OPERATIONAL MANAGEMENT LESSON 8 EXERCISE– REFLECTIVE ONLINE LEARNING

“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 a Lean thinking perspective. Pay particular attention to delays and to quality checking points. Assess the throughput efficiency of the process. Is a demand-pull or Kanban system used to control flow?”

Spanish ITV

ITV stands for Vehicle Technical Inspection, and it is a semi public technical control all cars must go through periodically for security and environmental reasons.

Accessing ITV sites can take place:

    when client decides to go directly according to his availability and the last revision date

    when government reminds through a letter last revision will prescribe shortly and reminds you can contact them and order a particular date

The second method eases resource planning forecasting, so this channel is boosted by government reducing the total process time for customers with fixed dates.

If on the other hand customer decides not to set a fix date, there is much waste generated as resources haven’t been planned aligned with supply.

Once all papers have been reviewed by employee number 1, each car is given a queue number (1 out of 12) in order to go thorough the whole revision process. The queue management is done through an information system that alerts how many cars are still on each queue; and takes into account the aging of the car, as the older the car is the longer time takes normally to go through the whole process.

Whole revision process is done on a rolling car basis (each employee is specialised on controlling specific sections, and the car moves straight from one section to the other one).

This process allows controlling exactly the time spent on each of the queues, and reduces the time spent by employees going from one car to another.

Between each section there is a traffic light that alerts the car it can move towards the next section, and to the first employee to allow a new car enter the queue.

In this way the waste time and waste efforts between sections is reduced and allows the whole process to get good time metrics.

One of the potential problems of this process management, is that if one of the cars takes too much time on one section of the Queue, it will surely mean a waste of time not only for this car, but for the rest of the cars on the queue.

Could this current process be improved by implementing a more complex Kanban system?

If we generate one additional queue with no employees, that is used only in case one car seems to need more time than others, we would for sure reduce the waste without incrementing the needed resources.

: 28 Mar 2009 18:55 |  Comments (1) |  Close comments |  Report a problem

OPERATIONAL MANAGEMENT LESSON 7 EXERCISE– REFLECTIVE ONLINE LEARNING

"Take a look at a material processing operation. What types of stock control methodologies (re-order point, MRP, ERP etc.) are used? Comment on the possible reasons for the choice of method. If you can, conduct a sample Pareto (80/20) analysis of stock levels and stock usage (by value). How effective is the stock management?"

State of the art restaurant material processing operations

On the last years “state of the art cuisine” has increased its popularity into levels no one expected before. This art is today a complex process of transforming simple raw materials into complex mix of flavour, texture or smells in order to “transmit impressions, feelings, sensations, and experiences”.

No chef in history has received as much publicity as Ferran Adria. He is called an artist and is compared to Dali, Picasso and is often called a genius managing his Spanish restaurant “El Bulli".

Being the recipe of this commercial success based on a tremendous effort to reach art levels with food, the recipe for doing it on a profitable way must be based on a accurate control of resources, due to high price of its unique raw materials, and the importance of reaching quality levels on schedule.

A tasting menu on “El Bulli” could be for example based on several different “complex processes” such as:

     Dishes that are foremost based on morphing, a concept which means that an ingredient is transformed into something else or into another state. Creations that show a great respect for the ingredient – although it is turned into another shape and form and a different taste angle

     Dishes that are based on various earlier concepts developed by Adria mainly creations with an appearance different than what we normally associate with the name or looks of a dish.

     Dishes that are more normal dishes but where a less than normal taste combination plays a part in the dish. Examples of this category were the civet of rabbit and the chocolate dessert with a black sesame sauce. Both these have been on the repertoire for a long time.

Analysing the complexity of this tasting menu, ant taking into account that it can be renewed on a monthly basis, we could categorize raw materials on a ABC Basis:

     A - The most expensive and perishable raw materials that can mean more than 65 % of the inventory value but account for less than 20 % items stocked. These items depend highly on the composition of each tasting menu, so depending on the month they are stocked or not.

     B – Not the most expensive raw materials on a value basis, but high perishable or high seasonality can mean more than 25 % of inventory value.

     C – Basic raw materials (oil, garlic, sugar, salt, etc) with low cost of buying and low holding cost. or ones non really perishable (beverages, wine, etc) with high buying cost but low holding one.

As every tasting menu is the outcome of a complex process with multiple ant interrelated tasks, the management of A Category items must be done through an MRP system, while the management of B and C categories could be done through a ROP system, as almost all tasting menus have this raw materials in common.

Focusing on A Category items, we could identify:

     The bill of materials would be the list of all raw materials required to form the complete tasting menu, remember this tasting menu is changed periodically, being important to analyse the impact it would have on the rest of the MRP system

     The item master file would keep track of every raw material and its specifications

     Transaction file would keep track of all transactions

     Location file is crucial to make possible a high speed kitchen daily work

     MRP explosion must be measured and control on detail to assure quality on time reducing economic potential losses

So analysing briefly the “state of the art cuisine” we can see how important can be the Operations Manager role not only on the quality of final design but on the profitability of it.

: 21 Mar 2009 17:08 |  Comments (0) |  Close comments |  Report a problem

OPERATIONAL MANAGEMENT LESSON 6 EXERCISE– REFLECTIVE ONLINE LEARNING

OPERATIONAL MANAGEMENT LESSON 6 EXERCISE– REFLECTIVE ONLINE LEARNING

“Find extreme or good examples of the following practices and justify the reasons for their adoption:

1. Level capacity management.

2. Chase capacity management.

3. Yield management.

4. Queue design”

Example of Level Capacity Management

A good example of level capacity management are the public services offered by spanish goverment at any public office, for example the  birth register office.

The demand for this services is quite predictable as there exist some ratios that can help to anticipate future births, but the ageing of the society, the increase on imigration and international adoptions has increased the unpredictability of this figures (on following diagram number of births on Spain on the last 26 years).

Therefore birth register offices could have a capacity planning with part time or temporal jobs to overcome this changes on demand, but as this is a public service all employees are fixed ones, and capacity is established fixed.

The number of employees attending office desk is fixed, capacity can be reviewed on a for example yearly basis but not during the year. As it is a public service, demand must adapt to offer. Performance Objective is cost control rathen than efficacy or revenue goals.

Example of Chase Capacity Management

What would happen for example with previous example if we were on preelection  months?. Maybe the political party would bet on efficacy as a performance objective in order to have happier electors.

In this case they could appky a Chase Capacity Managment model, in which demand could be measured more periodically (for example a monthly basis) and capacity readapt partially in order to cope better with it. This could be done by using more resources (part time) or maybe by introducing better efficiency on current process (for example leave one desk just to collect info from the customers and work on backoffice generating quite an inventory or work in progress process).

Example of Yield Capacity Management

A good example of Yield Capacity Management is the newspaper industry, as newspapers can be categorized as perishable goods as their value last for only 24 hours.

On the newspaper offer there are the following indicators to measure the

   Production : total produced issues

   Distribution: out of produced issues those who have been delivered for distribution

   Returns: issues given back by distributors

   Effective distribution: distributed issued less given back ones

   Effective lecture: those really read by customers

All issues produced but not bought have not yield at all, and those sold but not effective read have short term yield (revenue per issue) but affect negatively mid and log term revenue (through ads revenue).

So news companies must adapt their daily circulation to demand fluctuation in order to maximise revenue.

Example of Queue Management

A good example of Queue Management is the collection toll road management, as cars arrivals can vary from none on off peak time to collapse on peak time.

For an optimal management of these queues, companies establish multi queues organised by payment type (cash, credit card or automatic payment systems as RFID), vehicle type (car, TT, truck, etc).

Traffic density is constantly measured and employees have flexible time schedules to cope with demand changes, opening and closing queues as demand requires or even changing lane direction.

: 01 Mar 2009 16:49 |  Comments (0) |  Close comments |  Report a problem

OPERATIONAL MANAGEMENT LESSON 5 EXERCISE– REFLECTIVE ONLINE LEARNING

OPERATIONAL MANAGEMENT LESSON 5 EXERCISE– REFLECTIVE ONLINE LEARNING

“The IT Sector has a distinctive pattern of levels of integration. For one section of your organisation, write about the advantages and disadvantages of having an integrated supply chain. Comment on your impression of the levels of market force that apply to your chosen section.”

For this exercise I have chosen to analyse the Consultancy Services Supply Chain formed by the group of human resources who finally give final performance to customers, and moreover the evolution this sector has been through from a fully integrated SC to a worldwide decentralised one.

Consultancy Services SC use to be quite a simple one compared to manufacturing companies, just a group of human resources organised by experience, role or process who belonged to the consultancy firm and where used on each of the final customer project.

But on the last 10 years market trend has evolved drastically based on three main factors:

1)     Business globalisation

2)     Need of cost reduction and cost modularity

3)     the development of the technology capable to work over distance

This market trend has moved consultancy services from a quite simple and comfortable position (A) where customers could afford to pay high price per hour to get what they need when they wanted on a quite predictable environment, to (b) where market has evolved to unpredictability, and customers cannot afford previous prices and now finally to (c) where customers are in fact outsourcing their own processes into IT and consultancy services (c1) and core consultancy services must be delivered on an unpredictable market with low tariffs.

This market evolution has provoked a huge change on the Supply Chain of consultancy firms, in order to be capable to cope with this market demands while remain profitable.

Performance Objectives	A market	B market	C market
Quality	Quality was the main driver when consultancy services were delivering without subcontracting and without global delivery. Client could pay and wanted to pay for quality, so one of the main issues of consultancy firms was knowledge management and attrition control	Quality was still important but not as important as on A market. Customer could not pay such higher tariffs, and market was so unpredictable that they couldn’t afford to wait until best work was done.	Quality is not the driving driver, time to market is. Therefore customer pays for done on time more than done with quality. This causes a reduction on price and therefore a reduction on cost structures, increasing the need to subcontract.
Speed	Market was more predictable, so time to market was not the main issue. Long and mid term impact was enough important to take the necessary time to do things correct	Time to market was getting more important	Time to market is the driving driver, moreover when part of the customer business chain can be provided by consultancy firms (outsourcing). So the distance between the consultancy provider and the customer’s customer is narrowing
Dependability	Consultancy was focused on strategy and not on daily operations, therefore dependability was low	Consultancy began to enter the legacy and operations systems, therefore dependability was getting important	Absolute dependability, customer final service or products can depend on consultancy service given
Flexibility	Market predictability was high, therefore flexibility was less needed, but due to high prices, customer claim for this flexibility. Flexibility was being given by consultancy firms through overcapacity.	Market requires more flexibility, so consultancy firms begin to subcontract part of their SC	Flexibility is a key issue, but prices don’t allow to have overcapacity, therefore GDD must be used
Cost	Customer could afford to pay for high value services	Lower services and less money to be paid	Cost reduction through high scale services

As a conclusion we could see how this market is changing over the years, and how this change has affected what it looked as a simple Supply Chain into a each day more complex one.

: 28 Feb 2009 17:43 |  Comments (0) |  Close comments |  Report a problem

OPERATIONAL MANAGEMENT LESSON 4 EXERCISE– REFLECTIVE ONLINE LEARNING

OPERATIONAL MANAGEMENT LESSON 4 EXERCISE– REFLECTIVE ONLINE LEARNING

“For a product or service of your own choice, complete a QFD matrix that relates customer requirements to design characteristics. Justify your entry.”

For this exercise I have chosen the process of designing a TV Series for a Young Public Audience

1)     Importance of Design Process on a new TV series ?

“The purpose of QFD is to try to ensure the design of the product or services meet the perceived needs of customers”.

TV Series is one product that has on the last years improved its popularity so much that in fact it has cannibalised cinema movies market. But due to the high leisure competence this market faces daily, and the increasingly levels of exigencies from customers, the design phase is getting more important every day. Creating a TV Series can be really profitable (if it lasts enough) or a complete disaster (if it only lasts a few chapters), and the key to be successful is (1) to emotionally connect with the audience from the beginning and (2) assure this emotional link doesn’t loss strength through the life of the product.

In fact TV Series Industry is a derivation from movies sector, with two main advantages:

It is a way of reducing the huge risk of cinema movies (you begin to get revenue once to have all the risks incurred), as you can get revenues from chapter 1, and you don’t have to finish the product (whole series)

Design phase doesn’t end before the product begins to be “build”, in fact there is a retro feedback process that allows to revaluate the design on a weekly basis,

2)     QFD Analysis – WHAT?

Step 1 – Identify customer requirements

As potential audience is young population, their key requirements could be leisure related (music, videogames, computing), social networks, dealing with youth social issues (relations with parents, first love relations, approach to sex, school or high school), sports, etc

Step 2 – Competitive Scores

Step 3 – Key Design Characteristics

Step 4 – Relation between What and How

Step 5 – Technical Assessment

Step 6 – Correlation between design characteristics

Conclusion

On TV Series value chain, designing process is inherent to almost all the stages, as it must not only assure it reflects the customer requirements at the beginnig., but it also must evolve according customer need through the whole life of the product.

: 28 Feb 2009 13:11 |  Comments (0) |  Close comments |  Report a problem

OPERATIONAL MANAGEMENT LESSON 3 EXERCISE– REFLECTIVE ONLINE LEARNING

OPERATIONAL MANAGEMENT LESSON 3 EXERCISE– REFLECTIVE ONLINE LEARNING

Create a new entry in your log using the subject ‘Operations Management Lesson 3 Exercise’. This is a good time to complete a process map of your own and comment upon the findings. If you work in an area with high levels of contact with customers, you should think about extending the analysis into a service blueprint, which will define degrees of visibility of the process.

  

On this exercise I am going to analyse why it is important for a company like IBM to have a well designed catering service process and, how the costs of providing this subsidised service be highly recovered through and improve on final performance (payback).

1)     What performance is this process trying to achieve?

The cost of giving catering service to employees includes not only the cost of the given food, but also the opportunity cost of using space for the restaurant, the cost of setting it up, the wages of the employees or subcontracted company, etc.

Why should a company like IBM think about investing this money on employees, when today it is really easy to give a similar service through restaurant tickets?

There are several answers for this question, and they all take you into the same final message, “because it makes you save money” through efficacy (more time) and efficiency (better time employment).

Efficacy

On Spain the scheduled time for lunch varies from one hour to an hour and a half, what on a yearly basis represents around 330 hours.

If by providing this service, you can reduce this length to around 40 minutes, it means your employees can work more than 180 hours per year, what it means one whole month of work saved

On Spain the number of hours not worked due to illness or accidents is quite high, by having the restaurant on the office, you reduce this issue as employees don’t go outside and don’t have to drive or take public transport, so you have more days available

Efficiency

Spanish lunch is really far from other’s countries fast food idea. Spanish tradition is to have 3 dishes for lunch, so depending on the kind of food consumed; it will be the performance of the employee on the next two hours. By delivering this service IBM assures not only the quality of the food but what their employees eat

By having a shared restaurant, employees eat together, what improves the relationship between them and finally eases to work as a team, reducing the space between employees

By sharing the same table, sometimes employees keep talking about the job, and it is a good moment to through brainstorming solve blocked situations

So the cost incurred on the restaurant can be easily recovered through work efficacy and efficiency.

2)     Process flows objectives

Reduce the time spent on having lunch by employees

Assure flexibility on the time chosen to have lunch

Reduce the number of illness days

Help on having a wealthy way of living

Increase employees personal and professional knowledge

3)     Process flows risks

If process is not well designed and employees spent too much time, it is no worthy at all

Employee must appreciate the service as a reward from the company and not as a prolongation of the “daily nightmare”

4)     Process flows success keys

Balanced Speed of process, so it is not too fast (employee could feel they don’t rest at all) and not to slow

Balanced Hourly Employees Distribution, so it is not under usage on some hours and over usage on others

Quality of food and balanced quantity

5)     Understanding cycle time

So, how many minutes must last each cycle time, since the employee faces the restaurant until it leaves it. As we have described on success keys, this indicator is critical as it can mark the difference between receiving the catering service as a reward or as a way of retaining the employee on the job location.

Assuming each employee has on average 90 minutes to have lunch, and the fact the company wants to reduce it to around 40 minutes, and this includes coffee time, we can establish a good cycle time on 30 minutes, leaving 10 minutes to take coffee or smoke.

So how do we define the process in order to not exceed this level? Well this can be done through several adaptations on the process:

Not offering coffee on the restaurant but on a bar right close to the restaurant, in order to improve restaurant rotation and reduce conversation time around the coffee

Not giving full comfort to the restaurant facilities, not reducing the noise levels and others, so the employees prefer to talk during coffee time and not lunch time

6)     Defining capacity

How many people can eat at the same time? In order to adapt needed resources to this capacity.

Total number of employees eating at the same time = (catering capacity x standard time) / cycle time

Can the company influence the flow of employees?. This can be done through two ways;

By defining employee’s shifts, but this wouldn’t be appreciated by employees who could feel a trim of their freedom.

By implementing tools that help employees to know the best time to access the restaurant

On IBM Barcelona for example they face the 2^nd method by (1) measuring the number of employees by hour and showing this graphic on a diagram at the beginning of the row, so employees could know when is the best time to access, and (2) by installing a webcam on the row so every employee could online see the length of the row.

7)     Example of defined Process

On the following diagram we described IBM catering service on Madrid.

8)     Shape of the process

Analysing the previous diagram we observe a symmetric design on the restaurant. This allows in fact doubling the speed of the process in the slower tasks (lane + tray + food).

9)     Balancing losses

Analysing the previous diagram we can identify balancing losses mainly on two areas:

on the top left and right corners, where each employee speed depends on the speed of the rest of the lane filling their trays

on the top of the diagram where catering employees fill the employee’s tray with the desired food

10)     Little’s law

Will be left lane faster than right one?

11)     Conclusion

The design of the catering services can impact severely on the efficiency and efficacy of the employee´s performance.

I hereby include the diagram on PPT file.

l3.ppt

: 21 Feb 2009 13:14 |  Comments (3) |  Close comments |  Report a problem

OPERATIONAL MANAGEMENT LESSON 2 EXERCISE– REFLECTIVE ONLINE LEARNING

On this exercise I am going to analyse two quite different processes one from manufacturing and the other one from services.

a)     The process followed by an international high scale clothes retail company as Spanish Zara

b)     The process followed by a local psychologist, called for example Doctor

1)     Volume and Variety Analysis

  Zara like other international clothes retailers is a high volume retailer, but one of its main advantages to other retailers is they are also high variety retailer.

  Doctor is a really low volume “company” as the number of patients treated daily is really low, on the other hand the levels of variety of this patients ant the given treatments is close to infinite, thanks to the complexity of human brain

2)     Performance Objectives

Performance Objective	ZARA	DOCTOR
Quality	Low quality associated with low prices	X High Quality, ad for the patient this relation can be the basement of their daily life
Speed	High speed on time to market (each week new models are available) and high speed on the buying process decision	High speed on time to market (doctor must be available on any time) and low speed on buying process or session
Flexibility	No direct flexibility (client cannot but buy what is already made), and mid indirect flexibility (company is continuously analysing buying patterns and fashion trends to weekly adapt their models)	X High Flexibility, doctor must alter the treatment online as the patient gives proper details
Dependability	X Low, daily clothes absolutely substitutable and not linked to special occasions (weddings, parties, etc)	X High, the performance on the rest of daily acts are linked to the outcome of this task
Cost	High efficiency required as margins are really tight	Levels of efficiency established by daily time table

3)     Performance Objectives trade offs

Analysing the relation between the different Performance Objectives, we observe Doctor can trade off with Cost and Speed on Delivery, while Zara can trade off with Dependability and Quality.

4)     Operations Profiling

Applying the Slack et all diagram of the 4Vs, we observe Doctor operations profile is close to be ideal, while Zara operations profile is not, this is due to the business model adapted by Zara that tries to combine volume with final flexibility through a complex time to market operations design that combines R&D with Fashion trend Observation and really fast time to market on long scale.

5)     Process choice

We can categorise Doctor as a Professional services process and Zara as a mix between Batch and mass processes.

6)     Lazy L analysis

Doctor is always going to be on the same place on the “Lazy L” Analysis, as it cannot move into the right and low side due to the specific casuistic of this medical branch. The only way of moving could be incorporating new medical branches and moving from a small local psychiatric office to a huge hospital.

Zara began with a small shop of house coats for women, and over the years has moved into a long scale international clothes retailer that bases its success on delivering a high variety of cheap clothes with a weekly renewal of models, thanks to observation and a huge time to market based on great logistic operations. Today Lazy L analysis

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Anexess

I hereby leave the xls file with the diagrams used in case you want to use any

l2-diagrams_used.xls

: 08 Feb 2009 12:07 |  Tags: 2 Lesson Om |  Comments (2) |  Close comments |  Report a problem