Operations Management Lesson 10 Exercise

Apply some of the analytical tools within this lesson to a new situation. You might identify a system failure (or a risk) and use tools such as why-why and fishbone charts to analyse the situation. If you want to take this further, see if you can devise poka-yokes.

The topic chosen for this blog is the monthly meetings that I usually do with my colleagues, to analyze the business performance in terms of the negotiations won or lost, ongoing campaigns and possible proposals to customers.

These meetings are crucial, as we analyze the context in which we operate, we try to understand how we are moving on the market, how to meet customer needs and if the bids we present are correct.
In other words we analyse if we are moving in the wrong way (and therefore we have to change something), or if we are operating in the right way.

Usually, the applied methods are two: the “cause-effect” diagrams and the “ Why-Why “ analysis; we choose between the two methods depending on  the subject we are focuse on: for example when focusing on marketing campaigns we use the why-why analysis in order to see how the most important customers respond (or potentially could respond), when facing customer problems (for example HW or SW related issues)  we use the cause-effect diagrams.

Let's give a quick definition of the two methods used:

• Why-why Analysis start by stating the problem and why that problem has occurred; once the major reason for the problem occurring have been identified, each of the major reason is taken in turn and again the question is asked why those reason have occurred and so on. By doing so we create a kind of question chain, that end with the identification of the root problem.
  
  
• Cause-effect diagrams: this is a particularly effective method for helping to search for the root cause problems. We are used to doing this by asking what, when, where, how and why questions.

Let’s now give an example of a why-why analysis done for evaluating a SW campaign

blog_lesson_10_why-whyv2.jpg

While a “cause-effect” diagram for a customer who is having issues in  recovering data an IBM integrated system, could be as follows:

blog_lesson_10_cause-effect.jpg

as it comes out from the diagram the no data recovery issue could be solved in deeper analysing the possible root causes, such as Server failure, Sw failure, wrong utilization of IBM system by customer personnel.

One more example of why-why analysis is the assessment of every tender that has been done even if we lost it, because:

• In case of lost, we can identify the mistakes in order not to repeat them, and to understand our weaknesses in order to change them in strengths (perhaps learning from the competition).
• In case of win: we can check if everything was gone in the right direction or if there was something that we could improve.

During this meeting a key support it is given by a check list (that we consider as a Poka-Yoka device), that helps me to remember all the steps that I have to follow, this in order not to forget the slightest detail.

Zoe Radnor (2007); «Operation Management »;Warwick Business school

: 26 Oct 2007 16:15 |  Comments (0) |  Close comments |  Report a problem

Operations Management Lesson 9 Exercise

Create a new entry in your Blog using the subject ‘Operations Management Lesson 9 Exercise’.

Take a process that you are familiar with and critically appraise the existing quality control system.

For this blog I will develop the quality control barely mentioned in the blog 5 about the personal computer supply chain.

We will look in details two processes of the value chain: production and customer support; for each process we will try to assess if the quality control is effective or not.

On this purpose we have to keep in mind wich are the steps to follow for establishing an effective quality management system:

1. Define the quality characteristics of the product or service.
2. Decide how to measure each quality characteristic.
3. Set quality standards for each characteristic.
4. Control quality against those standards.
5. Find and correct causes of poor quality.
6. Continue to make improvements

In the production of personal computers the quality control activity already exists: when the Personal Computer assembly is completed, it moves to the testing area, in order to check if the product quality is compliant to the quality standards already defined.

Lenovo expertise, market intelligence (both customer side than competitor side) and market leadership on personal computers industry allow to define high level quality standards expected on products.Those standards have to be reached in order to confirm the market leader role.

The testing activity is fundamental for a threefold purpose: 1. Control if everything works; 2. Monitor the quality of components acquired from the suppliers 3. Decrease the number of repairs to be carried out on site by the customer (cost saving on the maintenance, if a problem is not resolved at the factory Lenovo will has to send a technician to solve at the customer).

On my opinion the production process is effective, since there is a strong focus on measuring quality features of finished products. It could be improved introducing a quality control system even before the testing process, in order to reduce reworks and bottlenecks in the production line.

In the "Customer Support" process Lenovo has many shortcomings: it is a process that Lenovo has outsourced.

Let's analyse how it is structured. We have: 

• The Call center to which customers refer for any problem on products (outsourced to a company A)

• The Call center for the first level at which calls are diverted to solve the problem (outsourced to a company B, in India and in South Africa)

• The Call center for the second level at which calls are diverted if the problem persists (Done by Lenovo)

• The technical staff, that eventually works on site to repair products (outsourced to a company C)

To check the quality of the process of the work, Lenovo usually control and measure several KEY performance indicators about the work of each outsourcing company and in case of non compliance with the service level agreements, Lenovo gives a feedback to the suppliers asking to improve the quality.

Due to several issues with customer support claimed by customers themselves Lenovo recently asked to an external company D to make a survey on customer satisfaction; through interviews conducted, the society D has revealed a low level of quality for the first level support, which was very detrimental because “the interaction between the customer and the service provider is another critical aspect of service delivery (that makes a difference to the customer’s perception of service quality)”.

As a consequence of these reports, it was decided to speak with Company B management, asking them to increase the quality of service.

Also in the customer support process there is a good quality management system, since all the standards are defined and the performance is always measured and compared to standards.

In my opinion another important thing to do would be to integrate the feedback of the technical staff of the outsourcing company C, within the "Lenovo Chain Management", this in order to speed up the resolution and detection of problems. It is very likely that people involved in daily maintenance of personal computers can suggest constructive improvements.
For instance to encourage them a good way could be a contribution to any suggestion that will be applied to the production process.

Zoe Radnor (2007); «Operation Management »;Warwick Business school

: 25 Oct 2007 09:54 |  Comments (0) |  Close comments |  Report a problem

Operations Management Lesson 5 Exercise

Create a new entry in your Blog using the subject ‘Operations Management Lesson 5 Exercise’.
IBM is famous for its level of supply-chain de-integration. For one section of the organisation, write about the strategy behind this approach and the advantages and disadvantages.

What I am going to analyze in this blog is the supply chain management of the IBM Personal Computer Division that was sold three years ago to Lenovo company.

The four main stage of the supply chain for the Personal Computer production are

• Materials Acquisition
• Assembly
• Test Quality
• Delivery

blog_lesson_5_img1.jpg

Let’s analyze in detail the different stages:

Acquisition of materials and assembly:
Of course, the Lenovo do not produces all the components of its Personal Computers but uses third-party by supplying from different vendors.
Almost all of the components are manufactured outside, and then assembled by Lenovo.

There are two main types of supplier:

• Transactional relationships suppliers: these are normally used for components that do not require technical specifications; it’s easy to find them in large quantities and varieties on the market, p. e. cables, power supplies, or the screws.
  These suppliers are not strategic and therefore, in case of lack of quality/low performance they can be substituted easily, since Lenovo has signed non binding contracts with them.

• Longterm partnerships suppliers: these are suppliers with which Lenovo develops synergies and maintain good relations to maintain standards; p. e. processors or Laptop chassis, which has been developed specifically for this models.
  These suppliers are strategic and therefore, Lenovo has signed binding contracts with them, sharing objectives, profits and expected service levels or product quality. The relationship with these suppliers is based on a win-win approach in which every single problem is a common problem to resolve and every single business opportunity is for the entire supply chain.
  
  

Quality Test:
In order to maintain an high quality standards, when the Personal Computer assembly is completed, they switch to testing. This step is fundamental for a threefold purpose: 1. Control if everything works; 2. Monitor the quality of components acquired from the suppliers 3. Decrease the number of repairs to be carried out on site by the customer (cost saving on the maintenance).

Delivery
This stage is totally given in outsourcing.

It’s very important to outsource the non-core activities, like the production of Hard drive or the delivery. This will be able the company to significantly reduce costs and focus on the core business.

In order to make a more competitive products, Lenovo is trying to optimize the delivery times, shipping, reduce inventories and reduce costs. In this direction, a great advantage has been taken by improving the control over the entire "Supply Chain" by integrating the supply chain of the most important longterm partners within their "Supply Chain.

Let’s analyse a problem caused by the outsourcing or the supply to the long term partners: the inefficiency caused by the supplier failures.

For example, two years ago there were a major problems with a faulty batch of hard drive that after about three working months they crashed; the supplier has not been able to prevent the failure. This led to a high cost of extraordinary maintenance and to a very low customer satisfaction; another example is the missed deliveries on time, due to inefficiencies of the carrier.

All these event are referred from the customers to Lenovo even if Lenovo has no the control on them.

Zoe Radnor (2007); «Operation Management »;Warwick Business school
N. Slack, S. Chsmbers, R. Johnston, A. Betts; «Operation and Process Management »; Prentice Hall
Navi Radjou (2005); «IBM Transform Its Supply Chain "To Drive Growth"»

: 24 Oct 2007 23:58 |  Comments (1) |  Close comments |  Report a problem

Operations Management Lesson 8 Exercise

: 22 Oct 2007 21:11 |  Comments (0) |  Close comments |  Report a problem

Operations Management Lesson 4 Exercise

Create a new entry in your Blog using the subject ‘Operations Management Lesson 4 Exercise’.
For a product or service of your own choice, complete a QFD matrix that relates customer requirements to design characteristics. Justify your entry.

The product that I decided to analyze through the QFD matrix are the palmtop computer (HCT).

This is a "new" market sector that is growing faster year after year, eroding market share to the mobile phones.

.

“The Whats”

: 21 Oct 2007 23:30 |  Comments (1) |  Close comments |  Report a problem

Operations Management Lesson 7 Exercise

Create a new entry in your Blog using the subject ‘Operations Management Lesson 7 Exercise’.
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?

I’ve chosen the material processing operation of VIP Garden, a shop of orchids, sited in Rome.

This shop works a high quantity of orchids and accessories related to the orchids' world, the decision about the products and especially the quantities of orchids to keep in stock (within the greenhouse) is taken by the principal (the owner of the shop) and it is based on the popularity of orchids and of the level of stock.

2 years ago they have bought a software that supports them in the management of the warehouse by linking the stock to sales. Before the arrival of this software, the system they used was the re-ordering point (ROP) system.

They identified in advance two factors:
1) the minimum number of orchids to acquire (relatively to the price of orchids and the cost of management)
2) the minimum value (re-order point) at which they had to do the new order, for not remain without orchids (normally their supplier takes from 4 to 5 days to supply)

So, when the ROP is achieved they entered a new order.

Now with the new SW they’ve moved from ROP to MRP; they have added additional information:
• the seasonality, p.es the increased number of marriages, in Rome corresponds to the months of May-June and September-October, (they are called for setting up weddings flower ornament).
• the rankings of orchids more sold
• the price at which were sold
•The maximum capacity of the warehouse (previously was happened, that once bedridden from low-price, unknowingly they bought more orchids that the greenhouse could contain)

The SW indicates the levels of stocks, the different influence factors, when and the quantity to be acquired by running an alarm, which is analysed by the principal and normally turned in order to the supplier.

For simplicity of management, method MRP has been applied only to the low price orchids, while for the high price (rare) orchid and the accessories, the principal is still continuing to use the ROP method.

Let’s apply the Pareto Analysis; we can divide the items in:

• A. High value items: 15- 20% of items that account for 75-80% of the total annual inventory value (low price orchid).
• B. Medium value items: are 30 -40% of the items that account for approximately 20% of the total annual inventory value (high price rare orchid, for which they cannot predict forecast).
• C. Low value items: are 40-50% of the total number of items and account for 10-15% of the annual inventory value (garden accessories).

It is plain that the VIP Garden decided to use both methods: MRP, as we saw, was used to calculate demand for high value items (low cost orchids), while they continue to use ROP for the high cost orchid and the garden accessories.

The fundamental factor with the implementation of the new SW is that they have discovered that the profitability of glass vessels linked to the selling of orchids is very high, especially if tailored; in fact now they normally sell the combination of orchids and glass vase (doubling the price of sale).

Furthermore as there is a huge request of orchids for weddings they have implemented an Excel spreadsheet (MRP order record sheet), where mark all the waiting period and processing of the various components for the creation of floral compositions. In order to have the perfect delivery time.

These components are:
glass vases (7 days of dispatch, in packs of 10)
Plastic vessels (2 days of dispatch, in packs of 20)
bark for orchids (4 days, in packs of 20 sacks)
to prepare a beautiful composition they take 20 to 40 minutes.

---

Zoe Radnor (2007); «Operation Management »;Warwick Business school

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

Operations Management Lesson 6 Exercise

Create a new entry in your Blog using the subject ‘Operations anagement Lesson 6 Exercise’. 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.

Level Capacity Management

“The level capacity plan satisfies high demand from existing stocks. When demand goes below capacity, overproduction is stored as inventory in anticipation of higher demand in later months. The disadvantage of this approach is that this tends to build in high stock levels and hence high levels of working capital are required. “Companies can be left with excess stocks on their hands”.

An example of level capacity management could be the first step of the production of salt by evaporation (in Italy there is one industry like this in Salina).
In hot countries, salt is produced by allowing the sun to evaporate sea water in shallow pools or ‘pans’; the steps are in order: Evaporation, Wash, Centrifugation, Grinding, Drying, Sack, Packaging, Shipping.
All the salt product by evaporation is accumulate in big pile and used when needed.
Normally, they  produce much more salt then they need as, in this specific case, there isn’t the problem for the company to stock or to be left with excess stocks on their hand, as the cost of stocking and the raw material is zero.

Chase Capacity Management

Opposite to the level capacity management is the chase capacity, “organisations could decide to match capacity and demand by altering the availability of resources. This might be achieved by employing more people when it is busy and adopting strategies such as overtime and additional shifts. The amount of planning does increase, but this is compensated by better utilisation of resources”.

An example of chase capacity management could be all kind of work with seasonal cycle p.e the management of a restaurant in a seaside resort, during the winter there are few costumers and therefore there are few waiters; only during the weekends (not always) and the summer the restaurant will be full of clients. During this period staff with a time contract will be taken to speed up the services.

Yield management

“Yield management is a collection of methods, that can be used to ensure an operation maximizes its potential to generate profit. “

An example of yield management can be seen in the streets of Rome, during the period of Porcini mushrooms. Every morning at the market you can see a farmer with its barrows that sells fresh mushrooms at a fixed price, it is logical that the purchaser will be the person who want the mushrooms for dinner and would like to pay that price for them, as the time pass, the possibility to have unsold goods increase and, in order to attract people to buy the mushrooms, the farmer will start to reduce the price.
The price is closely linked to the timing and quantity remained.

Queue design

An example of queue design is the queue that is made within the Big shop (like a supermarket) in the patrol station on highway close to Rome. Normally during the peak season (p.e. during holidays) a long queues are formed at the cash desk, in order to optimize the queue and make more pleasant stay in the queue, the manager decided to draw the line along the shelves of the shop and especially the area of the magazines. In this way the customers may both be attracted to products which had not seen previously, and thumb the magazines.

Bibliography:

Zoe Radnor (2007); «Operation Management »;Warwick Business school

N. Slack, S. Chsmbers, R. Johnston, A. Betts; «Operation and Process Management »; Prentice Hall
http://www.manfredinieschianchi.com/206-1IT-impianti-produzione-sale-colururo-di-sodio.htm

: 20 Oct 2007 17:07 |  Comments (2) |  Close comments |  Report a problem

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 the degrees of visibility of the process.

Following is the process map for the hardware (HW) repair of a laptop; in this service the costumer is the IBM employee;

blog_lesson_3_hw_repair.ppt

When an IBM employee needs HW reparation on his laptop, first of all, he opens a telephone ticket and with this number he brings the PC to the local support office

Here the technician checks the workstation and verifies if it’s a real HW problem instead than a SW one (in case of sw problem there is a different organization unit).

In case of Hardware Issues he takes the laptop and starts analysing it; once he finds the root cause of the issue, he checks if he needs a part or not and if this part is in the local warehouse (in the negative, he has to order it).

Once the laptop is repaired, he checks it and verifies if it need more repairs. If it’s all ok he calls the employee and gives him back the laptop.

We can catalogue this process as a Jobbing process; the local service staff usually deals with high variety and low volume; each operator can accept for repair needs one or more laptop, but he can only repair one at a time, with a stack management of his work.

We can also consider the process as “short and fat”.

The cycle time is very variable, depending on the level of the malfunction found in the hardware, and more on the spare part availability in the local warehouse.

Zoe Radnor (2007); «Operation Management »;Warwick Business school

: 09 Sep 2007 13:48 |  Comments (0) |  Close comments |  Report a problem

Operations Management Lesson 1 Exercise

Create a new entry in your Blog using the subject ‘Operations anagement Lesson 1 Exercise’. Take a small process you are familiar with and ask the following questions: 1. What is the strategic role of the process within the organisation? 2.What performance objectives are important? 3.Pick three questions from Table 1.1 about the strategic decisions hat have been taken within this process. Answer them, justifying he decisions in relation to the process role and performance equirements.

The “Workstation fleet management” is the management of a fleet of PC and laptop, using certain
tools, to improve operational efficiency and effectiveness.

In IBM we have more then 300,000 PC and laptop.

Every employee has got one PC that is his/her fundamental work asset: for this reason at IBM it’s required a perfect functionality of these assets. This responsibility is left to the “Workstation fleet management process”

At IBM there is a team of people, the so called “PC support team” whose task is to resolve any issue HW and/or SW related, that could occur to in the employee workstations.

The group is divided into different groups and each group is divided into different levels of
competences.
p.e. for the Sw group is divided in:

• group A for the first level at which calls are diverted to solve the problem
• group B for the second level at which calls are diverted if the problem persists

2) What performance objectives are important?

There are three main performance objectives that are quality, speed and cost.

Quality: which means doing things right, providing error-free solutions, resolving problems in the right way without adding new ones is a fundamental issue.

Speed: which means doing things fast , minimizing the time between the call for the service and the
delivery of a solution to internal customer. The faster is the service the lower is the working time lost by the employee. He can quickly go back to work and produce revenue and service for the company.

Cost: which means doing things with cost efficiency, one of the latest strategic goals targeted at IBM. Therefore it’s important to deliver every services with the less money impact. The target assigned to “PC support team” is to maintain the internal customer expectation with the lower cost possible.

Another important factor is the flexibility as the group have to work in different language and with
non predictable peaks of work (for example virus).

3) Pick three questions from Table 1.1 about the strategic decisions that have been taken within this process. Answer them, justifying the decisions in relation to the process role and
performance requirements.

What technologies should we use?

In the recent years IBM has taken the decision of using new Assistance Software also for the “Workstation fleet management process”. Since new SW’s have been used, they have improved the service effectiveness and efficiency, allowing a reduction
of feedback times, and consequently costs, while increased the quality of service.

for example, now every technician at PC Support can take the control of the workstation and directly work on it without the interference of the owner: this remote controlling procedure allow to centralize the service and reduce the local support with money saving.

How should we forecast and monitor the demand

On one side the new sw enable the support centre to collect all the information of the internal customers and the history of every workstation issues, on the other hand now it’s also possible to merge this information with the intelligence coming from the workstation suppliers (in case of manufacturing defects) and from public internet libraries (Virus); in this way it’s possible to forecast and monitor the demand.

How do we measure operations performance?

We can do this in three different ways:
Quality: if the ticket (so it’s called the opening of a problem) is closed and not reopened.
Speed: the time in which the support is able to resolve the problem.
Cost: total expenses for “Workstation fleet management process”, calculated with ABC criteria and compared with benchmarks.

Zoe Radnor (2007); «Operation Management»;Warwick Business school

: 08 Sep 2007 18:58 |  Comments (0) |  Close comments |  Report a problem

Operations Management Lesson 2 Exercise

Take two processes with different volume and variety characteristics. Profile these processes and establish the process choice and layout decision they have taken. Critically appraise the design decisions taken.

The two processes I’ve decided to analyse are both in the food industry: the first one is the “Discovery pizza ( a chain of take away pizza shop) selling process” , and the second one is the “ Skychief on board catering service, for airline CO’s”

The discovery pizza shop is a small open space in which customers could choose two different kind of solutions: for a small order (one/two slice of pizza), they could choose from the exposed pizzas and for big orders (one pizza or more) they could ask for their preferred pizza choosing from a list of ingredients and toppings (obviously in this case there’s a significant waiting time for the customer, who accept it in order to take away his/her preferred pizza).

The Skychief provides the meal on board for several airline Companies; at Skychief they have large laboratories where they pre-cook the food. Once the food is pre-cooked it is then transported to the airports and loaded on every airplane where it will distributed, heated up, to travellers.

Let’s analyses the 4 V’s profile for both these two processes:

Discovery Pizza:

Volume: low-medium volume;

Variety: only pizza, but with hundreds of different toppings and ingredients, well define product;

Variation in demand: medium high variation in demand, it depends a lot from the weather, and the traffic; there is also a seasonality with a decrease of sales during the national holidays and one month in the summer, when the city is empty.

Visibility: High, the process is total exposed to the costumers.

Skychief:

Volume: high, they produce thousand of meals a day

Variety: medium-low since the airline could choose only few different kind of meal with predefined ingredient.

Variation in demand: very low variation in demand

Visibility: low visibility and low contact skill (the personnel never meet the end consumers).

Process choice

For Discovery Pizza, using Slack et al’s process choice model, the process fits into the Jobbing Processes category: high skill employees are used with flexibility to produce one-off item; in my opinion, as the volume of take away pizza is increasing, DP has to move to Batch Process as it could produce more than one product at a time.

For Skychief we could consider the Mass Process Category: they produce high volume with narrow variety. In this industry the main performance objectives can be summarized as follows: good quality, speed, flexibility and of course low cost. In my opinion Skychief is moving in the right way, as in the “Lazy J trend” they stay close to the diagonal.

Zoe Radnor (2007); «Operation Management »;Warwick Business school

: 08 Sep 2007 18:33 |  Comments (0) |  Close comments |  Report a problem