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Operations Case StudiesRole of Operations ManagementStrategic Role of Operations Management- cost leadership, good/ service differentiationCost Leadership: Air Asia XAircrafts spend 20 mins on the ground- industry average is 1 hr (processing costs) Online/ Self-service check in (labour costs) 1 type of aircraft, Airbus A330, standardisation (input costs) No meals in flights (inventory costs) Outsources maintenance- servicing of aircraft (quality management costs)Good/ Service Differentiation: ZaraSpeed to market- garments from design to shop floor in 3 weeks- industry average is 6 monthsNew products in store twice a week 30,000 new designs each year- copies of fashion’s big names Lightening fast, locally targeted designs Limits outsourcing, designs and makes clothes in-house to ensure better quality Global distribution centre- turns over 2.5 mil items per week, nothing remains in the warehouses over 72 hoursItems are packaged and tagged at warehouse, saving staff in stores prime selling timeCustomers go to zara over 6x more than competitors Good/ Service Differentiation: Tiger AirlinesSells itself as a ‘low cost carrier’ - aims to keep operations costs low as possible to attract & retain customers Does this by having check-in staff also serve at departure gate (labour costs)No frills service is winning customersInfluencesGlobalisationAppleOutsources from China (349 suppliers),etc approx. 600 suppliers worldwide to reduce costs$249 to make per iPhone & $5 labourSaving $600 million by going global Would pay 35% more tax if manufactured in USQuicker to hire staff in China- 15 days for 200,000 factory workers TechnologyAmazonProductivity & workflow- The click to ship cycle used to be approx. 75 min w human labour, is now 15min for same job using robots – reduces lead times Inventory management & organisation- Robots use 50% less space in factories due to smarter use of space, such as building narrower isles and getting rid of certain handling systems, therefore more space for stockQuality management- standardised pre-set quality, limiting defects & human errorsOperations costs reduced by 20% - competitive edge Quality Expectations SamsungRecalled 2.5 mil Galaxy Note 7 smartphones after reports of bursting into flames Promised replacement phones were safe, but again caught on fire Killed off entire line to save brand image and shield other lines from the falloutSignificant financial damage- lost over $5 mil in operating profit in 9 months, company’s stock down by approx. 8% Cost-based CompetitionAppleApple produces so many devices that they can maximise the amount of goods produced to maximise their economies of scale and lower average cost per unit.Apple’s size and the fact that most of Apples products, such as iphone & ipad, share the same components the company can buy parts, such as processing chips and display screens, at lower prices due to buying in bulk Due to the large amount of products being produced by Apple the research and development undertaken by the company is essentially freeAbility to advertise products with a single ad achieves EOSGovernment Policies NORCOAustralian Government’s free trade agreement with China impacted NORCO’s operationsIncreases market share and being able to access growth in markets in Asia increases jobs and profit Increasers operations process massively – between 5,00 – 20,000 litres of milk exported each week Allows the operations process to become more innovative with new technologies and processes such as the new filler machine which has a capacity of 20 mil litres per year Legal RegulationVolkswagenUsed software to beat emissions tests in cars sold in the US- fines up to $25 bil, affected engines spewed 40 x legal limit of pollutants on the road Approx. $25 bil wiped from market value since scandal & recall 11 mil carsA month later, faced million dollar fines because of a “defeat device” that rigs pollution tests used on cars sold in AustraliaACCC is investigating as it is prohibited under the ACL mandatory safety standardsAffected over 40,000 diesel cars sold since 2009 Major consumer and competition detriment from their behaviour Cut down on R&D costs but negative impact as lowered shareholder value and costed operations department fines Adopted “triple bottom line”: people, planet & profit into operations Costly short term as had to re-organise and re-design operations process to achieve legal pollutantsOvercame this by sending production to countries w legal & ethical working conditions & implementing environmentally friendly processes Increased consumer & stakeholder trust & market value long-term Environmental SustainabilityUnileverLeading role in transformation of agricultural sectors, such as palm oil, uses approx. 7 mil tonnes raw materials per year In 2018, started transitioning suppliers to Sustainable Agriculture Code which includes stronger emphasis on environmental issues including greenhouse gases, water, waste & sustainable sourcing Reduced 47% of CO2 emissions from production since 2008 – reduced energy consumption, reduce processing costs for electricity & labour costs to transport coal Reduced wastage by 98% since 2008 - reduce packaging making process simpler & more efficient, recycling cuts cost & time 56% of agricultural raw materials were sustainably sourced by end of 2017 – increase of inclusive supply chains allows to monitor & address risks, finding opportunities to innovate & become more sustainable, maintain trust & uphold expectations of stakeholders Corporate Social Responsibility (CSR) SherrinCommitment to CSR was poor; failed to be responsible for production process by outsourcing Indian child labour to stitch their AFL footballs for the Australian market Failed to appropriately monitor and audit supply chainLacked leadership, organisation and effort to prevent these infringements of human rights Fall in share price and national recall of products costed them approx. $1 million They donated the profits from these balls to charity Had to re-evaluate their operations process by re-establishing a clear policy, provide adequate training and undertake regular and third-party auditing to prevent infringements of human rights Operations Processes – Transformation ProcessesInfluence of VolumeBoeingProduction rate increases- plans to increase the 737 & 787 production rate from 52 a month to 57 a month in 2019 Selling more planes generates more profit Reduces the unit cost of production as it increases the rate meaning the margin will expand Influence of VarietyHaydenshapes SurfboardsProvides 6 colours for customers to choose from while they used to provide any colour the customer wanted More standardised and mass produced while still offering varietyTherefore less lead time, less inputs, more efficient Influence of Variation in Demand Karen GeeAustralian designer Karen Gee’s website crashed and sparked an online frenzy after Meghan Markle wore her dress out Consumer tastes had a huge peak therefore increasing demand, the dress was sold out therefore Karen Gee needed to increase her inputs greatly to copeInfluence of Visibility (customer contact) Garfish ManlyKitchen is very open and visible to customers as well as providing a TV screen to watch their meal being prepared This improves the staff’s quality in making the food, cleanliness in the kitchen and quality of the meal Operations StrategiesPerformance ObjectivesSamsungFollowing the Note7 incidents, Samsung has developed new and enhanced performance objective measures across its entire operations process to improve quality and dependability8-Point Battery Safety Check addresses safety, durability, quality and flexibility through enhanced tests, such as a durability test and visual inspection, from assembly to shipment Multi-layer safety measures implements strict standards on every element including overall design, device strength and capabilities, and improved software algorithms for duration .auPairs small businesses and entrepreneurs, usually in countries, such as Australia and UK, with suppliers of work in developing countries, such as India and Egypt. Average customer support project costs less than $200 and can be worth 10 times the amount of labour by Australian standards – cost effective, impacting profit maximisation Customer support projects rose 89% in the 1st quarter of 2012 to around 1,000 projects globally Because the work is done more efficiently, it frees up resources for a domestic firm to engage in other activity or use the funds for further expansion Through outsourcing specific tasks, has cut costs and maximised profits Global FactorsGlobal Sourcing: BoeingThere is a massive global collaboration effort behind Boeing’s 787 from the cutting-edge materials and electronics used to build the plane, to the technology used during the design and assembly processThe design and production strategy to get the 787 built as quickly and economically as possible involves an unprecedented degree of collaboration between Boeing and its partners around the world, in Japan, Russia, Italy and the US, who are participating in the actual design of the planeParts are designed concurrently by partners and then virtually “assembled” in a computer modelCompany has different businesses building different pieces by creating data that is assembled and checked in real timeBecause of the online modelling, Boeing can trust its global sources with the process of creating entire sections of plane, from concept to production Economies of Scale: AppleApple produces so many devices that they can maximise the amount of goods produced to maximise their economies of scale and lower average cost per unit.Apple’s size and the fact that most of Apples products, such as iphone & ipad, share the same components the company can buy parts, such as processing chips and display screens, at lower prices due to buying in bulk Due to the large amount of products being produced by Apple the research and development undertaken by the company is essentially freeAbility to advertise products with a single ad achieves EOS Scanning & Learning: Toyota Toyota uses the lean manufacturing technique which organises manufacturing and logistics, including interaction with suppliers and consumers Toyota recognised as the automotive industry leader in manufacturing and productionProduction system inspiration from studying commercial enterprises in the USToyota’s strategies improving overall performance & quality:Overproduction- limits overproduction which degrades quality and productivity, creates excessive lead times, high storage costs and difficult to detect defects, instead uses “just-in-time” manufacturing- reducing the amount of inventory it would hold to a level that its employees would need for a small period of time, as every item is made as needed – more efficient and productive, higher quality as less defects, cost effective as less storage costs Waiting times- links processes together so that one feeds directly into the next dramatically reduces waiting – leading to higher efficiency, customer satisfaction and retention Reducing difficult jobs & defects – reduces tasks that require special skills from team members as it causes variation and inconsistent work resulting in health and quality issues e.g utilisation of robots in loading raw material has eliminated difficult jobs for workers Research & Development: Boeing There is a massive global collaboration effort behind Boeing’s 787 from the cutting-edge materials and electronics used to build the plane, to the technology used during the design and assembly processThe design and production strategy to get the 787 built as quickly and economically as possible involves an unprecedented degree of collaboration between Boeing and its partners around the world who are participating in the actual design of the planeThe business is spreading the costs of design and development throughout its partner network and building global relationships to help the company sell its plane overseas Japanese heavies, Russian design centres and Boeing in Everett work together in the research and development of the plane to create competitive advantage Overcoming Resistance to Change Coopersburg SportBaseball bats have been the bread and butter line for the company until a major player, Louisville Slugger, stepped into the market and cut Coopersburg’s sales in half Sales are decreasing and are in approx. $1 mil debt, no inventory or order tracking system Business owner’s big problem is a fear of trying new things and adapting to new technology so that the company can move away from its over-reliance on a product with a very limited market and huge competitor Builds a new facility and puts in place inventory and order tracking systems (re-organise plant layout) which ensures greater speed, reduces waste and better quality Expanding the product line to reduce dependence on a product with very limited growth potential Also eliminates seasonality with new products being sold to new customers Expands market by making new products for other sports in retail chains (e.g Bass Pro Shops) Supply Chain ManagementAldi Gen 3 Crates & ChepReusable plastic crate for fresh produce provide up to 29% improvement in supply chain efficiency from farm to retail stores This is because it incorporates a reduced fold down height, enabling up to 29% more crates to be fitted into trucks compared to previous crates Crate allows products to be packed directly on farms before delivery to warehouses then stores which reduces amount of repacking which makes the process faster The crate design allows it to be displayed on shop floors which assists with better product rotation and less product handling which leads to increased quality and minimisation of damages Quality Management QantasQantas Airbus A330 found overloadedA breakdown in the flow of paperwork controlling pallets of freight loaded on to the passenger aircraft led to it being overloaded, exceeding its maximum structural take-off weight by almost a tonneHad the potential to affect the safety of the flight A delay in notifying the error resulted in the aircraft making another 10 flights before maintenance checks for any damage were undertaken Was found that there was 28 freight control incidents at Qantas in the past 2 and a half years – uncovered a lapse of quality control at the airline as there was a lack of inspections at various points in the production process to check for problems and defectsQantas had not reviewed its Sydney freight loading centre for quality assurance in the 22 months before the incident , when it was supposed to be carried out every 6 months Had those quality assurance reviews been carried out, there would have been an established system to ensure that set standards are achieved in production, and the occurrence might have been avoided Qantas has since made changes to its operations by focusing on quality improvementThis includes continuous improvement, an ongoing commitment to improving a business’ goods/services, and total quality management, focusing on managing the total business to deliver quality to customersQantas has done this through changing the way it loads and checks freight into aircraft, reports incidents and has revamped its staff training Inventory Management JIT TOYOTAToyota’s inventory management strategies improve overall performance & qualityLimits overproduction which degrades quality and productivity, creates excessive lead times, high storage costs and difficult to detect defectsInstead uses “just-in-time” manufacturing- reducing the amount of inventory it would hold to a level that its employees would need for a small period of time, as every item is made as needed New Product/Service Design & Development Go ProGo Pro started as an old 35mm disposable, one-use wrist camera for surfers- a simple but powerful idea that filled an unmet need In its decade of existence, sales doubled every year to become the best-selling camera in the world New GoPro HD Hero3 1080p video and still camera can be controlled via a Wi-Fi remote- crammed all of these features into a body that is 25% lighter and 30% smaller than previous model and still kept the price under $400 Engineers are constantly striving for smaller, lighter and better performance with every new model without sacrificing the product’s low price point GoPro has a market focused approach, listening to their target group (passionate performers of various sport genres) and provided them with an affordable solution that focuses solely on their needs; footage quality, ease of use, robustness and mounting systems Close with their lead users (customers that try their product first then tell others) to fix mistakes at an early stage, great source of feedback and ideas for further product development TechnologyAmazon & Kiva RobotsProductivity & workflow- The click to ship cycle used to be approx. 75 min w human labour, is now 15min for same job using robots – reduces lead times Inventory management & organisation- Robots use 50% less space in factories due to smarter use of space, such as building narrower isles and getting rid of certain handling systems, therefore more space for stockQuality management- standardised pre-set quality, limiting defects & human errorsOperations costs reduced by 20% - competitive edge ................
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