November 05, 2007

Operations Management Lesson 10 Exercise

Operations Management Lesson 10 Exercise

As my job in IBM consists in selling Software products, for this blog I’ve chosen to talk about the difficulty of integrating the acquired company in Software Group division from a sales point of view, because the system presents several bugs.

These last years for IBM have been very important in order to grow the business and one way was the acquisition of important Software companies, especially in Tivoli brand that is focused on security, storage, automation and networking.

This strategy brings IBM a lot of vantages, mentioning some of them:

-        IBM buys Know-how of products;

-        IBM guarantees a deeper presence on customer

-        Extends market share

-        Extends presence on customer

-        Extends products portfolio

In order to gain the maximum advantage of the above conditions, acquisitions could be “quick and easy” from the process integration point of view.

Problem identification - Why-why analysis

When an acquisition occurs, from sales point of view we can incur these problems:

-        New products do not exist in IBM list price and are not able to be quoted for long time

-        Quotation is demanded to old company which applies different rules from IBM and the discount request process, as well

-        Customer data transfer process from the acquired company to IBM is always slow and incomplete

-        Sales people do not achieve targets as they are able to sell new products too late

If these situations last for long time, other problems could happen:

-        people coming from acquired company loose motivations and leave IBM, reinforcing competition

-        time to market is bad

-        lack of responsiveness to customer requests

-        market growth does not fit with the forecast

-        wasting time in getting information about customers that are not present in any database

-        customer satisfaction goes down

-        lack of maintaining 100% product functionatities

The answer is: “Why IBM takes much time to integrate new companies?”

The root causes are:

-        Lack of person committed in doing this (people from acquired companies are not familiar with the huge IBM world and cannot be operative immediately; then the process of taking them on board is very long)

-        Lack of clear processes and rules in case of acquisition (IBM does not employ dedicated people to this kind of situation)

-        Lack of flexibility of tools (Tools used for getting product configurations or processing orders are complicated, need to be uploaded worldwide and need formal authorization in compliance with the rules of each country where applying).

To get improvement to this kind of situation is not easy, but working on the right people to be committed in working on acquisition, from the integrating process point of view, applying clear rules will be a good start.

Operations Management Lesson 9 Exercise

Operations Management Lesson 9 Exercise

Before joining IBM I have worked in a company producing and distributing credit cards. In this company the 3 main sectors managing credit cards are: New Accounts, Credits, Call Center.

This company ran a particular application that allows employees to know all the necessary information about:

-        a single account belonging the whole account portfolio of the company

-        any credit card information of a single account

-        any account credit status information

This application was developed by an IBM Business Partner, worldwide reputation.

The Business Partner produced more than one version per year and several releases of this product, customer requirements were incessant and the developing of new functionalities seemed infinite. When I joined IBM I got in touch with some people responsible of this application and they told me how important the Quality Assurance step for this project was. They wanted to be 100% sure that all customer requirements were met. The QA process defined:

-        input based on customer requirements

-        ISO 9000 certification

-        Quality standards of the product

-        Quality control of these standards

-        Number of defects in test phase

-        Appraisal costs (internal and external)

At the end, in order to:

-        avoid external-extra quality costs,

-        achieve customer satisfaction,

-        ensure the work was compliant with customer requirements,

customer acceptance test occurred.

Operations Management Lesson 8 Exercise

Operations Management Lesson 8 Exercise

The objective of the 8th Blog is to evaluate a single step in a process in a “lean thinking” point of view, with attention on the delays wasting time and quality check points.

I have chosen the same example of 3rd blog, contract management process and, internally this process, I will talk about the “Software product contractual attachments” step, pointing out how this process does not match with “lean synchronization”.

“Lean synchronization” is the aim of achieving a flow of products and services that always delivers exactly what customers want, in exact quantities, exactly when needed, exactly when required and at the lowest possible cost (Slack et al, page 342).

In the case of the process here described, customers are represented by IBM people; this is an internal process and we talk about “internal customer”.

The main purpose of the process is to assure control, quality and speed about the delivery of contract attachments to IBM sales that is responsible of contract signing with external customer.

This process is pushed by the internal customer requirements and steps are:

-        configuration of software products (done by sales people)

-        preparation of MON - Master Order number (by a technical structure which validates the sales configuration, every time configurations are very demanding)

-        credit check request

-        MON data entry in Sap system (that will allow system in shipping products and charging License and Maintenance cost)s

-        print attachments.

Wasting time

This process allows wasting time because:

-        it is not able to manage peaks, people is not enough to manage all the requests and this is a first bottleneck

-        credit check tools are not updated, so often happens that the process slows down because of investigation, that requires more time

-        sap system is not flexible and do not allow to operate by hand when needed; then the system do not support “pdf” format printing, that could be done by scanner.

Flow control

The biggest problem is represented by the inadequacy of systems and lack of priority for employees.

A Kanban system could be implemented, in order to give the right priorities to each task. A new database could be create; sales people can insert their requests giving them a priority (the “kanban” colored card) and, basing on the “colour of the code” the requesting knows how much time needs to wait.

Operations Management Lesson 7 Exercise

Operations Management Lesson 7 Exercise

This lesson is about the “Inventory Management” and “Resources Allocation” that could be managed using tools and theories of ROP, MRP, and ERP.

The right use of these 3 elements has a significant impact upon the profitability of an organization.

For this 7th blog I have chosen a Building Company, analyzing how this company has to manage the stocks or semi worked materials in order to avoid logistic problems or high costs of storage.

Accordingly to the “Pareto Analysis” we can divide the material managed by the company in 3 categories:

-        High value items: represented by finished material to be installed once the building construction ends (i.e. sanitary fixtures, doors, windows, boilers…), around 20% of items that account for 55% of the total annual inventory value

-        Medium value items: represented by semi-manufactured products (i.e. different kind of panels, in order to separate environments, or solar/insulating ones…), around 30% of items that account for 25% of the total annual inventory value.

-        Low value items: represented raw materials (i.e. cement, lime, bolts and screws…), around 50% of items that account for 20% of the total annual inventory value.

Regarding the “Low value items”, company uses ROP method of making order timing decision because material is reordered in a fixed quantity, at specific trigger point, based upon historic data.

Regarding the “High value items”, as company is in a “dependent demand situation”, it uses MRP method. Company has to look at which products are going to be made and has to evaluate the appropriate quantities of end items it needs.

Regarding the “Medium value items”, company can apply ROP or MRP method, depending on the type of material, the seasonal price fluctuation of each component, the job order the company is dealing with.

As per its nature, MRP is quite complex to implement because requires a high number of variables to be used and managed together: gross requirements, scheduled receipts, on hand inventory and planned order releases. Moreover, the MRP element (master production schedule, bill of materials, inventory record files) must be carefully managed, because inaccuracies in data inserting leads to wrong MRP conclusions.

Operations Management Lesson 6 Exercise

Operations Management Lesson 6 Exercise

The 6th lesson is about the management of capacity and wants to point out the importance of resources used, in terms of quantity and quality.

For this blog I’ve chosen the “Warne Village Cinema” based in Rome.

It is composed of 16 cinema halls (with different seat capacity for each of them) and is situated out of the centre of the city, occupying a very large space.

Around Warner Village area we can find different kind of shops, like:

-        Amusement arcades

-        Library

-        Restaurants and Pizzerias

-        Sport shops

-        Big gymnasium

-        Large Supermarket.

Level/chase capacity Management

Starting from the Warner Village conception, cinema is able to meet demand by:

-        programming films in cinema halls with a certain number of seats at particular times;

-        choosing the number of times to program each film;

The big space at the entrance and exit of “Village” does not create any bottleneck for people passage.

Then different film typologies attract different people who are also interested in other activities to be done in the Warner surroundings (children are interested in amusement arcades, singles or people groups have the chance to meet ourselves, families go shopping).

The choice of opening a big supermarket and a big gymnasium in front of the cinema turned out to be a right decision for reasons here below.

Yield Management / Queue design

Supermarket and gymnasium facilities represent for the customers a way to optimize their own time because they could buy the cinema ticket before doing shopping or physical activities. That means saving a lot of time, avoiding queues for ticket buying or cinema entrance.

The same thinking could be done at the opposite: customers could prefer going to the cinema before going to gym or doing shopping, depending on the time.

Customer could avoid the crowding of the gym (for example) or they could prefer to do shopping in certain hour of the day because the supermarket offers special prices for goods in limited hours of the day.

Moreover, fidelity cards released by Warner Village attract people in “living the club”; so this concept of “global village” brings value to everybody in terms of minimizing the wasting time (for customers and for business locations) and maximizing revenue for the village.

October 22, 2007

Operations Management Lesson 5 Exercise

Operations Management Lesson 5 Exercise

For this blog, regarding the SCM, I’ve chosen to talk about the “IBM Integrated Offer Management”, in case of presenting an offer to customer.

This is a de-integration process because all the IBM divisions involved in this process are considered as “independent”; each of them have to achieve their own targets that are not linked with the objectives of the others.

The main “actors” of the chain are:

-        “SECTOR”: it is represented by the IBM sales responsible for the “high level relationship” with customer;

-        The 4 main “IBM Divisions” (HW, SW, Services and Consultancy”): they are represented by the IBM sales brand responsible;

-        “DEAL HUB”: it is represented by IBM persons responsible for the collecting of the whole stuff to be aggregated in the offer.

Sector --->

IBM Divisions --->

Deal Hub --->

Customer Proposal

The Sector indicates the way for the IBM divisions to proceed, maintaining the control of the whole customer business.

IBM Divisions are responsible about the prices of the all Brands belonging to the single Division, the special bid requests and they are also responsible of the contractual form to be applied to the products or services they are managing and selling.

The Deal Hub is the “Collector” of the information and authorizations got from the Divisions.

The Deal Hub put all the information together and, at the end, is able to present the final offer to Sector, in order to formalize it to customer.


As each ring of the chain is assumed to have an internal (local) process to be respected, sometimes this causes “tremendous waste and delays” (Womack and Jones “Learn Thinking”, 1996).

The delay is often related to the huge amount of authorizations that a single “actor” has to put in place; sometimes the complexity of the offer requirements led to an energy dispersion in the pursuit of internal process optimization, rather than supply chain optimization.

Other disadvantage is represented by the rapid change of internal policies and the consequent adaptation of people working in; as per consequence, time to market is negatively effected by.


Overall, the collaboration between IBM divisions is guaranteed and the concentration of capabilities also guarantees the quality of job. That leads to a more efficient planning of demand and distribution, and to a consolidated view of global sales.

The cost of work is splitted by the rings of chain and it is under control.

Operations Management Lesson 4 Exercise

Operations Management Lesson 4 Exercise

This lesson is about QFD and how it can fit into the development process of new products or services for a company. The QFD matrix helps companies in focusing on customer needs and how these needs could evolve.

For this blog I have chosen the case of “Tourist Information Kiosks”.

Regarding the “Whats” I put the items related to the information that customers need and would like to know, rating their importance in a scale from 1 to 5. “Maps of the city” and “Hotels” are rated 5 because the information they provide are the most common and useful for the tourist expectations.

“Emergency Points” is also highly rated because it could transfer to tourist a sense of safety and respect for people in general.

Regarding the “Hows” the “Colours”, “User Friendly” and “Languages” items are the most important because they cross 4 times the related “Whats”. About “Colours”, it has absolutely strong relationship with “Maps of the city” because tourist could have a clear and highly detailed picture of the site, could appreciate the differences and could use the kiosk as a tool to find locations where he/she will meet people.

“Speed” is also a very important quality characteristic in order to call for an emergency or to have a taxi in short time.

Table below shows in details all the important relationships.


Operations Management Lesson 3 Exercise

Operations Management Lesson 3 Exercise

About the third blog, I’m going to talk about the contract management process in “IBM Software Group (SWG)”, valid for the whole IBM European locations.

After getting the agreement with customer about the kind of Software to be sold, a long process starts inside IBM.

1) First of all, we need the price configuration of SW products, indicating how many quantities of particular SW licenses have to be sold (in terms of number of processors, for example).

A price configuration is also generated for SW Maintenance, which could be sold apart (if we are selling renewal of existing SW licenses) or embedded with new licenses.

“Configuration task” is managed by the “Techline Division”, based in Dublin.

2) Once we have the prices, in order to achieve the final price agreed with customer after long negotiations, we have to submit a “Special Bid Request” to the approvers. There are al least 3 levels of approval and maximum 5 levels of approval, depending on the amount of the “Bid”, the kind of SW products and the discount requested.

“Special Bid Request task” is managed by Software Sales Representative of customer and the requests are introduced in a dedicated Tool.

Tasks 1) and 2) must be managed in SEQUENCE; tasks 3) and 4) could be managed in PARALLEL with themselves or with task 1) and 2).

3) In order to demonstrate customer solvency, we have to ask for a “credit check”, indicating the amount of money that customer will have to spend. This must be positive in order to continue the selling process.

“Credit Check task” is managed by a division based in Bratislava.

4) In parallel with the above activities, we have to ask authorization to proceed with the formalization of the contract, especially this is a requirement for customers who do not want to sign contract compliant with IBM standard conditions (for example, the majority of customers belonging to Public Sector).

This task is demanded to “Contract and Negotiations” division.

At the end of the 4 tasks, we can proceed with the offer to customer. At the sign of contract, we have to send the contract to the “Fulfillment division”, based in Madrid, which is responsible of:

-        verifying that order is compliant with the bid approved;

-        customer and internal documentation is complete;

-        order data entry.

Operations Management Lesson 2 Exercise

Operations Management Lesson 2 Exercise

For the second blog I’ve chosen to talk about the difference between the “Pizzeria/take away” and “Pizzeria/Restaurant”, pointing out the following items:




High repetition: every day several quantities of pizza are prepared and took out of the oven; high repetition about the prepared flavors of pizza; high number of output produced in terms of Kilos of Pizza per day

Capital Need: specialized ovens for mass production and high costs of energy

Specialization: capabilities in managing the peak times, knowledge of what quantity / kind of pizzas (and flavors) to be produced relating to specific time of the day / week/ month.



Low repetition: smaller quantity of pizza produced comparing to the “Pizza take away” (low # of output produced in terms of Kilos of Pizza per day). Less typology of pizza flavors.

Capital Needs: generally, wood-burning oven (most diffused in this kind of Pizzerias) is an asset which did not bring high maintenance costs; the row material (wood) is less expensive compared to the energy of the traditional oven and it generates and keeps higher level heat.

High unit cost: comparing to “Pizza take away”, unit cost is higher because the cost of ingredients to be used is higher in terms of quantity bought.



Flexibility: Flexibility means to be responsiveness to customer requests in short time and in preparing any kind of pizza flavors in each moment as per customer choice. That requires raw materials and variety always to be available.

Complexity: in a “Pizzeria/take away” you can choose any kind of pizzas, from the easiest and lightest one to the more “sophisticated” with particular ingredients (or more genuine ingredients) or particular kind of flours.



Routine / Standard: as Pizza is not the sole business you could not find the same choice than in the “Pizzeria/take away”.

Complexity: Low, because of fewer flavors.



Batch processes: pizzas are baked simultaneously or sequentially in a high number of quantities; frequently, more than one oven is present in order to have the counter full of products to sell.



Mass services: high output but variety is controlled because of many raw material could not remain for long time unused.

Operations Management Lesson 1 Exercise

For this first blog I have chosen the way of doing “Pizza” and the role of “Pizza Chef”, describing how this job is important in designing the operation model of doing pizza.

The “Pizza Chef” is responsible of the whole phases of making pizza, with great attention on these important stages:

-      kneading (dough), “leaven-balls” preparing, leavening, manipulation, spicing, baking;

-      managing of storehouse and stocks, raw material conservation;

-      using and taking care of equipments;

-      managing the activities from the financial and administrative point of view;

-      taking responsibility of the relationships with suppliers and customers.

A skilled “Pizza Chef” is also able in “playing” with pizza, rotating it in acrobatic and choreographic way, sometimes at rhythm of music (see photo below).

A “Pizza Chef” has to know the whole kind of flours (light, whole meal…) and how to handle them with the other ingredients in order to achieve a mixture of good quality, accordingly with the whether and the seasons (different temperature degrees and different levels of humidity lead to different ways of managing the dough).

A good “Pizza Chef” must be able in preparing different kind of Pizzas (thin, thick, soft), accordingly with customer tastes and he must know the ovens capabilities, in order to manage the cooking point.

A “Pizza Chef” is also responsible of the dough quantity to be prepared with regard to the day of the week and to the forecasted number of customers to be served.

Other important factor is the creativity; there are several recipes that offer an infinite series of “new pizzas” with innovative tastes and aromas.

The capabilities of a “Pizza Chef” are crucial for the development of the pizza-restaurant business;

in fact, as a perfect Operation Manager, he has to take care at “volume” and “characteristic” of pizzas (quantitative and qualitative approach) and he has to succeed in meeting customer requirements (performance objective).

Referring to the “Operation and Process Management” we can state that the job of the “Pizza Chef” covers all the tasks of an operation manager:

-      coordinating the design of the process,

-      planning the ongoing operations (delivering),

-      developing the process over time.

Pizza with potatoes

pizza preparationpizza preparation 2rotating

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