Capacity Measurement

Today's case study from Collier (2015) chapter 10 provided an opportunity to experiment with two capacity measurement formulas:

• capacity required for an individual work order (Ci)
• total capacity required for the shop (sum Ci)

These formulas are detailed on Collier (2015), p. 208.

Applying these formulas to the David Christopher case is a bit tricky, as the "set-up time" used by our orthopedic surgeons actually does vary with volume, unlike the standard set-up time in a factory setting. Most of you caught this variation, and accommodated for it in your calculations. Congratulations! Here's a video detailing the calculations for this case...

Now the question is what to do about the delta between Dr. Christopher's available capacity and demand? Many of you suggested variations on hiring another surgeon (maybe part time), hiring other non-physician staff to free up the doctors, and reducing set-up/changeover time.

Kristen, Michael, and others had an important conversation about the costs associated with hiring another physician, and the hope that increased capacity would generate new revenue. What we don't know from the case are demand trends that might change this hope into a reality. It would be helpful to have that info.

Personally, I'm a fan of having a fully rested physician operating on me, so I'm a supporter of the set-up times between procedures (many of you want to reduce those times). Let me suggest another non-hiring alternative: what about using one Friday per month as a surgery day? Most other Fridays would still be available for conferences, etc. Then if demand warranted additional capacity, another surgeon could be hired after X period of time. Something to think about.

Now, how might you be able to apply these capacity measurement tools to your case study companies?

Capacity Management

Today's discussion board posts provided a number of insights about how different businesses manage their capacity: the ability "to accomplish their purpose over a period of time." (Collier & Evans, 2015, p. 205). We can measure capacity in two ways:

• maximum rate of output per unit of time (e.g., number of pizzas/hour)
• units of resource availability (e.g., number of seats in McInnis Auditorium)

As many of your pointed out through your posts, capacity is relevant to both goods and services producing businesses. It can be impacted by facility size/location, process design, workstation or equipment. Watch this video for a helpful introduction.

It is important to distinguish capacity management from inventory management. When we're talking about capacity management, were talking about maximum rates of output or resources availability based on constraints imposed by the facility, process or workstation design, or equipment. Inventory availability will certainly impact our ability to run our processes at full capacity, but it does not determine capacity. For example, a movie theatre may have 500 seats (its capacity), but the number of customers may not fill the theatre at any one showing. This lower number of customers does not result in lower capacity.

The intent of today's assignment was to give you a head start on case study part 3, item 4: planning and control tools. Today's capacity management topic fits under that umbrella. See these posts in today's discussion board for helpful examples as you continue to develop your own final case study installment:

• Long and/or short term capacity management strategies: Andrew B., Lauren S., Michael G., Katie K. 
• Short-term capacity management via labor skills mix: Jacob S., Mario M.
• Short-term capacity management via labor capacity & schedules: Edem A. & Xia C., then see Ryan's post for thoughts about the down side of this method over the long-term.

Finally, Kyle presents an example of a company that has created a distribution system with a large amount of capacity flexibility. What specific tools from Collier & Evans (2015), chapter 10, do you see at work in Kyle's example?

Lean Operating Systems

Today we were introduced to a successful example of lean operating systems implementation through our case study at the end of Collier and Evans (2015) chapter 17. The videos below are helpful supplements to our reading, highlighting some of lean's key concepts. We'll put these concepts to work in class next week. We'll also apply them in case study, part 3.

An introduction to lean.

This next video captures Collier and Evan's (2015) four principles of lean, but in a slightly different way.

And now a review of the seven types of waste. Note that the narrator adds an eighth type. This video does a particularly good job applying lean to service environments.

Finally, this video highlights some additional lean concepts not captured in today's case study, but that are critical to lean operations. Can you identify the concepts and tools we've discussed earlier in the semester?

Reference

Collier, D.A. & Evans, J.R. (2015). OM5. Boston: Cengage Learning.

Pareto Charts & Fish Bone Diagrams

Xia makes an important connection in today's discussion board between Pareto charts and cause-and-effect (or fish bone) diagrams. She proposes that fish bone diagrams can be used to dig into the top problem(s) identified in a Pareto chart for the purpose of conducting root cause analysis. This is absolutely correct. The combination of Pareto charts and fish bone diagrams is a powerful quality assurance tool.

This video from Jay Arthur (author of Lean Six Sigma Demystified) connects Pareto charts and fish bone diagrams, and succinctly explains how the "5 whys" can be used to complete the cause-and-effect chart.

Process Mapping

Process mapping is an important tool in process design and process improvement. One critical aspect of process improvement is identifying valued-added activities and waste. Waiting time is always a form of waste (we'll talk about this more in our lean module in the coming weeks). We can identify waste in a process by taking process mapping a step further using value stream mapping. Take a look at this video for a helpful introduction to value stream mapping.

Several of your process maps included a number of different parties participating in the process. Xia's map of the "fulfillment by Amazon" (FBA) process is a good example. Sometimes we want to have a clear picture of who's responsible for what step of the process and when. We do this using a swim lane diagram. The approvals swim lane diagram below uses all of the flow charting symbols we used in today's project, but organizes them by responsible party using "swim lanes".

Source: Paul Kerr, Wikimedia Commons, Public Domain

This next video provides a helpful tutorial on how to get started with a swim lane diagram. 

How might you use this tutorial to convert Xia's FBA process map into a swim lane diagram?

The Wedding Wagon

Collier & Evans (2015) characterize four basic process types: project, job shop, flow shop, and continuous flow. How would you classify this process, and where would you place it on their service positioning matrix. How might that be different from more traditional wedding planning?




Reference: Collier, D.A. & Evans, J.R (2015). OM5. Boston: Cengage Learning.

How to Create a Productive Office Space

View image | gettyimages.com

Here's a useful article covering the basics of office space design. Check it out and enjoy: How to Create a Productive Office Space

Store Location Using the Factor Weighting Method

Save-A-Lot is a good example of a company using a cost leadership strategy to meet unique needs in the  marketplace. This video from Good Morning America provides a nice overview of their strategy from the consumer's side of the check-out counter.



World News Videos | US News Videos

Save-A-Lot operationalizes their cost leadership strategy using a limited-assortment approach to grocery retailing. Their stores are smaller than conventional grocery stores, and carry a reduced number of SKUs (as you saw in the GMA video). The site requirements you built into your factor weighting grids all play a key role in ensuring each Save-A-Lot location is sustainable over the long term. See Julie, Kristen, Andrew and Eddie's posts for good examples of grids with well considered factor weightings.

Ryan brings up another important point in his grid and question to Eddie: the role of median family income. Save-A-Lot's operationalization of its cost leadership strategy allows it to locate in neighborhoods with median household incomes below $45,000 (approximately). These neighborhoods are often neglected by conventional supermarkets, resulting in Save-A-Lot meeting a real social need. This story from WCPO in Cincinnati illustrates just such a circumstance (note the importance of foot traffic for this location).

This video shed new light on Save-A-lot's site requirements, helping us to understand the role/importance of each factor. A special shout-out to Lauren and Micah who not only created their factor weighting grids, but researched location data to come up with some potential store sites (though they didn't identify this location).  :-)   Nice work!

As we discussed in class, the factor weighting grid can be used for any number of management decisions. You now have a tool you can put to use in a variety of OM settings and circumstances; anytime you have multiple variables against which you need to exercise managerial discretion and judgement in making your decision.

Fashion Supply Chain Case

H&M business concept | Source: about.hm.com

Thanks for your thoughtful comparisons of the H&M and Zara supply chains this week . Many of you made the point that these two supply chains have similarities, but also some important differences. See Kristen, Andrew, Mario, Michael, and Micah's posts for excellent comparisons of the two supply chains using the SCOR model. 

A central concept in supply chain design is effectiveness. How do we determine and design the most effective supply chain for our business? The answer to this question goes back to our company's overall strategy. Do we want an efficient supply chain, a responsive supply chain, or some combination of both? (See Collier & Evans, 2015, chapter 9, for a full discussion of the differences between these choices.)

H&M identifies their core business concept is "fashion and quality at the best price". Fashion certainly implies some level of supply chain responsiveness, but H&M spends significant time and energy outlining the efficiency aspects of their supply chain design as well. H&M ensures best price by designing in-house, purchasing in large volumes, efficient logistics, and overall cost consciousness (H&M, 2015). Zara, as Mario points out in his post, has a different focus. Zara clearly comes down on the responsiveness side of the design discussion with their focus on fast fashion. Your posts this week and earlier in the month detail how Zara delivers on their fast fashion commitment.

Sustainability is an important third measure of supply chain effectiveness. Andrew and Jacob point out H&M's efforts in this area. Resource efficient transportation is an important part of the H&M sustainability mix, as are reverse logistics: taking back used clothing for fabric re-purposing or fiber recycling. Note that the most resource efficient transportation methods are also the slowest. This is not necessarily a problem for supply chains that are strictly designed for efficiency, but can be problematic for supply chains designed to be responsive. It will also be a challenge for supply chain design that seeks to balance both efficiency and responsiveness. 

So, which supply chain design is most effective? The answer is the supply chain that best supports the company's strategy and facilitates delivery of the their customer benefit package. Be sure to consider these issues of efficient, responsiveness, sustainability and alignment with company strategy as you conduct the supply chain analysis in your case studies.

Enjoy the weekend. Stay warm. We'll continue our supply chain discussion in class on Monday. See you then!

References

Collier, D.A. & Evans, J.R. (2015). OM5. Boston: Cengage Learning.

H&M (2015). About H&M: Our business concept. Retrieved from http://about.hm.com/en/About/facts-about-hm/about-hm/business-concept.html. 

Zara Case

Zara, Rittenhouse Square, Philadelphia, PA / Photo by Tsedey Bogale on Google Maps

The Zara case provides us with an interesting example of value chain integration that runs contrary to many of their competitors. Rather than outsource all manufacturing and sell through others retailers, Zara's value chain includes a significant vertical integration component.

Many of you identified Zara's stores as an example of forward integration. But Zara's most unusual approach is their backward integration highlighted by Eddie and Michael. As Kristen and Jacob note, Zara makes 40% of their own fabric and 60% of their own merchandise. Key to their vertical integration are the lean and just-in-time practices identified by Julie, Kristen and Andrew. We'll talk more about "lean thinking" in the weeks to come. The key thing for us to understand at this point is that lean manufacturing and just-in-dime processes significantly reduce waste of all types in the value chain. This helps deliver savings to the organization. Think back to our Interface discussion in class... Interface financed their product and equipment innovations through savings garnered through lean practices. For Zara, lean and JIT help address Tim's question regarding the risk of being on the cutting edge of fashion: what do you do with leftover inventory when customer taste changes? Zara has a lower unsold item rate than the industry average, and they get closer to full price on the clothes they sell than most other fashion retailers. (See the Berfield and Biagorri (2013) Bloomberg Business article.)

Some of your most interesting questions and discussion centered on the value this vertical integration creates for Zara customers, and whether this model can be duplicated by competitors. Julie helps us with this discussion by first clearly linking the value created in the value chain with our value equation (see Collier, 2015, p. 26) and the customer benefit package (CBP) discussed in chapter 1. It is this relationship between affordable price (driven by Zara's lean/JIT value chain) and leading-edge fashion that creates value for Zara customers. Julie, Katie, Kristen, Lauren, Andrew, Kyle, Mario, Michael, and Ryan all ask or discuss this question: can Zara's model be duplicated? Perhaps, but not easily. In a future case we'll see the steps that H&M has taken to speed new fashions to their stores, but they do so without attempting the vertical integration we witness in the Zara model.

So what is it that makes this model so difficult to duplicate? More to come as our study of OM progresses this semester.

Reference

Collier, D.A. & Evans, J.R. (2015). OM5, Boston: Cengage Learning.

Sustainable OM

Hi all. Thanks for the excellent discussion on Spencer, White & Vroblesky (2009), chapter six. The authors challenge us by boiling down all of our reading to date into this one controlling idea: sustainability is all about the quality of relationships between God and human beings. This controlling idea echoes Nicholas Wolterstorff's characterization of shalom. This Hebrew word is often translated as peace in English Bibles. Wolterstorff (1983) argues that the peace of shalom is not simply an absence of violence, but is also the enjoyment of one's relationships with God, fellow human beings, oneself, and also the environment. This is the full meaning of shalom. We see all of these elements in Spencer's eight principles for sustainable living and your Blackboard posts.

The theme in many of your questions and response to one another revolved around application. What does "sacrifice" look like? (Katie and Mario.) How do we change the our perspective of industry so that we can approach caring for creation as a joy rather than a regulatory burden or hurdle to overcome? (Ryan, Michael, Tim & Mario.) How do we build justice for the vulnerable and the marginalized into the fabric of our businesses? (Katie, Julie, Andrew, Micah & Justus.) Whose job is it to ensure healthy relationships inside our companies (Tim & Kyle), and can a desire for improved relationships be intrinsic for business owners, managers and leaders? (Andrews, Kyle & Katie.)

As you might guess, there is no one way to answer these questions. The response/solution that each business provides will be different. The important thing is that you are all thinking about how to operationalize these concepts that stand in contrast to the common ways of conducting American business. We'll be discussing these questions throughout the semester in our study of operations management.

The owners of Broetje Orchards have asked many of the same questions, answering them in the design of their business strategy and their daily operations. Click on the image/link above to see how First Fruits applies Spencer's controlling idea, incorporating all four aspects of relationship identified by Wolterstorff. In the coming weeks we'll examine similar cases initiated by business owners operating from a non-faith based perspective.

So until Monday, may you enjoy all of your relationships!

References

Spencer, N., White, R. & Vroblesky, V. (2009). Christianity, climate change and sustainable living. Peabody, MA: Hendrickson.

Wolterstorff, N. (1983). Until justice and peace embrace: The Kuyper lectures for 1981 delivered at the Free University of Amsterdam. Grand Rapids, MI: Eerdmans.

Inventory Management

Hi all,

Today''s online class had the twin goals of (a) introducing ourselves to inventory management concepts, and (b) getting you to begin thinking about case study part 3.

Your case studies provided great examples of inventory concepts applied to manufacturing, distribution/retail, and service organizations. While the core issues and inventory types are different, all businesses have inventory to manage. See Dan & Ethans's post for good discussions of inventory in manufacturing (both small and large plants). Korey and Quin provide us with windows into distribution and retail inventory management challenges, while Karson and James help us consider inventory management in service organizations. And by the way, excellent follow-up questions to Andrew & Korey's posts!

The videos below support/reinforce our reading and the application you've already made in your posts. See the 3 Types of Inventory video for a helpful review of raw material, WIP and finished goods.

The Modernizing Inventory Management video is a nice mini-case study of inventory management in a small retail business. The clip is 5-years old, so you'll notice shots of some old computers, but the principles are the same. See how many concepts from chapter 12 you can identify at Cole Hardware.

See you on Monday!

Capacity Measurements

Hi all.

Our formulas for process and "shop" capacity in Collier (2013) chapter 10 are important ones. The proper application of these formulas can help to answer important questions about the ability of our process to meet demand.

Today's case applied two of our capacity formulas to a service environment, specifically a orthopedic surgery medical practice. In the video below I walk through the application of the formulas to the specifics of the David Christopher case. Take a few minutes to compare the discussion below to your own analysis and post.

Note: you'll definitely need to expand the view to full screen... sorry for the tiny numbers!

So now, how are these tools applied at your case study company? If they are not used, how could they be applied to improve the firm's operations management?

See you in class on Monday!

Process Design

Hi all,

So kudos to those of you who resourceful and brave enough to find and post a process video! Yes, that would be Quin and Malcolm!

Quin provides us with an opportunity to discuss service process design, particularly service encounter customer contact requirement, and process design in the context of the service positioning matrix (Collier & Evans, 2013, p. 140-143).

In fact, instead of me doing this analysis for you, let's do it together on Monday morning. So for Monday, watch Quin's brief video, read his post, and think about these questions referring to Collier chapters 6 & 7...

• What is the service encounter customer contact requirement for library copier services?
• What degree of customer discretion, freedom and decision-making power is needed?
• How repeatable should the service encounter process be?
• Where does this process fit on the service positioning matrix, and what are the cost and service quality perception implications?

A special shout-out to Shaina for excellent follow-up questions, and Karson for the process flowcharting expertise demonstrated in her post!

See you all on Monday.

Fishbone Diagrams & Pareto Charts

Hi all,

Nice work this week on your Cause & Effect (CE) diagrams (also known as "fishbone" diagrams) and Pareto charts.

The three brave souls -- Ashlyn, Karson & Shaina -- who took to MS Word to draw their diagrams did nice work not only with the drawing tools, but brainstorming potential causes and contributors related to their identified problems. These charts are very useful in starting the root cause analysis conversation; it sets the table with all the possible causes and contributors organized in such a way that you can begin to address each in turn.

ASQ Fishbone Diagram Template

The Pareto chart provides a tool that helps prioritize the causes and contributors identified in the CE diagram. Thanks to all who used the data in question 11 to create their charts. There was unanimity on which set of errors should be addressed first (shipping delays). Andrew, James & Quin argue that both shipping delays and shipping errors should be dealt with, as these two errors combined account for 80% of the problems. This is the value of the Pareto chart. It quickly stratifies a set of problems identifying which small percentage of your total list of problems are causing most of the pain. Using this tool, then, we found that 2 of problems account for 80% of the error. As a manager, we want to focus first on addressing those two issues; that's where we get the most bang for our buck.

ASQ Pareto Chart Template

All of our Pareto people worked to create their own charts using Excel. Congratulations! You can never have enough Excel practice. One of the features of a Pareto chart that makes life much easier is the cumulative total curve. I've attached a link above to a Pareto chart template from the American Society for Quality (ASQ), a leading quality assurance professional society. This template is easy to use and will provide both a frequency histogram and a cumulative total curve in your chart.

Just for fun, I've also attached a link to the ASQ fishbone diagram template. Another easy-to-use template for creating CE diagrams.

Here's to a quality Halloween.  :-)  

See you on Monday.

Save-A-Lot Store Location Discussion

Hi all,

Thanks for your experimentation with the factor weighting method for determining a potential Save-A-Lot store location. My general feedback is contained in the attached video.

See Ashlyn, Ethan and Quin's posts for some good discussion about the factors to be considered and their weightings. Also note my points in the video regarding the connection between factors selected, their weightings, and operations strategy/CBP).

Here's one of the articles I referred to in the video. It provides some good background on Save-A-Lot's business strategy.

Here's an excellent radio story on Save-A-Lot from the customer perspective. Its worth a listen.

Credit Card Case Feedback

Hello OM managers.

Today's online case presented us with a data set comprised of external and internal data, asking us to find the relationship (if any) between these data, and then develop recommendations based on the relationship found.

Many of you identified the importance of the external data in this data set: customer satisfaction. This is a crucial external measure; if we don't have satisfied customers, we don't have a business. The key in this case was to compare the customer satisfaction data with both the new applicant processing time and the plastic production turnaround time, which most of you did. Our goal is to understand the relationship between customer satisfaction and these internal metrics. Is there a relationship? In other words, does the speed at which we process new applicants and/or produce a new credit card have an impact of customer satisfaction? And if so, how much?

Using Excel to calculate the correlation coefficient between customer satisfaction and new application processing time, you found r = -0.41. The correlation between customer satisfaction and plastic production turnaround time was -0.21. Both of these suggests a negative relationship: customer satisfaction goes down as both of these times go up. But the relative strengths of these relationships is relatively weak. You visually confirmed this in your scattergrams.

Ashlyn, Andrew, James and Korey agree that better information is needed before the business can make any decisions about how to improve customer service. Better customer satisfaction surveys could be a part of this. Ethan gets us to the heart of the matter: our correlation coefficients suggest that while new application processing time and plastic production turnaround time are somewhat related to customer satisfaction, there are other drivers of customer satisfaction not captured in these metrics. To James' point, the departments need to work more effectively together to identify other potential variables (causes) and identify relevant metrics.

Another statistic that can help us understand the strength of the relationship between variables is the coefficient of determination, or r squared. The coefficient of determination tells us how much of the variance in a dependent variable is due to the variance in an independent variable, expressed as a percentage. See the excellent 3-minute video below for more background and discussion.

Take a minute to calculate the coefficients of determination for our case r-values. How much of the variance in customer satisfaction is accounted for by new applicant processing time and plastic production turn around time? What other internal company operations factors might be drivers of customer satisfaction?

Zara Case Update

Hi all.

Thanks for the Zara discussion in class today. Here's a case update from Bloomberg Businessweek.

OM & Sustainability - Feedback on the Spencer Discussions

Hello Operations Managers!

Thanks for last week's online discussions of Spencer, White and Vrobelsky (2009) chapters 3 and 5. Spencer and his co-authors do a good job prompting us to think about sustainability from a biblical perspective. Our challenge is to reconcile this biblical view with the realities of 21st century business. Operations managers have perhaps the most direct impact of any managers on the sustainability of any organization. This sustainability discussion is central to our work.

Spencer Chapter 3

Spencer chapter three provides a nice overview of why Christian's should care for the environment. Each of you captured Spencer's four main points. The challenge, of course, is to consider how Spencer's perspective fits (or not) with our definition of sustainable operations from Collier and Evans (2013). Dan and Quin touch on what is perhaps the central question for Christian business people and managers: is there a difference between the "spiritual" and the "secular"? Can Spencer's spiritual perspective be reconciled with Collier's 21st century business perspective, or are they simply speaking to different audiences and issues? Can we apply our ancient faith the how we design and operate our businesses? (I'm exaggerating Dan & Quin's points here for the sake of argument.) Ashlyn, James and Kory think we can. See their posts for some particularly insightful analysis and integration of Spencer and Collier. But is it really that easy? This is where Spencer chapter 5 can be useful in at least helping us to make the transition from theological theory to contemporary reality.

Spencer Chapter 5

Chapter five identifies and develops six practices of sustainable living as found in the Bible. Much of Spencer's discussion is drawn from the Old Testament, beginning with the jubilee regulations. All of your 9/12 posts hint at or specifically identify what Spencer identifies in chapter six as the "controlling idea" for this whole sustainability discussion: the quality of relationships with God and between human beings" (Spencer, et al., 2009, p. 148). Many of you identified concern for the vulnerable as one of the biblical practices identified by Spencer as one of the most important to you. Your discussion of the "roots" and "jubilee" practices was often linked to your observations and thoughts regarding the vulnerable. See James' post for a particularly thoughtful and heart-felt discussion of why jubilee and the vulnerable are so important to him.

So now what?

While the biblical practices Spencer identifies clearly have social elements, his book is written with a slant towards encouraging individual action. Our challenge as business people is to translate and apply this discussion to our role as operations managers. How do we realize these principles and practices in the operation of our business? Caring for the vulnerable is a good example. Several of you identify corporate social responsibility (CSR) efforts as one way to realize this principle in business operations. But are there other ways to address this principle? Check out the Broetje Orchards story for an example of how the Broetje's built concern for the vulnerable into their business strategy. (Click on the image below to go to the First Fruits website.)

http://www.firstfruits.com/founding-dream.html

Thanks for the thoughtful sustainability conversation last week. As you will discover, the Interface story provides us with yet another example of a successful company (this time in the carpet business) integrates sustainability into their business strategy and operations.

9/5 Online Class Feedback - Gantt Charts

Hi all,

Thanks for taking on the challenge of translating the data from Collier & Evans (2013) chapter 18, problem 6 (p. 409) into a Gantt chart. As we discussed in class earlier in the week, one of the critical aspects of Gantt (and CPM charts) is to clearly identify predecessor activities or tasks. When a specific activity has a predecessor activity, that means the new activity cannot begin until the predecessor has been completed. Once predecessors are identified and entered into the Gantt chart tool, the chart produced will provide a helpful visual representation of parallel project activities, and give you a view as to how delays or accelerations in activity progress will affect the project schedule.

One of the most confusing activity-predecessor relationships is activity J: prepare report. Before the report can be prepared, activities E, G and I must be completed. If you think about the content of activities E,G & I, this makes sense. We can't write the report until we've studied the existing technologies (E), conducted an equipment analysis (G), and determined the organizational impacts (I). Of these three activities, activity G is the one that ends at the latest date (based on its start date and estimated time of 10 days). So, we cannot begin to prepare our report (J) until activity G is completed, even though activities E and I will be complete well before G.

Check out Ethan's post for a good example of how a Gantt chart for this project should look.

Regarding the OM case study

Only Karson and Ethan had questions about the case study assignment. You may have the similar questions... check out Karson and Ethan's questions, and my responses to them, in the discussion board.

Note that our first in-class case study workshop is twelve days from today on September 17. You'll be bringing your first draft of part 1 to class that day for discussion and feedback. If you have any remaining questions about the assignment or your target company, bring those with you on Monday September 7 so you can get started on case study part 1 sooner rather than later.

Enjoy your weekend. See you on Monday!