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August 24, 2009

Human Resource Management Lesson 8 Exercise

For this exercise I would like to compare two different organizations that worked for. I described them in one of my previous blog entries. First of them is Tax Ministry, second is IBM. Using the Purcel's classification (Purcell, 1986) Tax Ministry has a traditional management style and IBM applies sophisticated human relations style in management. From the perspective of Storey's classification (Storey J. 1992) the HR departments play the Regulators and Advisors roles in Tax Ministry and IBM respectively.

The work environment in Tax Ministry was very formal. One of the most straight forward indication of that was the obligatory usage of the middle name (very formal refer in Russian language when you use the middle name, usually used in schools when the pupil refers to a teacher or in the army for example) when you refer to your colleague. The opposite situation is in IBM where you refer to the colleagues only by first name, even to the General Manager.

Among the other differences I can point the strict presence at the work place at any working hour in the Tax Ministry versus the Home office concept that exist in IBM when the employee can work from home using the secured connection to the IBM intranet via internet.

Any employee's absence in Tax Ministry should be documented by the evidence paper from the hospital or any other document that confirms the reason of the employee's absence. At the same time in IBM it is enough to have the verbal agreement with the first line manager to take a kind of emergency off or sick leave.

Thinking about the advantages and disadvantages of these setups I can point the following:

- the formalism that exists in the Tax Ministry gives better control over the employees, and each first line manager can check and control where is his employee and what is he doing. Vice verse in IBM employee can use this "freedom" to use the work time for the personal needs;

- from the other point of view the formalism in Tax Ministry increases the dissatisfaction of the employees and consequently increase the absenteeism so the productivity falls. In IBM the employee that has some emergency at home or some difficulties with the health can still work from home and do his tasks completely or partially.

- the strictly fixed hierarchy in Tax Ministry ensure the fast order path top-down, but more informal matrix IBM environment enforce the employees to give their feedback to the managers which is very important not only for the employees' satisfaction, but also for the company competitiveness in the current turbulent economic environment.

Summarizing all what I mentioned above I would like to give my personal opinion. From my point of view I would say that IBM's approach brings more employees' satisfaction, better productivity and easier feedback from the field to management through all the levels. This type of management style and interpersonal relations is better for the commercial organizations.

August 22, 2009

Human Resource Management Lesson 7 Exercise

Talking about this task I want to remind once again that we can specify the IBM as a company with the "sophisticated human relations" according to Purcell's classification (Purcell, 1986) and advisory HR department, according to Storey's model (Storey J. 1992).

There are a number of implicit expectations that I personally and my colleagues have:

1. Job security expectations. This is a very important subject for all my colleagues and me nowadays during the times of economic turbulence. The importance of this expectation increased dramatically during the recent months. Here I agree with the idea of Greenhalgh and Sutton (1991) that "survivors" feels less secure their jobs in case of work force reduction.

2. Career development. Neither my colleagues nor me have explicitly fixed employer's obligation to ensure our career growth. Nevertheless all of us expect that employer will judge fairly all our efforts and contribution and will reflect it in our career growth.

3. Personal development. Me and some of my colleagues are expecting the employer to support our wish to develop through different education, trainings, mentor programs etc. I would like to stress the attention that this is not such a broadly spread expectation.

4. Fair compensation (Salary/Bonuses). Here we all expect fair compensation of our contribution to the company goals.

5. Job process support. Under this expectation I can say that we expect that employer will provide us with all required tools like PCs, Stationary staff, Cell phone, Comfortable and secure work place etc.

Answering the second question I would like to mention that implicit expectations that I mentioned above are more or less universal for the most of my colleagues. Nevertheless, there are some differences depending on the concrete person or group. For example, I can split all my colleagues into three groups on the basis of the age:

1. Young employees 21 - 30 years old.

2. Mid-age employees 31 - 45 years old.

3. Older employees 45 - 60 years old.

For the first group of my colleagues (and I'm also in this group) the most important expectation is Personal development. We are looking for every chance to increase our education level, get additional qualification and improve our work experience. Job security and Compensation are less important for this group.

Second group more focused on the career development and wealth increase. So the main expectations would be career growth and compensation increase.

Third group would be more concerned in job security and secure and comfortable workplace. So these expectations would be more important for this group of people.

Talking about the idea of psychological contract I find it quite convincing. While working in IBM I covered a number of different positions. My every move to new position was explicitly reflected in my job agreement, but the most important subjects like new detailed role description, all obligations and job design, non-material compensation (like MBA) are discussed between me and my manager and during this discussion we "sign" a verbal psychological contract. Here I agree with the concept of Marchington and Wilkinson (2008) that during career path there is a row of psychological contracts that employee and employer renegotiate during each career move. So overall this concept seems very important to me in the relations between the employee and the employer.

August 20, 2009

Human Resource Management Lesson 6 Exercise

Starting this exercise I paid attention to the fact that there is no clear definition what the Learning Organization (LO) means. There are a number of definitions in different literature. For example, LO is “Organizations where people continually expand their capacity to create the results they truly desire, where new and expansive patterns of thinking are nurtured, where collective aspiration is set free, and where people are continually learning to learn together” (SENGE, P.M. 1990. The Fifth Discipline. London: Century Business). Another author gives us the following definition: “an organization that facilitates the learning of all its members and continuously transforms itself" (PEDLER, M., BURGOYNE, J. AND BOYDELL, T. 1997. The Learning Company: A strategy for sustainable development. 2nd Ed. London; McGraw-Hill).

To answer the questions of this exercise I would take as the definition the one that was done by Pedler (1997).

To specify the features of the LO I would use the ones proposed by Senge (1990):

- Systems thinking;

- Personal mastery;

- Mental models;

- Shared vision;

- Team learning.

As a target organization I would like to stress your attention to one of the IBM organizations that I used to work for some times ago. This is IBM Global Financing (IGF). The specifics of this organization are it's size (it has roughly about 2000 employees world wide, what is very small in terms of IBM population) and it's business (IGF is a kind of internal captive bank that provides short and long term financing for IBM business partners and customers).

Sticking to Pedler's definition and Senge's five features I would say that IGF is very close to LO model. First of all the management style, which is very similar to all IBM departments, is "sophisticated human relations" according to Purcell's classification (Purcell, 1986) and HR department, using the Storey's model (Storey J. 1992), plays the advisors role.

While working in IGF one of responsibilities was to assess the business development of the department overall, by its components (like business lines, products etc.), and understand and assess the place of IGF in the whole IBM picture. This fits in the feature of Systems thinking that allows me to study on the real business by understanding the details of the business line and it's place in corporation.

IGF management was interested in the development of the employees. During my career I was always involved in the personal and group study process. IBM has a developed tool - IDP (Individual Development Plan). Every employee has to set personal IDP annually and assess the results at the end of the period with the manager. By IDP I was always motivated to perform the personal learning by participating in different trainings, online education courses etc. Also IGF had semiannual team meetings for the whole European staff. This exchange of experience during the group trainings was also very effective.

Shared vision was also in focus in IGF. Using regular meetings. Exchanging the opinions IGF team always had a shared view on the issue that was supported by most of team members and management. This consolidated team position was a result of hard teamwork and long discussions inside the team.

By looking at all features that I have mentioned above I would say that IGF is very close to the model of LO. There are a couple of steps to go. For example, I do not see the huge attention to the Mental modeling in IGF. There is no proactive development of the sub corporate culture for IGF employees. Also I would be willing to see more frequent pan-European team meetings to create the society of IGF professionals and enforce the personal development of each employee.

From my point of view the changes that are still required for IGF to become an LO are feasible and desirable. Management is deeply interested to create the LO to get all the benefits of this model and get the competitive advantage.

August 19, 2009

Human Resource Management Lesson 5 Exercise

The question of the relations nature between employee and employer does not have the clear straight answer. There are too many factors that influence these relations. From the first sight, these relations have contradictional nature. The employer and the employee have different targets of their activity. If the employer's target is connected with the overall organization's performance (that may be measured in different way for different types of organization like: number of units produced, revenue, gross profit, PTI, net income, or some other for governmental and non-commercial organizations for example); the employee usually interested only in his personal well-being (salary, bonuses and incentives, different additional benefits). So having different goals the employee and the employer have to have the conflict.

Looking at the history of economics we can see a huge number of the explicit display of this conflict. In some countries (like Russia) this conflict became one of the reasons for the revolution.

Nowadays, most of the employers understand that this conflict is not only socially dangerous, but also has a huge negative impact on the productivity of the personnel. As a result of that we can see the shift of the employers' position to the "win-win" solutions with their employees. As an example I can point such programs as a: profit sharing, incentive bonus the size of which depends on the employee performance, different non-monetary benefits like education (i.e. MBA), company shares options etc. All these initiatives are targeted on one single aim to motivate and to consolidate the interests of the employee and of the employer.

Unfortunately it is not possible to achieve 100% consolidation but to some extend it allows switching the conflict to consensus.

The factors that may influence on the nature of the relations between employer and employee we can split into external and internal.

External factors are:

1. Economy. The economic situation has a dramatic influence on the employee's and employer's wish to move their opposite positions towards each other. HR specialists usually point two extremums in this field: "Labor market of the candidates" and "Labor market of employers". During the economic growth times the employment rates were high. The demand for experienced employees was high and the supply of the open positions was also high. As the result, employers had to accept the rules of the employees like: high salaries, number of additional bonuses and benefits, additional security (golden parachutes) etc. At the crisis time the situation is opposite and the employees are much more flexible today in terms of compensations.

2. Legal. How far the legislation is defending the employees' and employers' rights.

3. Market environment. Under this factor I mean the labor market standard for the geography in terms of the labor relations. The example can be the difference between US and Japan.

Internal factors are:

1. Management style and level of the employees' involvement. This is definitely very important factor as if the employee is satisfied with these this may be a very strong non-monetary motivation for him.

2. Personal relations between manager and employees.

3. Psychological climate in the teams and organization overall.

These are the main factors from my point of view.

August 18, 2009

Human Resource Management Lesson 4 Exercise

For this exercise I would like to compare the employee involvement styles and procedures of two organizations that I was working for.

First one is the governmental organization - Tax Ministry of Russia. Actually I was working for one of the regional Inspections of the Tax Ministry as a Federal Inspector.

As the second example I would like to look at IBM.

Talking about the first example I would say that the style of management and employee involvement is similar to other governmental organizations. Using the Purcell's classification (Purcell, 1986) it is Traditional management style. Labor is viewed as a factor of production and employee subordination is assumed to be part of the ‘natural order’ of the employment relationship. Labor Unions exist, but they are very limited in their actions as this is a federal services organization. For example, any strikes are forbidden.

From the perspective of employee involvement I can classify it as a Task-oriented and Indirect. The involvement is mediated by the Union leaders so the involvement is indirect. The actions of the Unions are mostly targeted at the operations level and are related to the day-to-day activities.

The other example is the opposite.

Management style in IBM Russia/CIS I can classify as mix of sophisticated human relations and Consultative according to the Purcell's (Purcell, 1986) classification. The concrete style depends on the department and certain tasks of the teams. Nevertheless, employees are viewed as the company’s most valuable resource.

The involvement of the employees is direct. It is done through the many different tools like:

- Employee Surveys;

- Management Feedback systems;

- Regular department and "all-employees" meetings


From the other dimension it is quite difficult to classify the involvement as it exists on both task- and power-centered levels.

Discussing the effectiveness of the employees' involvement systems described above I can say that there is no "True in an ultimate authority". At first sight it seems that the fist system (Tax Inspection) is not efficient. But thinking deeper you have to take into consideration the specifics of the job. It is federal services (the structure is close to military or police). There is a certain hierarchy that supports the order and effectiveness of the concrete tasks performance. There are number of the instructions and procedures and employees should strictly follow them.

In IBM we have a totally different situation. IBM is a private business that requires the creativity and broad thinking at the work. You can not just follow the instructions to be successful. So all this creative and innovative solutions that are invented by the employees should be properly communicated to the management to implement the best practices widely in the corporation.

From my point of view both systems are effective for each concrete case and environment.

August 13, 2009

Human Resource Management Lesson 2 Exercise

For this exercise I would like to take as an example the company that I worked for before joining IBM. The name of this company is CHG-MERIDIAN Deutche Computers Leasing AG. This is a German company with the HQ at the south of Germany. It was founded in 1970s and remained a family owned company till the 90s.

Starting from 1990s the interest to the financial leasing of the IT equipment started to grow rapidly due to the dramatic increase in the usage of IT itself. During this time CHG-MERIDIAN became a multinational leasing company with the offices in 15 countries of Europe including office in Moscow, Russia.

Using the Trompenaars' (1993) management practices classification I can say that:

1. Universalism is mostly applied by the management. CHG has a strict bureaucratic structure with well defined roles and formal choice of the best person to fit this or that position.

2. Collectivism used in the performance assessment. There is no individual target for the employees. The assessment is performed on the business unit level only. Most often it is done on the country level.

3. Neutral emotions.

4. And achievement prevails in the performance assessment.

Main decisions are made by the board that consists of the founder of the company and his sons. There is also the advisory board that consists of the accounting, finance, legal and business professionals.

Talking about the HR function I would like to apply the Typology of HR functions described by Storey (Storey J. 1992).

Typology of HR Functions

The HR function in CHG is mostly cared re the labour legislation and other rules and procedures related to the subject. HR can influence on some managerial decisions if they are inconsistent with the regulations but only on the day-to-day task basis. There is no HR involvement in the strategic decision-making process.

I think that HR plays the Regulators' role in CHG-MERIDIAN due to the rapid growth of the company from the small family-owned business to the multinational corporation. While being a family business CHG-MERIDIAN was mostly focused on the sales activities and did not care a lot about the employees. The financial products that CHG offers are very standadized and the sales people does not need to be very qualified to offer the standard solution to the customer. The credit decisions had been made by the owner of the company and there were no need in the educated credit analysts.

When CHG became a multination corporation the owners did not recognize the importance of the HRM and kept the same level of HR department with the same level of its involvement into the corporate management.

I think that this role of HR has more weaknesses than strong sides. The only strong side that I see is that HR is really focused on the labour legislation and documentary side of HR work. So this brings the safe position of the employees if the country labour legislation protect them.

But from the company development perspective I see a number of dramatic weaknesses:

- HR is not involved into the strategic decision-making process and because of that can not influence on the development rout of the company, at the same time HR is the most important one for the services company.

- As CHG became a multinational owners had to delegate some tasks to the local managers and leaders. Credit decisions are delegated to the local credit departments. The HR has to develop the employees. To increase their qualifications to ensure the proper decisions.

- HR has to participate in the compensation design as old fashioned sales plans demotivate sales reps and lead to the decline of revenue.

From my point of view the movement of the HR from Regulators to Advisors quadrant had already started in CHG-MERIDIAN. This should be supported by the founder and owners of the company and will lead their still family-fashioned business to become a true multinational corporation.

August 11, 2009

Human Resource Management Lesson 3 Exercise

From my point of view, pay is a hygiene factor (according to Herzberg's typology). So the employee can not be motivated with the pay only, but if the employee is not satisfied with his/her monetary compensation he/she can not be motivated at all. The other and more complex issue that I see is the level of pay that will keep the employee satisfied. This can not be achieved by some absolute figures as the employee will always compare himself with his colleagues. And if he personally feels that his pay is lower than his colleagues' doing the same or comparable job, the employee will be dissatisfied.

So the manager should be smart enough to keep the employee's salary at the level of satisfaction and motivate him with additional monetary or non-monetary tools.

During my career path I had different compensation plans:

1. Fixed Salary + Fixed % from Revenue from every signed contract + Fixed % from Profit from every signed contract.

This was so called individual PRP (M. Marchington, A. Wilkinson, 2008). I think that this pay mixture reflected well my performance targets. As I was a sales rep, my hygiene needs were covered by the Fixed salary and I was motivated to sell more by my participation in revenue and profit sharing with the company.

2. Fixed Salary + Bonus (Size depended from the team target achievement).

This was a team incentive plan. As I was a team leader and my team had to achieve one common for all team members goal this was another pay system the also reflected the targets of my job role.

3. Fixed Salary + Annual Bonus (Size depends on the fulfilment of my personal business commitments that I discuss and set together with my manager at the beginning of each year).

As my job role is no more connected with sales my pay type was changed. Now I have some targets in front of me and according to their achievement I get the fixed bonus and base salary increase.

From my point of view all pay types that I experienced during my life were good for the concrete position.

April 05, 2009

Operations Management Lesson 6 Exercise

Level capacity

As an example of level capacity I would like to look at the Indoor Skiing centre. Next to my house I have a Gym, or let's say sports club. It consists of many sections like: Gym, Swimming pool, Sauna, Indoor Skiing centre etc. When developer constructed this centre he created the capacity of the slope. It is 50m wide, 600m long and has difference in height of 80m. Number of air conditioning systems keeps the inside temperature of -5°C. This level of capacity can not be changed and is stable.

Management of this centre can't stop air conditioning if there is only one sportsman inside as snow will melt and it will cost the company much more money to relaunch the centre again.


Chase demand

AddeccoHere as an example I would like to offer Human Resources Outsourcing companies. For example IBM is the customer of Addecco and Zander outsourcing companies. This companies can easily chase the demand of their customers for new employees. Having a good database of available workers they do not hire them until there is a request from one of their clients. As soon as demand appears HR outsourcing company can hire the employee end rent it to customer with immediate coverage of the costs. If customer does not need this employee any more HR outsourcing company fire the employee and keep him as a candidate in the database.

Yield management

From my point of view here we can review as an example theme parks. While being a student in the university I was working during the summer vocations in Six Flags over Texas theme park in Dallas, TX.

Theme parks has a number of offers like "season pass", family tickets with discounted price.

  • Capacity of theme park is relatively fixed. It has number of rides, restaurants and shows with fixed capacity.
  • Market is definitely segmented.
  • Service can't be stored. It seems to be difficult to store the ride on the roller coaster.
  • The service is sold in advance as you by the ticket before you enter the park. Sometimes long time before.
  • Marginal cost is on the medium level.

Queue design

Let's review the queue design of the roller coaster. This queue is a mix of two designs: single queue and multi queue. The queue starts with the single queue design. This allows to structure the order of people going to the ride. At the closest point to the ride there is a split of the single queue into 10 queues to one trains as it has 10 seat rows. So this multi queue allows to minimise the time and simplify the structure of load. On the other side of the train there are 10 ways out. So load and unload are splitted. This also helps to minimise the time loss.

April 04, 2009

Operations Management Lesson 8 Exercise

Here I would like to get back to IBM Global Financing (IGF) process map that I described in Lesson 3 exercise.

IGF Process Map

Let's assess each step if it adds value from the Lean thinking perspective:

  • Step 1 "PREPARATION OF CUSTOMER REQUEST". Perfect performance of this step can help to avoid many issues in next process steps and properly prepared set of information allows to pass all approval stages faster and easier.
  • Step 2 "CREDIT CHECK". From my point of view this step adds value as it helps to dcrease the risk of unpaid debts and as a result decrease the cost of financing. This leads to the lower level of "waste" and cheaper financing interest rate for our customers. This step is one of the bottle necks of the process as capacity of credit department usually lower than the existing demand. So in peak time this can create a real issue for the business.
  • Step 3 "PRICING PREPARATION". This step also adds value as we can combine all incoming data for the pricing in a way to minimise customer's costs and cover all our risk and interest. From the other perspective it is another bottle neck as the capacity also does not match the business needs, but as this bottle neck is wider than "CREDIT CHECK" usually there is no big queue for pricing.
  • Step 4 "CONTRACTS NEGOTIATION". If customer accepts the offer we move to the step of contracts negotiation. This step is the narrowest bottle neck in the process as the capacity of the legal department is really unsufficient. But this step for sure adds value as it helps to avoid most of risks in the future and ensure the smoth contract fullfilment during the financing term.
  • Step 5 "BILLING". This is easy mechanical step that does not create lots of issues.

Once again reviewing the process of IGF business flow I can determine that this is rather push mode of work flow than pull one. This means that all existing bottle necks create a number of queues that does not allow the business to flow smoothely. Main reason is the nature of business. As IGF is a captive financing company it highly depends on the demand for the main IBM products (HW, SW, Services) and due to the high fluctuation of the attachement rate the demand for IGF financing is hardly predictable. So IGF mainly use MRP system of inventory management. That means that we have and inventory of available pool of money that we have to put into the market and renew this pool when we reach some critical point.

Operations Management Lesson 7 Exercise

For this exercise I have chosen the the assembling of personal computers. Every computer is a mix of spare parts like memory, hard drive, processor, video adapter, mother board etc. Let's assume that we assemble two types of desktops: standard type, and special powerful computers for special orders.

First of all we can classify the spare parts by the type of demand. Those for standard type of PCs will have independent demand. At the same time some special powerful 3-D graphic accelerators will have dependent demand which will depend on the number of special orders for this special computers.

For the spare parts for standard type of computers we can use ROP system to reorder them when inventory level reaches some critical point. This system is sufficient enough for such kind of inventory due to the high turnover of such spare parts and low cost of it's purchase.

For the more complex and powerful specific spare parts MRP system should be used. This system should use a complex of statistical information to plan and forecast peak demand for special computers. Besides that MRP should have an access to the information systems of the suppliers to be able to minimise the costs by purchasing higher quantity and using special promotion programs of the supplier. Third dimension of the MRP should be the cost of keeping the inventory. The mixture of these three dimensions will give us the most appropiate procurement policy.

The mentioned above classification can be used in ABC analysis. Let's devide all spare parts into three classes:

Class A: The most often used spare parts like wires, memory etc. The inventory cost is not high. Inventory turnover is high. ROP system should be used.

Class B: Often used spare parts like CPUs, HDDs, Standard Video adapters. Inventory turnover is medium. Mixture of ROP and MRP can be used.

Class C: Rarely used spare parts like complex 3-D accelerators and powerful video adapters. MRP should be used due to the complex forcasting of demand and procurement planning.

March 31, 2009

Operations Management Lesson 5 Exercise

In this lesson exercise I would like to review the integrated supply chain of IBM Global Financing (IBM Credit Corp.) on the world wide level.

IBM Global Financing (IGF) proivdes different types of financing for IBM customers. Among IGF products there are different type of leases and loans, innovative credit line schemes and other. In most of the countries IGF is a part of IBM Corporation local subsidiary, but as far as IGF acts as a bank I would prefer to look at it as an separate finanicng entity.

Taking into consideration all mentioned above I can describe the IGF supply chain as the following:

IntegrateÒ Supply Chain

This chain perfectly shows the flow of the IGF product from "raw material" stage (money in the bank) to complicated financial product with number of additional services, options etc.

This chain is well developed and pretty mature so main focus should be on the issues of price of financing, speed and quality of made decisions, additional benefits to standard products.


  1. Partners in the supply chain splits the risks Banks do not accept the credit risk of the end customer which is deifnitely much lower than IBM Corporation credit risk.
  2. IBM reduces its costs using cheaper lended money than using own capital.
  3. IBM has a pool of banks and able to get the best offer on the market at each point of time.
  4. Banks receives the consolidated pool of IGF deals (not deal by deal). This helps them to deacrese their SG&A expenses portion.
  5. IBM Global Financing injects specialized IT knowledge into pure financial business.


  1. Dependability of IBM on the Banks refinancing.
  2. Vulnarability of the chain (chain is open to external negative impact like financial crisis).
  3. Respectively longer decision-making time due to the involvement of global treasury.

March 30, 2009

Operations Management Lesson 4 Exercise

For this exercise I took a portable audio-player as an example of product.

What are the main customer requirements for the portable players:

    • Usually customer is looking for small and light device to make it easier to use it during the trip.
    • It is important for the customer to be able to have all your media data in one device.
    • Modern customers require the possibility to play videos and view pictures as well as listening the music.
    • Ability to use the device in long trips without recharging the battery..
    • Attractive modern design of the device to make it not only functional but also a part of personal image.

    Design characteristics:

    • Size/weight
    • Volume of memory
    • Number of data formats
    • Long-life Battery
    • Design


    The matrix above provides my estimation of the dependancies of "whats" and "hows".

    The result is the following:

    1. The most important in the portable media player high portability of the device which is very dependant on the size and weight of the device and the battery life-time.
    2. Second important is possibility to have all media data on one device. This led to the dependacy not only on data format compatability, but also size of the screen and memory volume.
    3. Appearance of the device is also very omportant as it is part of the personal image of the owner.

    March 28, 2009


    “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.


    March 21, 2009


    "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".

    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.

    March 03, 2009

    Operations Management Lesson 3 Exercise


    At this picture I described the IBM Global Financing "Business-as-usual" process. As IBM Global Finanicng interacts directly with the customer I used blueprint method of analysis.

    Sub-process: Credit check:

    Credit department receives the financial documents from the sales organization. Then credit analytic perform the analysis of creditworthiness of the potential customer based on its financials and IBM credit procedures. This check is done on two levels: A/R check and Credit check. After the check the deal should be approved by the relevant level of credit department management based on their clip levels.

    Output: Credit rating of the potential customer.


    Performance objectives:


    High: Credit analysis should be performed by high skilled analytic as this is critical for the corporation risk management.


    Medium: Speed should not be the target but due to the business requirements credit check should be performed in competitive time frame.


    High: The overall sales process depends on the result of credit check.


    Medium: capacity can be increased by additional highly skilled analytics


    Medium: IBM uses the information provided by different rating agencies.

    Process flow objectives:

    As I know there is no throughput rate, work in progress or resource utilization.

    The throughput time should be not more than 5 working days for the request.

    March 01, 2009



    “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.

    Level Capacity

    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).

    Chase Capacity

    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.


    February 28, 2009



    “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.

    C Mket

    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 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.


    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


    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


    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


    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.



    “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,

    TV Series Redesign

    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

    Competitive Scores

    Step 3 – Key Design Characteristics


    Step 4 – Relation between What and How


    Step 5 – Technical Assessment


    Step 6 – Correlation between design characteristics



    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.


    February 23, 2009

    Operations Management Lesson 2 Exercise

    I decided to review two different processes: ordinary credit card production (high volume vs. low variety) and exclusive gold and diamonds credit card creation (low volume vs. high variety).

    Normal credit card is a very standardized product. It has predefined size, name font and is created from standard plastic. The process of its production can be characterized as a “Mass process”. This production is performed by the assembly line. This brings high capital costs. But direct labor costs are low due to the high volumes. Most proper Layout type for this process will be Product layout type.

    Exclusive gold and diamonds credit card is absolutely opposite product and its production process is different. Here we are talking about very low volumes of production as the jeweler can spend weeks while creating this masterpiece. From the other point of view this brings high variety of the product as different materials and design can be used. The production process can be characterized as a “Project process”. This process involves unique, complex activities. The layout type for this process is “Fixed position layout” as recourses are moved to the product.


    February 21, 2009



    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).


    * 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


    * 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 2nd 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.

    Catering IBM Mad Diagram

    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.


    February 08, 2009


    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




    Low quality associated with low prices

    X High Quality, ad for the patient this relation can be the basement of their daily life


    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


    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


    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


    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




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