data might increase the weight of output. Conclusion The aforementioned research concludes that profitability is affected by the cost of production because management needs to incur the huge cost of the production of final product. However, the sales turnover is increased by devoting more input in the process of production. It can also be said that cost of production is the important aspect of the automotive industry so appropriate strategies can be employed for reducing the cost. 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