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Operations Management Lesson 9 Exercise

INTRODUCTION

I will appraise the quality control systems of milk production in the UK farming industry for this excercise. I’m familiar with this process from my childhood, where I grew up on our family farm before I left home for university.

The dairy industry in the UK is a mature market, where consumer requirements are stable in the short to medium term. The customers to a dairy farmer are companies such as Dairy Crest (previously the Milk Marketing Board before privatisation) who are milk distributors as well as dairy food producers. Other key stakeholders in the vertical value chain are the UK’s leading supermarkets e.g. Tesco.

QUALITY MANAGEMENT

Prevention costs

• Industry prevention starts with farms needing to be licensed to produce milk and demonstrating compliance with the milk quota regulations. In addition the farm has to ensure it complies with the Food Standard Agency and National Dairy Farm Assured scheme, in addition to any requirements placed on it by its milk distributor.
• On farm systems are then in place to manage and record breeding to ensure the herd is going to provide sufficient quality yields, in addition to understanding the genetic history (including animal passports) of the cow and its medical history in the event of genetic issues being identified.
• Each cow’s diet is then controlled and recorded to manage the quantity and quality of their milk yields.

Appraisal costs

• Farms monitor the output of their herds using a form of statistical process control (SPC), to ensure the milk meets the quality requirements (with lower and upper control limits) of the milk distributors before being collected for treatment and bottling.

Internal costs of defects

• Any milk produced from medicated cows is destroyed and if this milk contaminates production (usually through human error) then total production needs to be destroyed, which can significantly impact a farms income and its reputation with the distributor if it occurs regularly.
• In the event that medically contaminated milk is handed to the distributor, then the farm is fined as this can contaminate a whole tankers milk at best.
• Farms are randonmly inspected by DEFRA Dairy Hygiene Inspectors so any recommendations to maintain farm assured status, are alsoi internal defect costs.

External costs of defects

• There is a very low proportion of external quality issues occurring compared to the volume of industry sales, because of the level of investment made in preventing quality problems.
• The impact of some forms of defect could have a catastrophic impact upon the milk industry. A good example of this is the BSE, foot and mouth and blue tong cases which has significantly damaging the sales of beef and also indirectly milk sales in the UK.
• Consumers either stop purchasing the dairy goods or find alternative sources e.g. goods produced from outside of the UK .

CONCLUSION

The potential cost of milk quality defects and pervasive farming industry issues, can have a significant damaging effect on consumer confidence. This results in the revenues and profitability of the farming industry and also its vertical and horizontal supply chains being at risk of bankruptcy. There have been many examples of this since the BSE crisis of the 1990's.

Therefore significant investment is in place by the government, industry and farming community (self regulation, to ensure the industry does not suffer at the hands of a few farms bad practice) to prevent issues occurring. This has benefits dairy farming significantly, because only a small number of iosolated cases have occured. I therefore believe that the quality control systems in place, within a significant focus on provention is working well.

BIBLIOGRAPHY & REFERENCES

• Dairy Crest, "Our Business > Farming Relations". Dairy Crest Company Website, http://www.dairycrest.co.uk/ourbusiness/farmingrelations.asp, accessed October 2007.
• DEFRA Dairy Hygiene Inspections, “Defra Homepage > Animal Health > Inspecting and Licensing > Dairy Hygiene Inspection”, DEFRA Government Website, http://www.defra.gov.uk/animalhealth/inspecting-and-licensing/dairies/index.htm, accessed October 2007.
• Food Standards Agency, “Food Industries > Farmers and Growers”. Food Standards Agency Website, http://www.food.gov.uk/foodindustry/farmingfood/milkandairy, accessed October 2007
• National Dairy Farm Assured, “Homepage”. National Dairy Farm Assured Website, http://www.ndfas.org.uk/, accessed October 2007.
• Slack, N., Chambers, S., Johnston, R., Betts, A. (2006) Operations and Process Management, London: FT Prentice Hall
• Walley, P. (2007) The Warwick MBA: Operations Management, Coventry: University of Warwick

: 20 Oct 2007 16:56 |  Comments (0) |  Close comments |  Report a problem

Operations Management Lesson 7 Exercise

INTRODUCTION

The example I will use for this exercise is to compare the approaches that my fiancé and I used for our stocking our kitchen, before we moved in together.

FIANCE APPROACH

Method

• Periodic shopping – weekly shop
• Forecasts demand – identify meals for the period & create an ingredients list
• No inventory management - kitchen inventory is not checked
• Store Choice – utilise online shopping from major food retailer and convenience stores if there are shifts in forecast demand within the week

Advantages

• Scheduling – a weekly meal schedule is produced, so that certain ingredients can defrosted and more perishable items brought forward within the schedule
• Just In Time – online shopping can be delivered on specific date and time, when it may not have been possible to visit shops during this period

Disadvantages

• Redundant stock – shifts in meal requirements, can result in wastage and over stocking of perishable goods, as inventories not checked
• Space Mgmt – run out of space due to over stocking as inventories not checked
  
• Working Capital Intensive – capital cost of overstocking high value items as inventories not checked
• Responsiveness – where there are shifts in meal requirements and there is no safety stock, stock out costs occur as other food sources are found. These are often at a higher overall cost because of additional travel and time invested
• Safety Stock – A lack of inventory management also effects non food items as a schedule is not created for these porducts and are often missed e.g. loo role
• Discounts – as only the ingredients needed for the weeks meals are purchased, the potential for bulk purchase discounts is low

Summary

• Methodology - It’s clear that this approach uses a form of Material Requirements Planning (MRP) and is effective for ensuring that low value standard materials are restocked and medium & high value items are purchased if required that week. However, the usage of stock management information within this planning is very low causing stocking issues in supporting demand.
• Recommendation - monitor inventory levels to improve the accuracy of the MRP process

MY APPROACH

Method

• Inventory Management – inventory regularly monitored, with a list maintained of those items at or below the mental safety stock level
• Independent Demand – visit the shops and purchase goods to return the kitchen inventory to target inventory levels
• Store Choice – Utilise large hypermarkets for inventory restocking and convenience stores when only a few low value or perishable purchases are required
• Enjoy the Experience - Spontaneously buy additional ingredients that take my interest for creating future meals, plus the essential shopping cake treat!

Advantages

• Controlled Inventory Costs – inventory is maintained at desired levels, minimising stock out costs and ordering costs
• Flexibility – variety of stock enables flexibility in supporting changing demands (within constraints of the wide inventory built up)
  
• Discounts – as bulk purchases are made to restock the kitchen, the potential for bulk purchase discounts is high
• Space Management – effective use of kitchen storage space

Disadvantages

• Wastage – wastage occurs from stocking perishable items not required, although these are typically lower value items
• Purchasing Flexibility – the point at which shopping needs to occur varies and is not predictable, as the demand for ingredients shifts daily depending on the meals that I dedcided to make that day. It is not always a convenient/possible to go shopping when lower limit safety stock levels are breached.

• Capital Employed – capital employed in maintaining high value items, these may not be needed for quite sometime but typically have a long life span.

Summary

• Methodology - It’s clear that this approach uses a form of Reorder Point (ROP) stock control system, which results in a stable kitchen inventory and is able to support shifts in demand. Its largest disadvantage is that the re-stocking of perishable goods often means that this becomes a cyclical ROP approach.
• Recommendation – Plan some meals for each week, which help to utilise any over stocking of the higher value inventory items or perishable goods, to reduce wastage and capital employed.

CONCLUSION

• It can be seen that the approaches adopted by my finance and myself are quite different, with both having their advantages and disadvantages. The key driver causing these approach difference sare the objectives we apply to food shopping. My primary objective is to always have choice and be able to decide what meals to have each day. My fiancés primary objective, is to make plans so that there are less unknowns in the day to think about, as the meals are planned and the risk that she will need to go food shopping at an inconvenient time is lower
  
• Since living together my finance does most of the food shopping, as there are short to medium term shifts in the inventory needed dependant on the latest diet trend, which I’m just unable to keep up with.

BIBLIOGRAPHY & REFERENCES

• Slack, N., Chambers, S., Johnston, R., Betts, A. (2006) Operations and Process Management, London: FT Prentice Hall
• Walley, P. (2007) The Warwick MBA: Operations Management, Coventry: University of Warwick

: 20 Oct 2007 16:55 |  Comments (0) |  Close comments |  Report a problem

Operations Management Lesson 6 Exercise

LEVEL CAPACITY MGMT

A common example of level capacity management is seating capacity at sports stadiums. My local stadium is Twickenham rugby stadium and has a seat capacity of 82,000 (a 7,000 seat increase in 2007).

Figure 6.1

The stadium is used mainly at weekends and holds events every few weeks, with its most frequent usage being international rugby events, in addition to the annual national rugby cup finals and various music concerts. For music concerts, the stadium capacity changes per music concert as only a portion of the stadium is used but the pitch is also used for revel goers.

Figure 6.2

The stadium has a very low utilisation (I would estimate this to be less than 1%) but a high efficiency rate (I would estimate this to above 80%) as most events are sold out, with only a few events such as the varsity rugby march that do not sell out.

Level capacity management in this case is extremely costly, with the stadiums capacity being severely under utilised for such a significant investment (the new Wembley stadium which is less than 10 miles from Twickenham, which is of a comparable size cost approx £750m to replace the existing stadium and local infrastructure).

CHASE DEMAND MGMT

A concept which is growing quite rapidly within the UK because of the high volume of cars compared to the size of our country is traffic management. The best example of this is the chase demand management applied to the M25 motorway, during rush hour on a Monday morning.

Motorway capacity is relatively fixed if you assume that all cars are travelling at the maximum speed and all lines are being utilised, however demand varies significantly. The investment and time needed to cope with increasing demand during the peak periods to enable this to continue is immense. Therefore a form of chase capacity management has been applied, by controlling some of the motorway capacity constraints.

Motorway speed limits are 70 miles an hour for most vehicles, and a vehicle travelling at this speed need to be spaced a certain distance apart in order for motorists to be driving safely, which creates a lot of redundant space between vehicles. Therefore the Automatic Traffic Management (ATM) system has been developed, were motorway efficiency is measured. When efficiency reaches a tolerance level the speed limit is reduced in increments of ten miles per hour to slow traffic down. This enables vehicles to travel closer together as less breaking distance is needed, which causes an increase in the motorways capacity. If used correctly, this can also be used to limit the demand coming into a motorway stretch where bottlenecks are occurring, by slowing the demand of cars travelling into the bottleneck by forcing a lower throughput in previous stretches of junctions.

Figure 6.3

In addition the latest concept is also to increase the capacity of motorways, during rush hour by directing vehicles to use the hard shoulder of the motorway. In a three lane motorway, this could have the effect of increasing motorway capacity by 33% [reference].

YIELD MGMT

An example of a company who uses yield management is the Odeon cinema. The Odeon offer lower prices in the week, when demand is much lower in order to entice customers to come into the cinema. Utilisation is at its highest on Friday, Saturday and Sunday nights where maximum occupancy is often achieved (typically more the main attraction films) so the Cinema increases its prices and also charges a premium for the best viewing positions as demand exceeds capacity and the pricing strategy brings in more revenue whilst maintaining high capacity utilisation.

Figure 6.4

The Odeon has also teamed up with the mobile phone company Orange, in developing a But One Get One Free (BOGOF) promotion called ‘Orange Wednesday’. This promotion is to entice clients to come to the cinema in the week (or more specifically a Wednesday), when demand yield’s are at their lowest.

QUEUE DESIGN

The outbound airport security at Heathrow airport has two single queue/multi server designs, which enables a constant flow of air travellers through the security check areas. There are two queues as the demand is such that the queue length during peak times is unmanageable. During off-peak hours, the second queue is closed.

Figure 6.5

This model maximises the capacity and resource utilisation of the security process. However, airport security has attracted considerable attention since the terrorist attacks in America 9/11 with increased security measures (new regulations on what you can take through and more thorough checks e.g. shoe removal) used to reduce the risk of terrorism. This has resulted in a longer and more anxious experience for people, with scenes during the summer holiday season of people queuing outside the airport. This could be improved by virtual queuing, such as those used in Walt Disney theme parks.

BIBLIOGRAPHY & REFERENCES

• AllBusiness, “Virtual queuing: could it be a reality for airports?”. AllBusiness Company Website, http://www.allbusiness.com/specialty-businesses/264987-1.html, accessed October 2007.

• Fred Van Bennekom, “Airport Security Line Queues”. Personal Pages of Fred Van Bennekom, http://www.greatbrook.com/Personal/airport_security_line_queues.htm, accessed October 2007

• Highways Agency, “Newsroom > Kelly announces new ways to beat motorway jams”. Highways Agency Government Website, http://www.highways.gov.uk/news/newsroom.aspx?pressreleaseid=153273, accessed October 2007.

• IBM Services A-Z, 2007. “IT Services > Outsourcing/Hosting > Infrastructure Outsourcing and Hosting” IBM Company Website, http://www-935.ibm.com/services/us/index.wss/itservice/so/a1000414, accessed July 2007.

• Orange Wednesday, "Orange & Film > Orange Wednesdays". Orange Corporate Website, http://orangewednesdays.orange.co.uk, accessed October 2007.

• Slack, N., Chambers, S., Johnston, R., Betts, A. (2006) Operations and Process Management, London: FT Prentice Hall

• Twickenham Stadium, "Twickenham Stadium, The Home of English Rugby". Rugby Football Union Official Website, http://www.rfu.com/microsites/twickenham/index.cfm, accessed October 2007.
  

• Walley, P. (2007) The Warwick MBA: Operations Management, Coventry: University of Warwick

: 20 Oct 2007 16:54 |  Comments (1) |  Close comments |  Report a problem

Operations Management Lesson 5 Exercise

INTRODUCTION

IBM’s Strategic Outsourcing (SO) business unit provides clients with the management of application and information technology (IT) systems, by strategically partnering to manage and operate their client’s applications and IT systems, generally under a mutually beneficial agreement. The outsourcing agreement may include the transfer of IT employees and IT assets to IBM. IBM provides service level assurances to ensure quality of service is attained and measured (IBM Services A-Z, 2007).

Within the SO business unit, IBM then decides which delivery capabilities it should invest in developing, managing and operating internally and those areas it will de-integrate and seek a strategic partner (these are strategic partners as SO agreements and investments are typically five to ten years in length). This is reflected in a recent quote from IBM’s world-wide General Manager for ITDelivery (the service delivery organisation who provides the core services to SO clients) :-

“We make strategic judgments about which operations we want to excel at and which ones are best suited to our partners. We base those decisions on client needs, economics and expertise.” (Bob Zapfel, General Manager, ITDelivery, October 2007)

Once such example of IBM partnering to deliver SO services, is IBM’s decision to enter into contract discussions with AT&T (global network services provider) in October 2007 and below are some of the advantages and disadvantages that may have been considered in this strategic decision:-

ADVANTAGES

• Leverage Partner Capital Investment - The capital investment required to develop a global network services business is very high ($bn), so this service delivery asset needs to be at the very core of a company’s client value proposition to consider this investment. A few global organisations such as AT&T have made this investment as part of their strategic capability. IBM is able to achieve its strategic advantage by offering clients the full end to end IT proposition, by partnering with organisations where it does not to have an in-house capability. Partnering enables IBM to leverage AT&T’s investment and avoid the significant risk associated with such an investment.
• Maximise Opportunity Cost - The investment capital that could have been spent on developing a global network can now be channelled into ventures with potentially higher investment returns, lower risk and more aligned to the company’s strategic direction and creating competitive advantage in these areas.
• Increase Speed to Market (see figure 5.1) – By utilising the core competencies of AT&T as a leading network services provider, IBM can remain at the forefront of technology as they strive to maintain competitive advantage over its competitors. This enables IBM to bring its partner capabilities to its clients quicker than IBM would have been able to achieve on its own.

Figure 5.1

• Leverage Intellectual Property (see figure 5.2) – IBM can leverage the intellectual property, knowledge, best practices, experience and tools of AT&T to compliment its own capabilities and offer a full IT service capability. This consolidation of capabilities under one umbrella provides IBM with a strategic advantage for clients to have a one stop shop for all their IT service needs.

Figure 5.2

• Increase Business Flexibility – IBM is able to reduce its straight line revenue growth constraints, which would be present if it delivered its own network capabilities (where revenue growth would be more tied to the physical infrastructure and number of resources in-house). By partnering, IBM is able to become a provider of value rather than assets. With a lower fixed cost base for these services and higher variable costs, shifting IBM’s cost basis to a ‘pay for what you use model’, this enables more financial and therefore business flexibility to channel its capital to evolving growth areas.

DISADVANTAGES

• Increased Dependency on Corporate Relationships – The most significant cause of business partnership failure is a breakdown in the relationship of the companies involved, usually because of poor communication. IBM will now be dependent upon the delivery of the AT&T service to its customers. The organisations relationship can be an enabler for higher growth, but also introduces new risks. The organisations trust, culture and approaches to commercial negotiations are all important factors in the management of the corporate relationship than they are a in-house model. In an all in-house model a single individual e.g. the Managing Director resides over both internal service providers to make decisions where conflicts occur.
• Lower Control and Influence – By partnering with AT&T, IBM’s natural control and influence is reduced, with large exit implications for both organisations. In the event that AT&T have conflicting needs between IBM and other partners, IBM may receive lower priority as although it’s one of the worlds largest organisations it does not mean that IBM will be one of its largest client in the medium to long-term. IBM also has fewer alternatives in reducing its costs in the event that this business area becomes inefficient.
• New Risk Exposures – Risk exposures of the AT&T organisation, could now result in IBM also becoming exposed to these risks. A malicious attack on AT&T’s network security for example could impact the services IBM provides to its clients. In addition an IBM competitor acquiring AT&T would create much uncertainty and discomfort for the partnerships future.
• Reduction in In-House Knowledge – By relying on your partner to deliver services into your organisation, then you reduce the need for subject matter experts in your own organisation. This can be very dangerous, as you need to demonstrate to clients that you are adding value and if you are relying at the hands of your partners then it is difficult for your own resources to consider alternative considerations when the in-depth knowledge is not within your own company.
• Risk of Conflicting Objectives – It is difficult to incentivize a partner to reduce their costs when their corporate responsibilities will be to grow revenue and profit for their shareholders.

This agreement is an example of the continued strategic actions being taken by IBM as we strengthen our globally integrated enterprise business model. We create and capture value for our clients through an open and collaborative working model, underpinned by a competitive cost structure. In this model, delivery excellence and innovation is fostered through diversity and alliances are a function of complementary expertise.

BIBLIOGRAPHY & REFERENCES

• Bob Zapfel, October 2007. Understanding our Newest Agreement with AT&T (PE and DPE call final.ppt). IBM Global Services Presentation, IBM Confidential, Document Owner Bob Zapfel.

• IBM Services A-Z, 2007. “IT Services > Outsourcing/Hosting > Infrastructure Outsourcing and Hosting” IBM Company Website, http://www-935.ibm.com/services/us/index.wss/itservice/so/a1000414, accessed July 2007.
  
• Slack, N., Chambers, S., Johnston, R., Betts, A. (2006) Operations and Process Management, London: FT Prentice Hall
• Walley, P. (2007) The Warwick MBA: Operations Management, Coventry: University of Warwick

: 20 Oct 2007 16:54 |  Comments (2) |  Close comments |  Report a problem

Operations Management Lesson 4 Exercise

INTRODUCTION

The product selected to analyse using the Quality Function Deployment (QFD) tool is the ‘electronic key fob (EKF)’ used to securely lock and alarm vehicle doors. The QFD chart will ensure that the features most valued by customers are highlighted and prioritised for inclusion in the preliminary design of the product.

QULAITY FUNCTION DEPLOYMENT

In the consideration of ‘what’ are the customers key needs, the first priorities are to factor in what the product is designed to actually do:

1. Security – The EKF was invented to improve the security of your vehicle and also increase the ease in which it’s done. Therefore this is also the most important design feature.
2. Reliability – The EKF needs to be reliable, otherwise the vehicle is left unsecured or inoperable as it cannot be accessed or driven. This is the second most important feature, as if you can’t rely on the product to do what its designed to do it provides little to no value.
3. Repair & Replacement – Although a key requirement is the product should be reliable, in the event that the EKF does become inoperable or is lost it needs to be easily repaired or replaced to enable the vehicle to be returned to its operable state rather it being as useful as a heap of metal.
4. Size – The EKF is taken with you when you leave the vehicle so needs to be easily carried in a pocket or bag.
5. Durability – The EKF is used by many people on a daily basis and is often left in pockets and bags, where it’s liable to being squashed or bashed around.
6. Transmission Distance – The EKF may need to be operated from a distance, in which case the transmission distance needs to enable the vehicle security to be turned on and off from a range of distances.
7. Design – The EKF should be aesthetically pleasing.

In the consideration of ‘how’ the customer’s key needs are provided, the following areas are utilised:

• Technology – To deliver the wireless electronic security coding, provide consistency and reliability, minimise space and enable transmission distance.
• Foldaway key – To minimise the use of space and provide design innovation.
• Fob material – To provide a tough casing to protect the technology, deliver a reliable and durable product and give a good product appearance.
• Battery – To minimise space and provide long term reliability and repair, when drained.

There are few interdependencies between the ‘Hows’ of this product, with the only relationships being between the battery driving the technology and the fob material needing to support the foldaway key mechanism.

There is a wide range of relationships between the ‘Whats’ and ‘Hows’, with Technology being the most significant factor in delivering the majority and also most important product features, which include product security, reliability, size and durability. The second most important feature is the battery, which powers the Technology. The next most important is the fob material, which enables the durability and the product design and the least important is the foldaway key, which reduces the key size and provides a neat and innovative design.

The EKF replaced the traditional turn key, with the new product significantly improving vehicle security. However, with this improvement in the most important ‘what’ has come a decline in the competitive score of the next three most important features (reliability, size and durability) as the new technology requires extra space and adds additional components which increase the risk of the product becoming unreliable or damaged from use.

The largest movements in the competitive score are the transmission distance being significantly increased from effectively 0 cms to many meters with the EKF. However, the ease of repair of replacement has significant fallen with the EKF because of its additional complexity requiring greater expertise to fi, which are not as widely available (this assumes that people have a spare key that can be copied, rather than replacing the car locks). Although these features (transmission distance and repair & replacement) have significant competitiveness implications, they are two of the three least important features to customers.

BIBLIOGRAPHY & REFERENCES

• Slack, N., Chambers, S., Johnston, R., Betts, A. (2006) Operations and Process Management, London: FT Prentice Hall
• Walley, P. (2007) The Warwick MBA: Operations Management, Coventry: University of Warwick

: 20 Oct 2007 16:53 |  Comments (2) |  Close comments |  Report a problem

Operations Management Lesson 3 Exercise

INTRODUCTION

The selected process to map is the IBM Request For Service (RFS) process. The RFS process exists on all outsourcing contracts to deliver any client work that doesn’t exist within the base service contract. This process step is an important stage within the end project lifecycle of a company and is often the first visibility IBM has of the customers’ project portfolio.

HIGH LEVEL PROCESS MAP & OBSERVATIONS

Below is a high level process diagram (figure 3.1) of typical companies’ project lifecycle from identifying an idea or need all the way through to realising the benefits of that idea or need.

Figure 3.1

Highlighted in yellow is the IBM RFS process, which is a critical stage where many projects do not progress far beyond. At this stage the solution developed identifies the estimated costs, time and risks of the project, which are evaluated against the intended project benefits and enables a company to evaluate whether the project provides sufficient return on investment to progress into implementation.

DETAILED PROCESS MAP & OBSERVATIONS

The process is a best practice process applied to all IBM Outsourcing contracts and deals with a wide variety of requests in terms of volume and size, some clients submit only a few requests per month where as others submit more than one hundred per month. The requests vary from requesting some desktops to be moved (as little as one man days work) to developing a proposal to outsource the support of all our companies’ business applications (millions of dollars, to implement and provide an on-going service requiring labour, hardware and software services). Because of the variety, the time taken to pass through the process varies significantly from anywhere between two days to two months.

Below is a line of visibility process diagram (figure 3.2) of the RFS process from receiving a new RFS from the customer through to rejecting or releasing a proposal in response to the customers RFS.

Figure 3.2

Mapping the process onto a service blueprint (figure 3.2), shows that IBM have designed this process to be a predominantly back office function, where the customer does not have any visibility of the tasks being undertaken except where an interaction is required. This level of visibility for simple requests which can be processed quickly is probably sufficient, however as requests become more complex/large then this level of visibility could be quite disconcerting to the client as they are unable to observe the level of activity and direction of the solution.

Many of the outsourcing contracts have service levels in responding to simple & medium complexity requests, within a given period. As the process is long and thin, with no activities being completed in parallel, there is a high risk of delay within the process caused by growth in RFS volume or complexity or resource absences. Any delay will have a direct impact in delaying the release of the proposal response and poses a real risk to RFSs missing their service level target.

Therefore variable resourcing is needed to support the variety fluctuations in RFS volume and size, as well as dissolving bottlenecks as they occur. This is fundamental if the process is achieve some of its key objectives of delivering:

1. Incremental Revenue
2. Maintaining process overhead in-line/below revenue growth/decline
3. Service levels
4. Customer satisfaction

BIBLIOGRAPHY & REFERENCES

• Slack, N., Chambers, S., Johnston, R., Betts, A. (2006) Operations and Process Management, London: FT Prentice Hall
• Walley, P. (2007) The Warwick MBA: Operations Management, Coventry: University of Warwick

: 20 Oct 2007 16:53 |  Comments (1) |  Close comments |  Report a problem

Operations Management Lesson 2 Exercise

INTRODUCTION

The processes to be compared are the manufacturing of suits between Marks & Spencers (FTSE100 retailer) and Raja Fashions (Hong Kong based bespoke tailor).

Marks & Spencers is a respected clothes & food retailer with over 500 stores in the UK alone, who are well known for the quality of their products and service.

Raja Fashions is a bespoke tailor, who has a team of 10 tailors who travel the world, covering all of the major UK cities, the USA, France, Germany and Japan. They boast providing services to the House of Lords and Downing Street as a demonstration of their quality.

PROFILE

Figure  2.1

Raja Fashions

• Raja's stock about 20,000 fabrics ranging from affordable to exclusive, for clients to select the material they want for their suit. Prices can be as low as £150 up-to many thousands of pounds.
• The client can then specify any style suit they wish (including Tuxedos, waist coats and neckties to match) and whether they have any specific requirements to modify this. Examples include, the location and number/style of pockets, number of vents and pleats, the material/colour of the suit lining, any personal signatures or logos etc
• They operate in twenty four city locations across England, and five city locations in the remainder of the UK, producing 1,000 suits to the British market every week [BBC reference].
• The manufacturing process visibility is low to medium as the product design and measurement, which starts the operations process is conducted between the tailor and the client.

Marks & Spencers

• M&S develop a new suit range every season, which is targeted as a high quality but low cost product (price range of £99 to £349 based on website prices available October 2007).
• They provide a relatively small range (variety) of products, which are sold in a wide range of predefined measurements based on their market research and sales experience in what sells well.
• Their geographical presence across the UK creates a large target audience, coupled with their brand and value strategy provides a relatively stable but high sales volume. Because of the mass scale and relatively low operating costs M&S are operating in a commodity pricing strategy which is also vulnerable to variation in demand, as the purchase can be delayed.
• The manufacturing process visibility is very low as the products is purchased ready made by clients.

PROCESS CHOICE

Raja Fashions has adopted two process approaches for their suit manufacturing with jobbing being the choice for meeting with their clients, in city hotels to take the tailor measurements. Once the measurements and design are then sent to their manufacturing operations, a batch process is adopted where by common activities are grouped together and passed through the manufacturing process.

Marks & Spencers also utilise two processes, but for different reasons. The majority of the suit manufacturing is done by mass processes to cut the suit material and undertake some elements of suit stitching. These elements are then passed onto a batch process, where skilled labour provides a hand finish to the suits.

LAYOUT DECISION

Raja Fashions had adopted two layouts to deliver their service, with a fixed position layout being used where the tailors visit their clients by setting up measuring and design teams in city hotels for their customers to visit them. Once the measurements and design are selected the information is sent to their Hong Kong and China manufacturing teams to develop where a cellular layout is used to produce the suit before shipping.

Marks & Spencers has adopted a product layout, as their suits are manufactured to their standard size configuration and suit style for that season.

REVIEW

Raja Fashions have chosen two process and layout decisions. These decisions clearly reflect their business strategy of providing a quality and personal service, whilst minimising costs to provide value for money. This approach provides a client focused approach at the tailoring stage, with the Raja Fashions team travelling vast distances and incurring high overheads in order for them to service client demand. Then there is an efficient but flexible process in the manufacturing process to enable the client bespoke requirements to be effectively delivered within a standard process.

Mark & Spencers has adopted two process choices but only one layout. This approach supports their strategy as once the operation is setup; little flexibility is needed in changing the manufacturing process so this layout is the most efficient design for this operation. Whilst they utilise high quality material and a hand made finish to ensure a quality product for sales in their store.

I would conclude that both companies are utilising the appropriate models to deliver their business strategy.

BIBLIOGRAPHY & REFERENCES

• Marks & Spencers, "About Marks & Spencers > The Company > Our Stores". Marks & Spencers Company Website, http://www.marksandspencer.com, accessed October 2007.
• Raja Fashions, "About Raja Fashions". Raja Fashions Company Website, http://www.raja-fashions.com/001.html, accessed October 2007.
• BBC News, 2002, "BBC > News > Business > Hong Kong's travelling tailor". BBC Corporate Website, http://news.bbc.co.uk/1/hi/business/2018123.stm, accessed October 2007.
• Slack, N., Chambers, S., Johnston, R., Betts, A. (2006) Operations and Process Management, London: FT Prentice Hall
• Walley, P. (2007) The Warwick MBA: Operations Management, Coventry: University of Warwick

: 20 Oct 2007 16:51 |  Comments (0) |  Close comments |  Report a problem

Operations Management Lesson 1 Exercise

INTRODUCTION

The IBM Project Resource Forecasting Process at Royal & SunAlliance will be discussed. R&SA is one of the largest Outsourcing clients that IBM has within the UK, with project resources provided in the UK, India & South Africa.

STRATEGIC ROLE OF THE PROCESS

The strategic role of the process is to enable IBM to maximise revenue by supplyling the right level and quantity of IT skills at the right time to deliver the IT project requirements of R&SA. This enables R&SA IT to deliver projects that enable revenue enhancement, cost reduction, competitive advantage and compliance with the Financial Services Authority.

PERFORMANCE OBJECTIVES

Quality

This is a key objective as the process needs to provide a level of detail and accuracy to enable the forecast to be of value, otherwise the output may not offer any additional value than an experienced individual applying their judgement. The forecast should estimate the required:

-> skills (type and level), man days,  timing, any other specific requirements e.g. location

Speed

The speed of the process is not significantly important. The forecast should provide an estimate of the resources required in three months time. The further R&SA are required to forecast into the future, the lower confidence they have in this information as there is a high risk that the information is subject to change. IBM is more likely to fulfil changes in R&SAs demands the more notice is provided.

Dependability

The process is used once per month and should be approached in the same manor each time to avoid the process output being affected.

Flexibility

The purpose of the process is to enable IBM flexibility in supporting the changing requirements of R&SAs project needs, so that the type, level and volume of resources can be adjusted in-line with demand. There is not total flexibility in this process, as:-

-> The forecast must be provided three months before the resources are required for IBM to commit to providing the forecasted demand

-> IBM require a minimum demand commitment so that the overheads of the service to be recovered and the standard charge rates to be sustainable

Cost

The IT industry is a commoditised market, causing significant pressure on IBM to maintain its cost levels in line or better than the market place. In addition the agreements exist between IBM and R&SA which benchmark the rates IBM charge for project services. This means that the cost of supporting the Project Resource Forecasting Process must be kept to a minimum also, in order for there to be a cost/benefit of using the process.

STRATEGIC DECISIONS 

Design: What role should the people who staff the operation play in its management?

The IBM employees who deliver the process need to be part of the IBM Project Delivery management, as the information needs to be regularly reviewed e.g. weekly, to ensure that the actual demand being experienced is in line with the forecast. Where the actual demand differs, this needs to be quickly discussed between IBM and R&SA to agree the approach for fulfilling this change in demand.

Delivery: How much inventory should the operation have and where should it be located?

The operation should not have more resources that those which can be funded under the minimum forecast commitment. The resources that are most frequently demanded in terms of skills and location should be retained as inventory. The management of the process may decide also to retain any scarce skills that may be difficult to replace if released.

Development: How should the operations performance be measured and reported?

Performance should be measured in terms of:-

• The accuracy ratio of forecast versus actual demand experienced for each quality measure
• Any process deviations/exceptions from the agreed approach
• The satisfaction of R&SA and IBM that the process is achieving its objectives
  

The performance should be reported monthly, to review the months actual’s versus forecast. This information should be distributed to the R&SA and IBM management teams and be discussed as part of the management governance, with the key stakeholders.

BIBLIOGRAPHY & REFERENCES

• Slack, N., Chambers, S., Johnston, R., Betts, A. (2006) Operations and Process Management, London: FT Prentice Hall
• Walley, P. (2007) The Warwick MBA: Operations Management, Coventry: University of Warwick

: 27 Aug 2007 19:37 |  Comments (2) |  Close comments |  Report a problem

Chris's First Blog Entry

Great video from Pixar, watch it if you haven't

This is just a picture!

: 12 Jul 2007 13:14 |  Tags: Test |  Comments (2) |  Close comments |  Report a problem