April 03, 2009

Operations Management Lesson 8 Exercise

Operations Management Lesson 8 Exercise

Process map a process (or use one you have already compiled earlier) and assess each process step to decide whether or not each step adds value from Lean thinking perspective. Pay particular attention to delays and quality checking points. Assess the throughput efficiency of the process. Is a demand-pull or Kanban system used to control flow?

For this exercise I will map a process of the same company as in lesson 7 exercise Play.com. The process I will describe from the Lean thinking perspective is which processes are activated when a customer orders a DVD movie. Womack and Jones (1996) describing the Lean thinking perspective perceive economies-of-scale as largely inefficient and wasteful. The transition from mass to lean based processes was originated in Japan within manufacturing. Western manufacturers were amazed by the efficiency of Japanese car manufacturers and their Kaizen (Constant Improvement) philosophy. This philosophy implies that one should: Make when needed, with perfect quality, produce no waste and produce at the minimum cost

Play.com uses in many ways the Kaizen approach in their inventory and customer management. The concept of “value” is crucial in the Lean thinking philosophy. Play.com uses for the most part Lean in planning and operations management. A lot of items such as DVD’s and CD’s sold on Play.com are seasonal and that prevents long term planning. Like their competitors they have seasonal sales where superfluous stock is being sold at lower prices adding flexibility to the stock and capital management.

In the following example we will see the flow of the DVD movie arriving from the producer to the Play.com inventory and further on to the end customer.

A DVD movie title is produces at the factory. It is a new release of a very popular Movie.

There is a great interest for this movie and many customers of Play.com pre-order this movie.

The Lean system using the Kanban philosophy implies that the inventory control is more efficient that the regular inventory control. Play.com need to apply operational control and be responsive to customer demand for this particular DVD. If it is out of stock in high season the customers will simply order it elsewhere, at places such as Amazon.com or CDWow.com or many others.

Production of product - at the External Factory

Outside the scope of Play.com's influence

Registration as available in stock

The registration of product coming to stock is shown on the Web as available in stock.

Ordering of product - on the Web Portal www.Play.com

Say a DVD movie by customer. Play.com has excellent throughput efficiency compared to other similar sites. The ease of use and transparency is also excellent as all prices are delivered so no extra charges are added to your order. It is a perfect example of Lean thinking in demonstrating a high degree of operational effeciency and responsiveness.

Logistics and the Shipment of product -

If the DVD is in stock it will take about 1 week to receive it in your mailbox. I live in Norway and sometimes it arrives the same week as ordered. The DVD's are sent from the State of Jersey which I guess is another way of cost and tax saving for Play.com and their logistics operation. The product shipment and delivery status may be tracked on my personal page when I log in.

Invoicing

The ordered DVD is invoiced when ordered. The CRM system that is used has already all information needed stored when you log on. It is quite easy to add or remove ordered products before you confirm purchase.

Replenishing stock (ROP)

There should be a message informing the stock management that a certain product is sold out or the stock needs to be replenished.

The re-order point may be a weak point in this system. I've been using Play.com for a number of years and when I order products that are not in stock they sometimes do not show or ever get beyond the "awaiting stock" stage. The reason for this may be that the product is not ordered at all or that some pre-orders are "forgotten" by the system.

wl

In any case, there should be rigorous stock control for effective stock management and just-in-time delivery of products. The frequent almost constant sale of DVD's outside seasonal sales campaigns at bargain prices indicate that there are improvements to be made in the Stock control management.


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