Cases of Operation Management Case #01: Operations Strategy in a Global Environment Motorolas Global Strategy For years Motorola

and other U.S. firms such as RCA, Magnavox, Philco, and Zenith were among the worlds most successful consumer electronics firms. In the face of withering competition from the Japanese, however, these firms began to fall by the wayside. Motorola has remained the exception: Today it is one of the world leaders in mobile communication technology, including the manufacture of cellular telephones, paging devices, automotive semiconductors, and microchips used to operate devices other than computers. Motorola has taken on the Japanese head-to-head. Although it may have lost a few battles here and there, the firm has won many more. Motorola heard the call to battle in the early 1980s. The firm then controlled the emerging U.S. market for cellular telephones and pagers but, like many other firms at the time, was a bit complacent and not aggressively focused on competing with the Japanese. Meanwhile, Japanese firms began to flood the U.S. market with lowpriced, high-quality telephones and pagers. Motorola was shoved into the background. At first, managers at Motorola were unsure how they should respond. They abandoned some business areas and even considered merging the firms semiconductor operations with those of Toshiba. Finally, however, after considerable soul searching, they decided to fight back and regain the firms lost market position. This fight involved a two-part strategy: First learn from the Japanese and then compete with them. To carry out these strategies, executives set a number of broadbased goals that essentially committed the firm to lowering costs, improving quality, and regaining lost market share. Managers were
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Cases of Operation Management sent on missions worldwide, but especially to Japan, to learn how to compete better. Some managers studied Motorolas own Japanese operation to learn more fully how it functioned; others focused on learning about other successful Japanese firms. At the same time, the firm dramatically boosted its budgets for R&D and employee training worldwide. One manager who visited Japan learned an especially important lesson. While touring a Hitachi plant north of Tokyo, he noticed a flag flying in front of the factory emblazoned with the characters P200. When he asked what it meant, he was told by the plant manager that the factory had hoped to increase its productivity by 200% that year. The manager went on to note somewhat dejectedly that it looked as if only a 160% increase would be achieved. Because Motorola had just adopted a goal of increasing its own productivity by 20%, the firms managers soberly realized that they had to forget altogether their old ways of doing business and reinvent the firm from top to bottom. Old plants were shuttered as new ones were built. Workers received new training in a wide range of quality-enhancement techniques. The firm placed its new commitment to quality at the forefront of everything it did. It even went so far as to announce publicly what seemed at the time to be an impossible goal: to achieve Six Sigma quality, a perfection rate of 99.9997%. When Motorola actually achieved this level of quality, it received the prestigious Malcolm Baldrige National Quality Award. Even more amazing have been Motorolas successes abroad, especially in Japan. The firm has 20 offices and more than 3,000 employees there. It is currently number three in market share there in both pagers and cellular telephones. Worldwide, Motorola controls much of the total market for these products, has regained its

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Cases of Operation Management number-two position in semiconductor sales, and is furiously launching so many new products that its rivals seem baffled. Today, Motorola generates over 56% of its revenues abroad. Major new initiatives are underway in Asia, Latin America, and Eastern Europe. The firm has also made headway in Western Europe against entrenched rivals Philips and Thomson. But not content to rest on its laurels, Motorola has set newand staggeringgoals for itself. It wants to take quality to the point where defects will be counted in relation to billions rather than millions. It wants to cut its cycle times (the time required to produce a new product, the time to fill an order, and/or the time necessary to change a production system from one product to another) tenfold every five years. It also wants over 75% of its revenues to come from foreign markets by 2002.

DISCUSSION QUESTIONS 1. 2. 3. What are the components of Motorolas international Describe how Motorola might have arrived at its current Discuss Motorolas primary business strategy.

strategy? strategy as a result of a SWOT analysis.

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Cases of Operation Management Case #02: Product and Service Design Product Design at Regal Marine Global firms like Regal Marine know that the basis for an organization's existence is the good or service it provides society. Great products are the keys to success. With hundreds of competitors in the boat business, Regal Marine must work to differentiate itself from the flock. As you read in the Global Company Profile that opened this chapter of your text, Regal continuously introduces innovative, high-quality new boats. Its differentiation strategy is currently reflected in a product line consisting of 22 models. But why must Regal Marine constantly worry about designing new boats? The answer is that every product has a life cycle. Products are born. They live and they die. As Figure 5.1 shows, a product's life cycle can be divided into four phases: introduction, growth, maturity, and decline.

Figure 5.2 shows the four life cycle stages and the relationship of product sales, costs, and profit over the life cycle of a product. When Regal is developing a new model boat, it typically has a negative cash flow. If the boat is successful, those losses may be recovered and yield a profit prior to its decline. The life cycle for a successful Regal boat is three to five years.
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To maintain this stream of innovative new products, Regal constantly seeks design input from customers, dealers, and consultants. Design ideas rapidly find themselves in Regal's styling studio, where Computer Aided Design (CAD) technology speeds the development process. A Regal design engineer can start with a rough sketch or even just an idea and use the graphic display power of CAD as a drafting board to construct the geometry of the new boat. The CAD system helps the designer determine engineering data such as the strength, dimensions, or weight. It also allows the designer to be sure all parts will fit together. Existing boat designs are always evolving as the company tries to stay stylish and competitive. Moreover, with life cycles so short, a steady stream of new products is required. A few years ago, the new product was the 3-passenger $11,000 Rush, a small, but powerful boat capable of pulling a water-skier. The next year, it was a 20-foot inboardoutboard performance boat with so many innovations that it won prize after prize in the industry. Then it was a redesigned 42-foot Commodore that sleeps six in luxury staterooms. With all these models and innovations, Regal designers and production personnel are under pressure to respond quickly. By getting key suppliers on board early and urging them to participate at the design stage, Regal improves both innovations and quality while speeding product development. Regal finds that the sooner it brings suppliers on board, the faster it can bring new boats to the market. The first stage in actual production is the creation of the "plug," a foam-based carving used to make the molds for fiberglass hulls and decks. Specifications from the CAD system
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Cases of Operation Management drive the carving process. Once the plug is carved, the permanent molds for each new hull and deck design are formed. Molds take about 4-8 weeks to make and are all handmade. Similar molds are made for many of the other features in Regal boatsfrom galley and stateroom components to lavatories and steps. Finished molds can be joined and used to make thousands of boats. Discussion Questions: 1. How does the concept of product life cycle apply to Regal Marine products? 2. Why does Regal Marine suffer negative cash flow in introduction stage of its product life cycle? 3. What strategy does Regal use to stay competitive? 4. What kind of engineering savings is Regal achieving by using CAD technology rather than traditional drafting techniques? 5. What are the likely benefits of the CAD design technology?

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Cases of Operation Management Case #03: Quality Management Quality at the Ritz-Carton Hotel Company Ritz-Carlton. The name alone evokes images of luxury and quality. As the first hotel company to win the Malcolm Baldrige National Quality Award, the Ritz treats quality as if it is the heartbeat of the company. This means a daily commitment to meeting customer expectations and making sure that each hotel is free of any deficiency. In the hotel industry, quality can be hard to quantify. Guests do not purchase a product when they stay at the Ritz: They buy an experience. Thus, creating the right combination of elements to make the experience stand out is the challenge and goal of every employee, from maintenance to management. Before applying for the Baldrige Award, company management undertook a rigorous self-examination of its operations in an attempt to measure and quantifies quality. Nineteen processes were studied, including room-service delivery, guest reservation and registration, message delivery, and breakfast service. This period of self-study included statistical measurement of process work flows and cycle times for areas ranging from room service delivery times and reservations to valet parking and housekeeping efficiency. The results were used to develop performance benchmarks against which future activity could be measured. With specific, quantifiable targets in place, Ritz-Carlton managers and employees now focus on continuous improvement. The goal is 100% customer satisfaction: If a guest's experience does not meet expectations, the Ritz-Carlton risks losing that guest to competition. One way the company has put more meaning behind its quality efforts is to organize its employees into "self-directed" work teams.

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Cases of Operation Management Employee teams determine work scheduling, what work needs to be done, and what to do about quality problems in their own areas. In order that they can see the relationship of the specific area to the overall goals, employees are also given the opportunity to take additional training in hotel operations. Ritz-Carlton believes that a more educated and informed employee is in a better position to make decisions in the best interest of the organization. Discussion Questions: 1. In what ways could the Ritz-Carlton monitor its success in achieving quality? 2. Many companies say that their goal is to provide quality products of services. What actions might you expect from a company that intends quality to be more than a slogan or buzzword? 3. Why might it cost the Ritz-Carlton less to "do things right" the first time? 4. How could control charts, Pareto diagrams, and cause-and-effect diagrams be used to identify quality problems at a hotel? 5. What are some non-financial measures of customer satisfaction that might be used by the Ritz-Carlton?

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Cases of Operation Management Case #04: Supply Chain Management Dells Supply Chain and the Impact of E-commerce Dell, the personal computer manufacturer highlighted in chapter 7s Global Company Profile, has long embraced the internet and e-commerce in its supply chain. The figure at the bottom of this page shows Dells unique e-commerce model. Dell sell high-volume, low-cost products directly to end users. Assembly begins immediately after receiving the customer order. Traditional PC manufacturers, in contrast, have previously assembled PCs ready for purchase at retail stores. Dell uses direct sales, primarily the internet, to increase revenues by offering a virtually unlimited variety of PC configurations or customize them. Customization allows Dell to satisfy customers by giving them a product that is close to their specific requirements. Options are easy to display over the internet and allows Dell to attract customers that value this choice. Dell also uses customized Web pages to enable large business customers to track past purchases and place orders consistent with their current needs. In addition, Dell constructs special Web pages for suppliers, allowing them to view orders for components they produce as well as current levels of inventory at Dell. This allows suppliers to plan based on customer demand and as a result reduces the bullwhip effect. Products in the PC industry have life cycles of only a few moths. But PCs across different manufacturers are highly substitutable because they often have the same components. Thus a firm like Dell, which brings products to market faster than the competition, enjoys a huge early-to-market advantage. Competing firms that sell through distributors and retailers have to fill shelves at retailers before a product reaches the customer. Dell, in contrast, introduces a new product to customers over the internet as soon as the first of that model is ready.

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By using direct sales (phone and Internet) to sell PCs, Dell is able to eliminate distributor and retailer margins and increase its own margin. The direct sales model allows Dell customers to place orders at any time of the day from anywhere in the world and is much cheaper; retail stores have a huge array of additional costs because of their bricks-and-mortar model. Direct sales allow Dell to collect payment for its PCs in a matter of days after they are sold. However, Dell pays its suppliers according to the more traditional billing schedules. Given its low levels of inventory, Dell is able to operate its business with negative working capital because it manages to receive payment for its PCs an average of 5 days before it plays its suppliers for components. A PC supply chain that includes distributors and retailers finds it nearly impossible to achieve these results. Dells order processing, products, and assembly lines are designed such that all components on which customers are offered customization can be assembled in a matter of hours. This allows Dell to postpone assembly until after the customer order has been placed. As a result, Dell holds inventory in the form of components that are common across a wide variety of finished products. Postponement, component modularity, and tight scheduling allow low inventory and support mass customization. Dell maximizes the
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Cases of Operation Management benefit of postponement by focusing on new PC models for which demand is hard to forecast. PC manufacturers who sell via distributors and retailers find postponement virtually impossible. Therefore, traditional PC manufacturers are often stuck with PC configurations that are not selling while simultaneously being out of the configurations that are selling. Dell, in contrast, is better able to match supply and demand. Dells e-commerce model results in higher shipping costs than, selling through distributors and retailers, however, Dell sends individual PCs to customers from its factories. Because these shipments are small (often one or a few PCs), manufacturers selling through distributors and retailers ship with some economy of scale, using large truck shipments to warehouses and retailers, with the end user providing the last portion of delivery. The Dell supply chains outbound transportation costs are higher, but relative to the price of a PC, transportation cost is low (typically 2% to 3%), and thus the impact on the overall cost is low. Discussion Questions 1. Although it might seem that Dell, with its build-to-order model, is best equipped to benefit from e-commerce, a traditional PC manufacturer, selling through distributors and retailers, may also have a lot to gain from e-commerce. Why? 2. 3. 4. 5. How has Dell exploited the advantage of the internet to What is the main disadvantage of Dells selling PCs over the How does Dell compete with a retailer who already has a PC How does Dells supply chain deal with the bullwhip effect? improve performance? internet? in stock?

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Case #05: Just-In-Time Mutual Insurance Company of Iowa Mutual Insurance Company of Iowa (MICI) has a major insurance office facility located in Des Moines, Iowa. The Des Moines office is responsible for processing all of MICI's insurance claims for the entire nation. The company's sales have experienced rapid growth during the last year, and as expected, record levels in claims followed. Over 2,500 forms for claims a day are now flowing into the office for processing-. Unfortunately, fewer than 2,500 forms a day are flowing out. The total time to process a claim, from the time it arrives to the time a check is mailed, has gone froth 10 days to 10 weeks. As a result, some customers are threatening legal action. Sally Cook, the manager of Claims Processing, is particularly distressed as she knows that a claim seldom requires more than 3 hours of actual work. Under the current administrative procedures, human resources limitations, and facility constraints, there appear to be no easy fixes for the problem. But clearly, something must be done, as the workload has overwhelmed the existing system. MICI management wants aggressive, but economical, action taken to fix the problem. Ms. Cook has decided to try a JIT approach to claim processing. With support from her bosses, and as a temporary fix, Cook has brought in part-time personnel from MICI sales divisions across the country to help. They are to work down the claims backlog while a new JIT system is installed. Meanwhile, Claims Processing managers and employees are to be trained in JIT principles. With JIT principles firmly in mind, managers will redesign jobs to move responsibilities for quality control activities to each employee, holding them responsible for quality work and any necessary corrections. Cook will also initiate worker-training programs that explain the entire claim processing flow, as well as provide comprehensive training on each step in the process. Data entry skills will
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Cases of Operation Management also be taught to both employees and managers in an effort to fix responsibility for data accuracy on the processor rather than data entry clerks. Additionally, emphasis will be placed on cross training to enable workers within departments to process a variety of customer claim applications in their entirety. Cook and her supervisors are also reexamining the insurance and claim forms currently in use. They want to see if standardization of forms will cut processing time, reduce data entry time, and cut work-in-process. They hope the changes will also save training time. Making changes in work methods and worker skills leads logically to a need for change in the layout of the Claims Processing Department. This potential change represents a major move from the departmental layout of the past, and will -be a costly step. To help ensure the successful implementation of this phase of the changeover, Cook established a team made up of supervisors, employees, and an outside office layout consultant. She also had the team visit the Kawasaki motor cycle plant in Lincoln, Nebraska, to observe their use of work cells to aid JIT. The team concluded that a change in the office facilities is necessary to successfully implement and integrate JIT concepts at MICI. The team believes it should revise the layout of the operation and work methods to bring them in line with "group technology cell" layouts. An example of the current departmental layout and claim processing flow pattern is presented in Figure S 12.6.

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Figure S12.6: Claims Processing Layout

As can be seen in this figure, customer claims arrive for processing at the facility and flow through a series of offices and departments to eventually complete the claim process. While the arrangement of the offices and workers in Figure S12.6 is typical, the entire facility actually operates 20 additional flows, each consisting of the same three departments. However, not all of the 20 flows are configured the same. The number of employees, for example, varies depending on the claim from requirements (larger claims have to be approved by more people). So while all forms must pass through the same three departments (Customer Claim Entry, Accounting. and Customer Claim Approval), the number of workers for each claim may vary from two to four. For this reason, the MICI facility currently
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Cases of Operation Management maintains a staff of over 180 office workers just to process and route claims. All of these people work for Ms. Cook.

Discussion Questions 1. Identify the attributes you would expect the Claims

Processing Department at MICI to have once the new ".117systern is in place. 2. What would the restructured cell layout for claim processing in Figure S 12.6 look like? Draw it. 3. What assumptions are you making about personnel and equipment in the new group technology cell layout? 4. How will the new JIT oriented system benefit the MICI operation? Explain.

Source: Adapted from Marc J. Schniederjans. Topics in Just-in-Time

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Case #06: Project Management Managing Hard Rocks Rock Fest At the Hard Rock Cafe, like many organizations, project

management is a key planning tool. With Hard Rocks constant growth in hotels and cafes, remodeling of existing cafes, scheduling for Hard Rock Live concert and event venues, and planning the annual Rockfest, managers rely on project management techniques and software to maintain schedule and budget performance. Without Microsoft Project, says Hard Rock Vice-President Chris Tomasso, there is no way to keep so many people on the same page. Tomasso is in charge of the Rockfest event, which is attended by well over 100,000 enthusiastic fans. The challenge is pulling it off within a tight 9-month planning horizon. As the event approaches, Tomasso devotes greater energy to its activities. For the first 3 months, Tomasso updates his MS Project charts monthly. Then at the 6-month mark, he updates his progress weekly. At the 9- month mark, he checks and corrects his schedule twice a week. Early in the project management process, Tomasso identifies 10 major tasks (called level 2 activities in a work breakdown structure, or WBS): talent booking, ticketing, marketing/PR, online promotion, television, show production, travel, sponsorships, operations, and merchandising. Using a WBS, each of these is further divided into a series of subtasks. Table 3.8 (see page 100 in textbook) identifies 26 of the major activities and sub activities, their immediate predecessors, and time estimates. Tomasso enters all of these into the MS Project software. Tomasso alters the MS Project document and the time line as the project progresses. Its okay to change it as long as you keep on track, he states.

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The day of the rock concert itself is not the end of the project planning. Its nothing but surprises. A band not being able to get to the venue because of traffic jams is a surprise, but an 'anticipated' surprise. We had a helicopter on stand-by ready to fly the band in, says Tomasso. On completion of Rockfest in July, Tomasso and his team have a 3month reprieve before starting the project planning process again. Discussion Questions 1. Identify the critical path and its activities for Rockfest. How long does the project take? 2. Which activities have a slack time of 8 weeks or more? 3. Identify five major challenges a project manager faces in events such as this one. 4. Why is a work breakdown structure useful in a project such as this? Take the 26 activities and break them into what you think should be level 2, level 3, and level 4 tasks.

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References Brian McWilliams, Reengineering Technology, March 19, 1996 the small Factory, Inc.

Griffin, R. W. and M. W. Pustay, International Business: A Managerial Perspective, Second Edition, (pages 647/648) 1999, 1996 Addison Wesley Longman. Reproduced by permission of Addison Wesley Longman. All rights reserved. Heizer, J. and Render, B, 2004, Operation Management, Seventh Edition, Prenhall, p. 185. Horngren, C. T., Foster, G. and S. M. Dator, Cost Accounting, 11th ed. (Upper Saddle River, NJ: Prentice Hall, 2003). Krajewski and Ritzman, Operations Management: Strategy and Analysis, 6th ed., Addison-Wesley Publishing Company, 2001 Murdock Robert G, Render Russell Barry and Roberta S., Service Operation Management, Prentice-Hall, Inc, 1990 Presentation of the Alternative Work Structure Team, Huffy Bicycles, at the Case Studies in Team Excellence Competition, The Ohio manufactures Association, Columbus, Ohio, October 6, 1993 Ricard B, Chase, Robert Jacobs, Nicholas J., Aquilano, Operation Management for Competitive Advantage, tenth edition, 2006 Russell Roberta S. and Taylor III, Bernard W., Operation Management, 3rd ed., Upper Saddle Rivers, NJ: Prentice-Hall, Inc, 2000 Saladin, Brooke, case prepared as a basis for classroom discussion, at Wake Forest University,

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