Operations Management

SUB: OPERATION MANAGEMENT

1. How would operations strategy for a service industry be different if any from that for a manufacturing industry? (It’s an example & explains)
2. Consider the following two mutually exclusive projects. The net cash flows are given below: NET CASH FLOWS years PROJECT A FROM PROJECT B 0 – Rs. 1,00,000 – Rs. 1,00,000/- 1 + Rs. 30,000 + Rs. 15,000/- 2 + Rs. 35,000 + Rs. 7,500/- 3 + Rs. 40,000 + Rs. 20,000/- 4 + Rs. 45,000 + Rs. 22,500/- 5 + Rs. 25,000/- 6 + Rs. 27,500/- 7 + Rs. 30,000/- 8 + Rs. 32,500/- If the desired rate of return is 10% which project should be chosen?
3. What are the levels of aggregation in forecasting for a manufacturing organization? How should this hierarchy of forecasts be linked and used?
4. How would forecasting be useful for operations in a BPO (Business processes outsourcing) unit? What factors may be important for this industry? Discuss.
5. A good work study should be followed by good supervision for getting good results. Explain with an example.
6. What is job evaluation? Can it be alternatively used as a job ranking? How does one ensure that job evaluation evaluates the job and not the man? Explain with examples?
7. What is the impact of technology on jobs? What are the similarities between job enlargement & job rotation? Discuss the importance of training in the content of job redesign? Explain with examples?
8. What is internet connectivity? How is it important into days business would with respect to materials requirement planning & purchasing? Explain with examples?
9. Would a project management organization be different from an organization for regular manufacturing in what ways? Examples.
10. How project evaluation different from project appraisal? Explain with examples.

SUBJECT: Production Management

1. What are the different types of production/operation system? Where would each one of them be applicable? Give practical examples.
2. What is flexibility in the operations function?
3. Can it be one of the strategic weapons? Explain your response.
4. What is the distinction between accounting profit & economic profit? How is such a distinction linked with the concept of opportunity cost?
5. What is the difference between the Scanlon & Rucker plans?
6. Productivity improvement is not a one-shot project Do you agree with this statement? Discuss
7. Is supply chain management a philosophy? Discuss
8. What is the aim of production planning?
9. What is forecasting? Elements of forecasting & Methods of forecasting?

QUESTION 1 Operations management must be managed properly in order to improve an organization’s productivity and profitability. In the Cadbury World case, several micro and macro processes are involved and those processes bring some impacts to Cadbury World. Thus, Cadbury World must possess a sustainable micro and macro processes to achieve the best outcome and performance. Micro processes that involved are easily to manage compared to macro processes because macro processes are hard to manage or manipulate (Jae, Shim, Joel & Siegel, 1999).

As a result, Cadbury World must put more efforts in solving the obstacles and troubles that occurred within the macro processes. First of foremost, we will be discussing the micro processes that involved in Cadbury World case. Within the micro processes, they can make some planning on their operation and strategic management processes to enhance their business and profitability. Micro Processes| Explanation and elaboration| Company| * Cadbury has set up a team to improve their operation management. * More tickets collectors have been assigned in the exhibition centre to manage and help visitors when they need assistance. Cadbury is always open for criticism, feedbacks and recommendation to improve their operation management. | Customers | * Cadbury always attempting to fulfill all the requirements and needs from their customers and ensure their customers will have a wonderful trip in their exhibition centre. * This is because customers will affect their reputation and brand name if they are not satisfying with the services and products that provided (Galloway, 1998). * Other than that, Cadbury has launched some new products and add more elements into their exhibition programme to attract more visitors and customers. Competitors| * Cadbury World has implemented SWOT analysis to identify their strengths and weaknesses and also the opportunities and threats from their outside environment. So that, they are able to gain the competitive advantage among their competitors. | Intermediaries| * Cadbury requires several marketing intermediaries in promoting their activities and products. * As such, they have selected some marketing intermediaries to promote this Cadbury World exhibition event and help them to gain the profits. | Suppliers| * It is crucial to select the best suppliers to enhance the production of Cadbury.

Due to this, Cadbury has implemented some analysis and works when choosing their suppliers because they always ensure their products have the high quality that can fulfill every customer’s requirements. | Table 1: Micro processes as applied to the case Cadbury World Macro Processes| Description | Demographic| * Several analysis have been implemented to analyze the preference and needs among people from different demographic profile. * This is because demographic profile is crucial when managing the requirements from different customers. Those analysis can be done according to several groups such as gender, age group, nationality, likeliness. | Natural| * Cadbury always seek for alternatives although their natural resources are still available and still able to support their operation and production. * This is because they believed that natural resources will be finished exploited in one day. So that, they want to put some efforts before the day to come. | Economic| * Economic trend must be aware from time to time to prevent Cadbury World business being affected during the economic crisis. Technological| * Cadbury always conscious and aware with the new technological and applied the technological elements into their operation system to gain the higher profits. * Besides, with the technological elements such as automated system or centralized system can help their operation system become more efficient and easy to manage the visitors that entering their exhibition centre. | Table 2: Macro processes as applied to the case Cadbury World Figure 1: Input-Transformation-Output model (Cadbury World case) The model of input-transformation-output in Cadbury World case has been displayed in Figure 1 above.

This model consisted of micro and macro processes because as mentioned earlier, micro and macro processes are very important for the operation processes in an organization. From the figure above, we will be discussing the micro processes of Cadbury World case in the form of input-transformation-output model. Those micro processes are company, customers, suppliers and competitors. Cadbury needs a lot of human resources such as manpower to carry out their daily operations process. Those manpower with the technological methods are essential to convert the raw materials from the input to the transformation process  (Tilanus, 1997).

After that, the incomplete goods that in the transformation process will turn into the outputs which are products and goods that introduce to the markets. When the products introduced to market, Cadbury may get some feedbacks from publics or their customers and also their competitors. Hence, Cadbury must do some amendment on their operation processes within the internal management in their organization or review their suppliers to enhance their operation process. QUESTION 2 Process flow chart to show the ways of customers are being processed through the operation from start to finish

The process design that adopted by Cadbury World case is the product-based layout because the arrangement of the equipments in every section of the exhibition centre are clearly displayed in a logical sequence. Hence, the process design can provide the better understanding to their visitors if they wish to take a tour without guiding. This is because the product-based layout can eliminate the confusion of the visitors as the process flow is predictable and repeatable (Thompson, 1967) . QUESTION 3 3. 1: The capacity of each processes in question 2 above The entrance 5-20 visitors x (60 minutes / 2-1/2 minutes) = 360-480 visitors per hour The Marie Cadbury room * Original design (70 visitors x 1/3) x [60 minutes / (5 minutes + 1-2 minutes + 4 minutes)] = 131-144 visitors per hour * Peak times 70 visitors x [60 minutes / (5 minutes + 1-2 minutes + 4 minutes)] = 382-420 visitors per hour The packaging plant 30 visitors x [60 minutes / (3 minutes + 8 minutes) = 164 visitors per hour The demonstration area (15 visitors x 8 guides) x (60 minutes / 6-17 minutes) = 424-1200 visitors per hour * The shop [(60 minutes x 60 seconds)/15 seconds] x 3 checkouts = 720 visitors per hour * The restaurant: If the tables are allowed to sit with different families or groups of visitors (60 minutes/25 minutes) x 169 covers = 406 visitors per hour * If the tables are allowed to sit with one family or same group of visitors (60 minutes/25 minutes) x 53 tables = 128 visitors per hour The coffee and ice-cream parlour (60 minutes/18 minutes) x 46 covers = 154 visitors per hour 3. 2: The projected annual, weekly and hourly demand from the data in the case (Mid August to end of December 4. 5 months). Explain the impact of seasonality on these figures. 1. The Entrance: 2. 5 minutes 2. The Marie Cadbury Room: 10 – 11 minutes 3.

The Packaging Plant: 11 minutes 4. The Demonstration Area: 6 – 17 minutes 5. The Shop: 15 seconds = 0. 25 minutes 6. The Restaurant: 25 minutes 7. The coffee and ice-cream Parlour: 18 minutes After reviewing the case of Cadbury World, we can understand that the time required for each station in the case of Cadbury World when during the normal period are 84. 75 minutes / 3. 53 hours and 72. 75 / 3. 03 hours during the peak periods. Therefore, the projected demand are as below:- 1. Annual demand = 4. 5 x 30 x (3. 03 – 3. 53) = 409. 05 – 476. 55 hours 2. Weekly demand = 7 x (3. 03 – 3. 53) = 21. 21 – 24. 71 hours 3.

Hourly demand = 3. 03 – 3. 53 hours Holiday season, weather, national celebration or event such as election can cause some impacts of seasonality that affect Cadbury World business and operation. From the Cadbury World case, the period of the exhibition event is held from mid of August to the end of December. During that period, Halloween and Christmas might influence their operation as people may wish to take a short travel to refresh themselves during these holidays. As such, Cadbury World can be a better selection. However, when the demand of seasonality increased, Cadbury World needs extra capacities to support their operation.

If not, they will face some bottlenecks and affect their overall performance and profitability. QUESTION 4 4. 1 The ways that Cadbury world management has varied capacity to respond to changes in demand When the business of an organization is boosted up, this means that the demand has been increased as well. Thus, the organization need more capacities to prevent they fall into bottlenecks (Stevenson, 2010). In Cadbury World case, some bottlenecks might be occurred if they didn’t varied the capacity to respond to the changes of demand. Firstly, more ticket collected have been arranged accordingly in the entrance area during peak period.

Those ticket collectors will apply the technological system such as automation system to handle the situation in the exhibition centre and also the safety of their visitors. Besides, Cadbury internal management team have implemented some actions to enlarge the space of parking lots during the peak period. After that, the shop, restaurant and ice-cream parlour areas will be amend to cater more visitors. 4. 2 The operations that occurred the bottlenecks in the process and the ways that service can be amended to increase bottleneck capacity. Where are the bottlenecks in the process? How could service be amended to increase bottlenecks capacity? | The entrance| * Introduce online ticketing to reduce the time that needed to purchase the tickets. * Utilize information technology system to handle the safety of visitors that enter the exhibition centre. * Enhance the dependability and speed in the exhibition centre to provide the convenience to visitors. | The exhibition area| * Boost up the efficiency of Cadbury staffs that handle the visitors that enter this area. * Apply micro operation system and information technology method to reduce the delays problems and also eliminate the workload of attendant. Improve the process flow in Marie Cadbury room as it is the bottlenecks in this section. | The packaging plant| * Change the areas that show the brief videos. * Such as displaying the brief videos in the areas before entering the packaging plant to give a brief explanation and understanding to visitors. | The restaurant| * Amend the process flow because current process flow is inconvenient to visitors. * Redesign the serving points and serve more variety of food in each serving point. * So that, visitors can enjoy their favorite food without passing every serving points. The restaurant design can amend to a round shape instead of row arrangement to increase the flexibility to visitors. | LIST OF REFENCES Galloway, L. (1998) Principles of Operations Management. India: ITP. Jae, K. , Shim, Joel, G. & Siegel (1999) Operations Management. USA: Barron’s Educational Series. Stevenson, W. J. (2010) Operations Management. An Asian Perspective (9th Edition). New Zealand: McGraw-Hill. Thompson, J. (1967) Organizations in Action. New York: McGraw-Hill. Tilanus, B. (1997) Information Systems in Logistics and Transformation (2nd ed). USA: Elsevier Science Ltd.

Summary

This assignment looks at the operations management of the two large organisations in their respective sectors. The organisations discussed are Toyota Motor Corporation, an automaker giant, and Barclays PLC, a financial services giant. I have discussed competitive priorities, marketing strategy, capacity planning, inventory management, supply chain design, performance measures and total quality management. All these help the organisations gain competitive advantage over other competitors as they focus on different ways to lower the cost of operations and making the best use of the resources by ensuring that all the waste is eliminated. The insight has been provided as to how these goals can be met to achieve the competitive advantage and how the innovation and long term sustainability of the companies can be achieved successfully.

Introduction

The following article discusses and compares the processes, priorities and strategies used in two huge organisations in different sectors. We would be discussing Barclays PLC and Toyota Motor Corporation. The reason for the discussion of these two companies is that they are well renowned in their respective sectors.

Barclays is a global financial services company headquartered in London, United Kingdom. In the 2010 Forbes magazine’s list of world’s leading companies it was ranked 9th largest banking group and 21st largest company worldwide.

Toyota is a multinational automaker headquartered in Toyota City, Japan. In 2010 Forbes magazine’s list of world’s leading companies it was ranked 360th, a steep fall from its 3rd ranking in 2009. This was partly because of a major accelerator problem with its cars which forced Toyota to recall millions of cars worldwide and partly because of decline in sales amid the global crisis in automobile industry.

Main Body

Barclays

Being founded in 1690, it now operates in more than 50 countries and employs over 147,500 people. It has over 48 million customers worldwide. It operates in different sectors which include Credit Cards, Retail Banking, Corporate and Investment Banking and Wealth Management. It has a primary listing on London Stock Exchange and a secondary listing on New York Stock Exchange. We will be discussing the retail banking operations of Barclays in this assignment. (Barclays, 2011)

Toyota Motor Corporation

It was founded on August 28, 1937 and it employs over 320,590 people. Its main business activities are motor vehicle production and sales. It is the world’s largest automobile manufacturer in terms of sales and production. It is a part of Toyota group which in addition to automobile industry also provides financial services and builds robots. In this assignment we will be dealing with the production aspect of Toyota.

Competitive Priorities

Toyota – Barclays

• Low Cost

Present – Present

• Quality

Present – Absent

• Flexibility

Present – Present

• Time

Present – Present

Competitive priorities are the critical operational dimensions a process or value chain must possess to satisfy both internal and external customers.

Toyota’s main competitive priorities are concerned with its cost, quality and flexibility.

Toyota’s low cost operations enable it to produce products at low cost. This helps in setting low costs for customers and earning reasonable profit making the cars more attractive to customers and more competitive in the market.

It offers flexibility in its products. It offers a wide range of models targeting a wide customer base ranging from Aygo and iQ for low income families to auris, prius and corolla for medium earners to lexus, land cruisers and camry for high earners. The customers can also design their own cars and can choose what specifications they want in their cars which make them unique to others. It gives the freedom to customers and a sense of power.

Toyota maintains a high quality of standard in their production. They treat quality with utmost importance and that’s why when quality is mentioned the name of Toyota springs in to the mind of the customers. This gives Toyota the edge over its competitors.

Barclays has a competitive advantage of low cost operations. To gain the benefit from low cost operations over its competitors Barclays has moved its back-office jobs and the call centres to India where cheap labour is available. As India is a IT hub so the cost is also saved by not needing to invest in training and hiring of people.

Barclays offers flexibility in its bank accounts. It offers 13 different types of current accounts for the customers to choose from which are in addition to the business accounts, premier accounts and the saving accounts. A wide range of these accounts mean that the customer can evaluate what suits best to their circumstances and is more likely to be choosing it over other accounts. (Current Accounts, 2011)

Barclays lacks quality in the customer service. As of September 2010 bank complaints ranking recorded by Financial Services Authority (FSA), Barclays was rated 2nd clocking in 259,266 complaints for the six months period with only Lloyds being the worst. (BBC News, 2010)

It tries to serve the customers in time. In September 2010 bank complaints survey it was revealed that 91% of the complaint cases were dealt with by Barclays in the given timeframe of eight weeks.

Marketing Strategy

Corporate strategy provides a direction that serves as the framework for carrying out all the organisation’s functions. It specifies the aims the company will pursue and identifies the growth objective.

Ansoff matrix

Toyota

Toyota has a vision of making cleaner and environment friendly cars. It segments the market according to different regions as well as different people. It aims to target each and every person possible.

It has got environment friendly cars e.g. prius for those people who are environment conscious. It targets the middle and low income families with the economy cars and the up market customers with luxury cars.

It uses differentiated marketing as it has specified cars in specified markets. The models which it produces and provides in one country are not necessarily present in other countries e.g. it only provides two models in Pakistan whereas in America and Europe it provides loads others.

It focuses on what the customers in a specific country are concerned about. In the developed countries who are concerned about environment it provides Prius to attract the customers whereas this car is not present in Pakistan as not a large chunk of people are concerned about eco-friendliness there.

Throughout its existence Toyota has adopted all four marketing strategies discussed in Ansoff’s matrix to succeed and become the market leader it has been for so long until the recent accelerator problem occurred with its cars which was disastrous for it.

Barclays

Barclays is one of the financial industries that have invested heavily in the marketing. It keeps on coming out with different ways to keep itself in the public eye. It’s a main sponsor of different sports including football, tennis, golf, individual sponsorships, and the cycling in London. It is the official partner of one of the biggest football leagues followed in the world known as Barclays Premier League.

Barclays has achieved its growth by product development, market development and diversification. It diversified into the new business of cycle hire throughout Central London, United Kingdom.

It expands its business by market development by investing in new countries with its banking operations and then by product development by increasing its operations in those countries.

It is now operating in more than 50 countries and provides a wide range of services.

Barclays also indulges in other marketing activities. In June 2010 it launched an online game, 56 Sage Street, to target young people. It was also supported by activities on Facebook which is the largest social networking website.

It has also made advertisements that included waterslide and rollercoaster which are not typical for a financial institution. It takes people by surprise.

Capacity Planning

Capacity planning deals with setting out future capacity requirements after forecasting the future demands for that period. It’s straightforward to determine capacity requirements when demands for products and services can be forecast with a certain degree of precision.

Barclays can also use the Theory of Constraints to identify the bottlenecks e.g. the time the mortgage department takes to process the home-loan application. Once the bottleneck is identified the plans can be made to overcome the bottleneck. The personnel could focus on the bottlenecks to make sure that the resources are being fully utilised. The employees would be properly trained to make sure they fully understand and work to overcome the bottlenecks. Once the time issue has been resolved the bank can start looking for more constraints.

Toyota can use the capacity management to match the demand in busy periods. It knows the demand would be more at the start of the year as compared to the year end and much more when a new model is being launched. Past analysis can be used to predict the demands at different times of the year. It can arrange the staff in a way which would not cause any hindrance to its operations and would be able to meet the demand if not over do it. If it’s for a short time period the staff can be asked to do overtime. This might require paying more than the original pay rate but it would eliminate the cost of training, hiring and paying additional benefits.

The Theory of Constraints can be used to find out the bottlenecks which limit the production. Different ways of overcoming the constraints can be applied and personnel required to focus on removing the constraints. The employees in that department need to be properly trained to make sure they make the best use of the resources. Once the constraints are removed the company can move on towards identifying other constraints before they arise and cause problems.

Inventory Management

It is an important concern for managers in all types of businesses to plan and control the inventories in order to meet the competitive priorities of the organisation. Poor inventory management can seriously affect those organisations that operate on low profit margins.

Like any other bank Barclays’ only inventory is cash. It needs to be very careful with the inventory management to run the business. The cash that customers deposit is invested by the banks to earn money. The cash flow per day should be anticipated properly and it should be made sure that sufficient amount of cash is kept in the bank to serve the customers when they come for it. This level should be worked out so that they don’t keep so much cash which could have been invested elsewhere instead of keeping in the safe and hence results in lost value. On the other hand it should not be so less that it results in customers being denied money at any stage.

Inventory management plays a very important part in the manufacturing organisations e.g. Toyota. As Toyota deals in lean manufacturing so the inventory level for Toyota is almost zero. Less inventory results in savings as there are no inventory holding costs, cost of capital, storage and handling costs and taxes, insurance and shrinkages. While there are so much savings it is not without risks. The products need to be perfect to keep the process going as with TQM there is no inventory to cover up if something goes wrong. Toyota can keep a safety stock inventory just in case any breakage occurs in the production system.

Performance Measures

It is important to see how well the organisation is performing both for the manufacturing and service organisations. Key factors responsible for the success or failure should be noted and if possible the factors responsible for success should be exploited and those of failure minimised if not diminished.

Both manufacturing and service industries need to see if the performance measures meet the competitive priorities of the organisation.

Key Performance indicators could be set up to see if the performance is up to the mark. Barclays can use this to assess the quality of service provided by the staff. It can be noted by assessing the no. of complaints received in a given time period. The customer satisfaction surveys can also be handed out to customers to see where do they feel the lackings are. The steps can then be taken to overcome those problems. The following KPIs can be used to measure the performance of the organistaions.

Barclays

• No. of accounts opened
• No. of home loans approved
• Staff turnover
• Customer feedback
• Share price on Stock exchange
• Investor returns
• New products offered

Toyota

• No. of cars produced
• No. of defects occurred
• No. of injuries
• New models introduced
• Customer interest

Supply Chain Design

Supply chains permeate the entire organisation. It is hard to envision a process in a firm that is not in some way affected by a supply chain. The supply chains must be managed to co-ordinate the firm’s inputs with its outputs to achieve the competitive priorities of the firm’s enterprise processes. Supply chains are equally important for both the service as well as manufacturing sector organisations. As a firm grows big it can’t perform all its activities by itself and to gain that competitive advantage it needs to evaluate its options and outsource its less profitable activities or manage close relationships with a few reliable suppliers.

As the service sector industries like Barclays are concerned they can outsource quite a few of their operations. India being the hub of call centres for the US and the UK, the call centre of Barclays can be moved there which provides with cheap labour and trained staff. The contract could be given to companies and so Barclays would not need to hire the staff which would save it from paying out fortunes in redundancy costs if it ever needs to finish operations. As the staff would be already trained there would be no training costs and no hiring costs.

As Barclays deals with the important personal information of millions of clients it can outsource the delivery of documents to a firm that specialises in the handling of documents and provides a good reliable delivery. It would be cost effective as well as a competitive advantage as customers will see it a trustworthy brand who takes the clients’ security very seriously.

For a manufacturing organisation like Toyota, it needs to maintain close relationships with a few suppliers who clearly understand the true meaning of the brand and understand what quality the customers exactly expect of that brand. It should not go for a large number of suppliers who barely understand the brand as Toyota did and what was the first brick laid to the devastation of Toyota which saw millions of cars being recalled worldwide. Maintaining close relationships with a few suppliers instead of going in a large supply chains which include tier-2 and tier-3 help create that special bond. It helps achieve the “Just in Time” which is only possible through Total Quality Management.

All the companies involved in the supply chain need to be closely linked to each other and they should be expecting high quality from each supplier as they all rely on one another to provide the best value product to the customer.

Both Toyota and Barclays can outsource their payroll system to a specialist financial firm which would be both cost effective and would also be dealt with the experts. By outsourcing these activities they can focus on more important activities which are the basis of their businesses.

Total Quality Management

Total Quality Management is a philosophy that aims for achieving high level of process performance and quality. To achieve this it stresses on three principles which are related to employee involvement, customer satisfaction and continuous improvement in performance.

Employee Involvement

TQM plays an important part in both the manufacturing as well as service sector industries. It emphasises that everyone in the organisation must share the view that he is responsible for the quality of the product. TQM gives rise to effective teamwork which is the basis of quality circles, which became popular in the late 1970s after Japanese used them successfully.

In Toyota the employee involvement can be achieved by having quality circles and listening to the concerns of each employee in those teams. Every employee should be encouraged to come up with solutions. Every employee should be given the authority to stop production line as soon as quality problem is spotted.

Quality in both the manufacturing and service sector organisations is achieved in different ways:

• Manufacturing Service
• Reliability Tangible factors
• Durability Courtesy
• Performance Timeliness
• Features Consistency
• Serviceability Responsiveness to customer needs
• Conformance to specifications Atmosphere

Continuous improvement

Customers today demand and expect high level of quality at a reasonable price. For the companies to survive in the long run they need to make quality in their products a top priority. This can be achieved through Six Sigma principle where the level of defects is reduced to approximately 3.4 parts per million. This in turn saves both time and cost and wins customer loyalty.

Barclays can achieve the total quality management in their operations in a number of ways. A timeframe can be set up in which a customer needs to be attended at any cost no matter how long the queues are. The customer needs to be greeted happily at his first contact and should be catered to in an efficient and effective way.

Toyota can benefit by reducing the waste and making proper use of the resources. The staff can be trained to use the plan-do-check-act cycle for problem solving. This helps to point out all those activities that don’t add any value to the product and new ways can be found to complete the production cycle in less time and eliminating those activities that don’t add any value to the product.

Customer Satisfaction

Customers are usually satisfied when their expectations regarding a service or product have been met. They often describe the satisfaction as quality.

This can be measured by Barclays in terms of how long it takes for a customer to be served after he entered the front door. The time should be set in which a customer needs to be served in the best possible way. The calls should be answered in a given time and staff should be properly trained to answer the queries. The atmosphere of the branch and the appearance of the staff members should be given importance to.

Toyota can make sure its customers are satisfied by making the cars of excellent quality in lowest possible cost to the customer. Quality should be inspected at every stage. Any defects would delay the entire process and hence delay the delivery to customer leading to the unsatisfied customer. The good quality would mean less wear n tear resulting in less warranty claims and a satisfied customer.

Evaluation of the operational concepts of Barclays and TMC

a) Capacity Planning

Barclays

The capacity planning would help Barclays as it would be able to anticipate demand and make sure it has got the right resources to meet any variations in demand. The demand variations could be studied using the past analysis and extra staff could be made available at busy times of the day or the year. The competitive advantage could be achieved by making sure that all the customers are properly attended and less staff made available at less busier times. The sustainable advantage could also be achieved by making best use of the resources in the most effective way.

Toyota

The capacity planning would help Toyota anticipate what model’s demand is going to be more as compared to the others. More emphasis could be laid on producing those cars whose demand is more and less production for the cars whose demand is comparatively less. This would help gain competitive advantage as producing the right amount of cars would save costs and no stock would need to stored. Sustainability in the long run can be achieved due to the economies of scale achieved.

b) Inventory Management

Barclays

The inventory management would help Barclays keep sufficient cash to keep its process working and at the same time investing it somewhere else to gain higher returns. The competitive advantage will be achieved by making the best use of the cash and gaining the maximum possible return out of it. This would help in long term sustainability of Barclays.

Toyota

The inventory management would mean keeping less stock and hence resulting in almost zero stockholding costs, insurance and tax. The space would also be free and hence used for other purposes. Maintaining safety stock would help them if they face problem at any point in time with the inventory or to meet an unexpected increase in demand. This all would result in cost savings and hence provide a competitive advantage.

C) Supply Chain design

Barclays

As Barclays has already outsourced its back office and call centres to India which is a hub of call centres and a greater awareness of IT so it gives it a competitive advantage above those competitors whose call centres are UK based because there is cheap labour available in India. Above that there are no hiring and training costs to be incurred. Innovation can also be achieved because when talent is pooled together from bright people in different parts of the world many new things are discovered which would not have been possible otherwise. This also helps with the long term sustainability.

Toyota

The supply chain design for Toyota would mean having close contact with a few suppliers who best understand the culture of the company. This would mean a greater understanding of what product is required and what quality is desired. The competitive advantage would be achieved because of close relationship. Discussion between the supplier and enterprise would also lead to innovation. This would also help with the long term sustainability of the company

d) Performance Measures

Barclays

The overall performance of the operations can be measured by KPIs or Balanced Scorecard. It can be found out that equal importance is given to all the four perspectives which are customer, financial, learning & growth and internal business process perspective. This would help achieve the competitive advantage and would also help in the long term sustainability.

Toyota

Toyota can measure the performance of its operations by setting up benchmarks and comparing the actual performance with the benchmarks. Reasons for not matching up with the benchmarks could be looked and proper measures could be put in place to meet up with the standards. This would help achieve competitive advantage and also help in long term sustainability.

e) Total Quality Management

Barclays

Barclays could use TQM to make sure all the resources available to it are properly used and given importance to. All employees work to the full of their potential and customers are given the best service possible. This would help Barclays gain competitive advantage over other competitors and also help in the long term sustainability. It would also help in the innovation.

Toyota

The lean production system adopted by Toyota eliminates its waste totally and helps achieve low production costs. This gives it a competitive advantage over other competitors. Competitive advantage could be achieved by saving costs and resources and sustainability in the long run can be achieved.

Conclusion

Operations management is very important for an organisation as operations are at the heart of the overall success or failure of the company. The topics discussed in this assignment for managing operations are capacity planning, inventory management, supply chain design, performance measures and total quality management. The companies under discussion here are Barclays and Toyota. Overall, Toyota is more cost effective and it pays great emphasis on lean manufacturing and JIT which is the key to effective use of the resources and cost reduction.

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11. Krajewski, L., Ritzman, L. & Malhotra, M. (2007). Operations Management: Processes & Value Chains, 8th Edition. Prentice
12. Hall.Heizer, J., Render, B. & Rajashekhar, J., (2008). Operations Management, 9th Edition. Prentice Hall.

Introduction

Strategic Focus, one amongst the most important step in the design and development of a product, enables companies to discover and explicitly commit themselves to important considerations (Ahoy, 2008). In the current case studies of Ready Materials and Zara, efficient and effective strategic focus assisted in expanding and extending the business into the narrow market or industry segment. More specifically, the super-responsive supply chain developed by Zara permitted the company in designing, producing and delivering new garments for marketing worldwide (Gattorna 1998). Ready Materials, on the other hand, possessed no clear strategic focus and witnessed complexities in meeting the volatile demand pattern. This characteristic absence of strategic focus caused a demand uncertainty, which eventually led to the emergence of buffering mechanisms (forward load, inventory and capacity). Owing to the fluctuating nature of daily demand, most of the purchasers of Ready Materials have aligned their orders with respect to a day per day operation and waited for the dispatch for an average time of 24 hours. Use of capacity buffering system in the form of annualised hours helped in managing Ready Materials at times of demand fluctuations, enabling adjustments to the working day by up to two hours, either way, without any intimation (Gattorna, 2009). Though these buffering mechanisms caused the company to witness low levels of staff morale and retention, in recent years, this has gained immense attention with the work force finishing the task early more often than late. Buffering mechanisms undertake the forms of order backlogs link with a variable extension to lead time. Inventory buffering mechanism, used by Ready Materials, compressed the customer response time by committing capacity in the advance of demand. Reducing the capital or, in other words, operating at the negative working capital helps in aligning with offsetting the investment in additional capacity. Thus, managing buffering mechanisms through resource alerts and effective prioritisation of resource attention assists projects in taking an advantage. It minimises the impact of Parkinson’s Law, and prevents unnecessary distraction alongside facilitating recovery planning when required, yet at a time in advance when the project or company is in trouble. Presence of high demand uncertainty necessitates the need of project and strategic management (Lake, 2010). As indicated earlier, the use of buffering and alignment mechanisms, allow the resources and companies to gain a strategic focus of resource attention besides enabling the advantage of good morale and early task finish. Much focus can be levied on time schedule management, and this automatically decreases unnecessary distraction, further enabling for the recovery planning to prevail, when needed. However, this is only necessary whenever the company witnesses extreme difficulty (Ahoy, 2008).

Managing of uncertainty remained at the core of improvement of project performance for Ready Materials. Making use of highly sophisticated just in time systems could help in adjusting to the alignment and this automatically offers an efficient strategic focus. At such times, the company is required to get the projects completed both ahead of schedule and with efficient reliability of stock delivery dates that were promised. This specific approach to alignment offers mechanisms which allow a “complete system” view of projects. The mechanism of alignment recognises and safeguards the uncertainty and thereby avoids the Parkinson’s Law at the task level whilst considering Murphy’s Law at the project stage. All of these implications suggest an intimate interrelationship between strategic focus, buffering and alignment. Effective and efficient management of these three segments of operational management helps each of the companies in driving towards success (Vitale, 2002). It is the duty of project managers to shift their attention from assuring the achievement of strategic focus, task estimates and intermediate milestones. All of these are vital from the date it is required to the final promised due date. But, a grasping of the whole implication of this approach is an immense challenge. Running factories for only a single shift, sending half empty loads to other countries, which were followed by Zara, could help in focusing local efficiency at the expense of international responsiveness. Investing in the overall capital assets can eventually enhance the strategic focus and organisational flexibility (Stratton, 2008). Owing production assets can offer the company a level of control over its schedules and the companies no matter what they intend to do. Besides manufacturing of complicated products, it can enhance strategic focus and thereby minimise the incorporation of buffering mechanisms and alignment patterns.

References
Ahoy, K. (2008). Customer Driven Operations Management: Aligning Businesses, Processes and Systems, London: Hoffmann Publishers, pp. 90-100.
Gattorna, J. (1998). Strategic Supply Chain Alignment: Best Practices in Supply Chain. London: SAGE Publishers, pp. 451-460.
Gattorna, V. (2009). Dynamic Supply Chain Alignment. London: Heinemann Publishers, pp. 341-390.
Lake, H. (2010). Operational Management and Control. London: Routledge Publishers, pp. 34-90.
Stratton, R. (2008). Theory Building: Relating Variation, Uncertainty, Buffering Mechanisms and Trade-offs, Proceedings of the 3rd World Conference on Production and Operations Management. Tokyo: Japan.
Vitale, B. (2002). Business to Business Marketing. London: Routledge Publishers, pp. 34-89.

Abstract

This report undertakes a case study of Tesco Finest Beef Cannelloni from the perspective of analysing the supply chain of the ingredients of the product. As a means of creating value for a company, the supply chain will be examined from the perspective of managing uncertainty, promoting efficiency and ensuring certain standards are met. The study looks at the ingredient list of the product, using various secondary sources to track these ingredients to the supplier, where after the supply chain and challenges thereof are analysed to present a reasoned conclusion as to the efficiency of the Tesco Finest Beef Cannelloni product.

Introduction

Since the 1990s, an essential element of the UK beef industry has been the emergence of partnerships between producers, abattoirs and supermarkets in order to ensure sustainability in the supply chain relationships (Fearne, 1999). Since this time the total market share of the beef industry held by supermarket chains has increased to over 75 percent of the total fresh meat being supplied by these retail outlets. These long-standing partnerships are also essential mechanisms for ensuring accountability and transparency in the supply chain, a principle recently recognised by Tesco Plc as a priority for their supply chain management strategy in the near future (Tesco, 2013). Tesco is one of the largest retailers in the UK with operations extending to Europe and the East. One of the primary strategies of Tesco is to be the creator of a highly valued brand known for quality at a competitive price (Tesco, 2013). The quality therefore of their own-label brand is an essential element of creating value in their supply chain. The product that has been chosen as the subject of this report is the Tesco Finest Beef Cannelloni. It is essential to the quality of the Finest Beef Cannelloni product therefore that Tesco have some measure of control and transparency in the upstream supply chain process of the product. This is essential to ensure the quality of the processed meat that is eventually integrated into this product. It is evident through the recent equine contaminate scandal that there is a lack of control over this element of the Tesco supply chain as four Tesco-branded products have tested positive for the contaminate (Tesco, 2013). This report seeks to understand the supply chain of the Tesco Beef Cannelloni product, which will serve as the subject of critical analysis herein.

Processed Product and Controversy

As mentioned, the processed meat product that is the subject of the current report is Tesco Finest Beef Cannelloni. With the contamination of certain Tesco branded products with horsemeat, there has been a renewed interest in ensuring quality, sustainability and certainty in the supply chain. Arguably, this may have formed the basis for the integration of supply chain goals by Tesco. Van der Vorst and Beulen (2002) argue that improving the strength of the supply chain in times of controversy, such as previous outbreaks of swine flu and foot-and-mouth disease, is necessary for preventing the spread of the contaminate and to regain consumer trust. The manufacturing function of the supply chain of a company is affected by three identified categories of uncertainty, namely supply, process and demand uncertainty (van der Vorst & Beulen, 2002). The presence of these uncertainties drive the decision makers to create safety buffers in time, capacity and inventory in order to mitigate the potential effects of any uncertainty in the supply chain (Fynes, et al., 2004). It is argued that maintaining a level of flexibility in the supply chain is one of the essential characteristics necessary to ensure uncertainty is correctly managed. In the case of Tesco Beef Cannelloni, there has been uncertainty created due to the presence of horsemeat contaminates in other similar beef products in the Tesco brand range. This will create a hesitance on the part of the customer to purchase Tesco branded beef products. Ensuring increased and publicly acknowledged transparency in the supply chain of the company is an essential element to ensure the long-term sustainability of the product, as there is a need to increase consumer trust in the brand again.

Ingredients

The ingredients of Tesco Finest Beef Cannelloni according to the product information are as follows:

Beef (23%), Tomato, Cooked Egg Pasta, Milk, Water, Tomato Juice, Tomato Puree, Whipping Cream, Cornflour, Onion, Mature Cheddar Cheese, Garlic Puree, Wheat Flour, Cheese, Olive Oil, Beef Stock, Soft Cheese, Pasteurised Egg, Carrot, Celery, Salt, Butter, Oregano, Balsamic Vinegar, Sugar, Vegetable Oil, Pectin, Basil, Marjoram, Black Pepper, Bay, White Pepper, Nutmeg, Cooked Egg Pasta (Durum Wheat Semolina, Water, Pasteurised Egg) and Beef Stock (Beef, Yeast Extract, Salt).

For the purposes of the supply chain analysis, these ingredients can be categorised as follows: Meat and meat by-products, milk and dairy products, fresh ingredients, and herbs and spices. As individual analysis of exact supply chain information on every product is not practical for the purposes of the present report, these categories will serve to track the supply chain of the ingredients.

Sourcing of Ingredients

In analysing the supply chain of the Finest Beef Cannelloni, within the greater Tesco supply chain one can observe a complex structure due to the vertical integration and outsourcing model that is used in the broader supply chain strategy of the company. The Finest Beef Cannelloni is not manufactured by Tesco itself and is a product of a supply chain manufacturer who delivers the final product to the central distribution warehouse of the company (Tesco, 2013). However, as part of the vertical integration of the supply chain, these manufacturers are still subject to the same quality standards and control mechanisms as Tesco’s unprocessed products. The ingredients for the Finest Beef Cannelloni are sourced from a number of different of supply chain sources which are used by the manufacturer to then make the product. The meat and meat by-products that are used in the range are sourced directly, either from an abattoir or the meat processor directly (Tesco Plc, 2013. With a controlled agricultural policy with regards to all meat products used, Tesco aims to ensure that their products are of the highest quality. Rigorous quality control mechanisms which aim to ensure the continued maintenance of the product quality see the meat producers and abattoirs being subjected to routine and surprise inspections in order to ensure that the quality standards are maintained (Tesco, 2013). The meat products are an essential component of the Finest Beef Cannelloni range. The sourcing of the milk and dairy products of Tesco follow a similar strategy to their meat supply process. It stands to reason that the financial interest in ensuring the quality of meat and dairy products is greater than it would be for dried herbs, spices and other ingredients, as the quality of these products is an essential element of ensuring the quality of the end-user product. With vast differentials in quality standards of meat and dairy existing to a greater extent, the supply of these products from controlled farms is essential to the value offering of their final product.

The Tesco Nuture policy is one which is applicable to the supply chain of all fresh fruits and vegetables that are directly stocked in the Tesco supermarket, but also applicable to the products used in their branded ranges. This policy ensures that all fruits and vegetables are grown according to environmental and responsible standards, which simultaneously encourages sustainable farming practices, such as responsible energy use, recycling and use of natural resources, and which independently audits all farmers to ensure that these standards are met (Tesco Nuture, 2013).

The remainder of the ingredients, namely herbs, spices and other ingredients are sourced either through trade or directly from manufacturers which supply to the Tesco supermarket chain (Tesco Plc, 2013). This is a complex supply chain process as there is little control over the quality of the product prior to its addition to the Finest Beef Cannelloni. As there is no significant financial interest in directly manufacturing these products as part of the vertical integration of the supply chain, it is logical that these products are sourced in this way.

These ingredients are then supplied to the manufacturer who processes the product for delivery to a central distribution centre of Tesco (Tesco Plc, 2013). The complexity of the supply chain is an avenue which has been identified for improvement in the future as, despite having rigorous standards for abattoirs and processors, the presence of equine contaminates in other Finest beef products has demonstrated that there is a lack of transparency in the supply chain and further that the supply chain is too complex. It is evident therefore that the complex structure of the supply chain makes the tracing of the individual ingredients somewhat problematic, lacking the transparency that has been complained of in light of the recent scandal questioning the overall product quality of these goods.

Supply Chain

Supermarkets are different from other processed meat manufacturers, as they buy meat directly from meat processors using a centralised distribution system (Fearne, 1999). Supply Chain Management can be defined as the integration of key business processes from end user through original suppliers that provides products, services, and information that add value for customers and other stakeholders (Drucker, 1998). This flow of information, products and services for Tesco can be observed in the diagram below:

(Tollington & Wachter, 2001)

The relevance of this model cannot be overstated, as the central concern of this model of supply chain management is the flow of information from the customer which will ensure that the needs and desires of the end-user customer are carefully considered in order to tailor the product to meet the specific needs of those customers (Lambert & Copper, 2000). This ensures that demand uncertainty which is a central concern of supply chain management theory is effectively managed.

The Tesco supply chain is one which is based on vertical integration of suppliers, manufacturers and distributors. This ensures that there is maximum control over the supply chain process. As noted above, the processed product is delivered to a central distribution centre, which sees the final product then being shipped using the Tesco distribution network to Tesco supermarkets around the UK. The supply chain strategy of Tesco is to ensure that the products supplied in supermarket regions are reflective of the specific needs of those customers, Finest Beef Cannelloni therefore is available specifically in UK supermarkets. As Tesco Finest is only available in Tesco supermarkets, the downstream supply chain is relatively simple, as there is no interaction outside of the vertically integrated supply chain and unlike manufacturers, there is no dealing with agents or distributors. It is evident that the supply chain of Tesco is complex through necessity, as it simultaneously functions as supplier and buyer of goods for distribution within the supermarket chain itself. Although accountability is sought after through vertical integration, this has itself presented problems with transparency and therefore poses a complex situation to Tesco who now has to attempt to simplify the supply chain for the purposes of quality control, whilst maintaining efficiency in this dual role that it has.

Challenges

There are a number of challenges for the Tesco supply chain and most notably these relate to the complexity of the identified manufacturing, processing and supply sources. Although there are significant quality and control mechanisms that form a part of the Tesco supply chain with regards to their upstream operations, it is evident that the complexity of the supply chain itself has resulted in some discrepancy in the supply chain, as other Tesco Finest products have been found to contain the equine contaminate. Although this is not specific to the Tesco Finest Beef Cannelloni, as forming part of the same supply chain, similar quality control standards can be faced. Although the manufacturing process of Tesco is vertically integrated into the supply chain, this affords Tesco less control over the manufacturing process and therefore may present difficulty in maintenance of standards in the long-term.

These issues however have been noted by Tesco, particularly the difficulty which is created with their overly complex supply chain (Tesco, 2013). In an attempt to recreate value within the supply chain, which was lost as a direct result of the horsemeat scandal, the company has committed to publicly available product testing published online, as well as new goals for defining the upstream supply chain, specifically to simplify the supply chain in order to promote accountability and transparency.

Conclusion

As a generalisation, one can observe through this analysis that Tesco exhibits all the success factors of an efficient and value-based supply chain, namely exhibiting elements of continuous investment, good staff, volume growth, improvement of measurement and control of costs and innovation (Fearne & Hughes, 1999). Tesco is constantly seeking to improve the ways in which it creates value through its supply chain management and the way in which they have dealt with the horsemeat scandal has demonstrated an important element of flexibility in the supply chain process. This is to say that the company immediately responded to the identified weakness in the supply chain by reassessing their goals and working towards a strategic reformation of the supply chain in order to meet the consumer concerns over quality and transparency.

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