Master of Business Administration

Course: Managing Operations (UOWMBAOM01)

Student Name: Clayton Nicholas

Wales Student Number: 0911867179733

RDI Students Number: STU23407

Assignment Word Count: 3827

Submission date: 25th October 2010

Table of Contents
Contents Page Number
Company Overview
3

Introduction to problem 4 Process under consideration

5 Process chart 7 Process table 8

Relevant operations theory

9 Scheduling 9 Queuing 9 Quality Focus 10 Facility/ Plant layout 10

Comparison of theory with practice 12

Scheduling 12 Capacity planning 13 Room and workbench capacity review 13 2

Current Process/ facility layout under review 14

Potential changes that could improve quality and customer focus 15 Recommendations on improving the process 16
Master Schedule and job review 17 Recommended service work flow and work process layout 18

Summary of recommended Changes and their impact on operations 19 Change Execution 19 Bibliography/ Work Cited 20 Appendices 21

Company Overview

Supreme Engineering Services is a family run company based in St Lucia, Caribbean. Its primary areas of business are sales of electromechanical equipment, Information technology products and IT related services. It was founded in June 1997. The company has a thirty percent share in the IT equipment/ hardware service and maintenance business in St Lucia. This service sector continues to grow year after year at a high rate. In the area of equipment and product sales we have struggled to keep a slim ten percent market share in the ever so aggressive sales sector. There are five small business units which make up the company. Those units are: 1. 2. 3. 4. 5. Equipment and general IT product sales. Networking (data + voice, wired and wireless) hardware products sales. Computer, printer, copier and general IT equipment repair and maintenance services. Networking wired and wireless installation and maintenance. Computer assembling unit. 3

The third and fourth SBUs above have core staff and shared staff currently. All staff that joins the company must undergo training in their core specialty areas followed by cross training in the operations of the other SBUs. This cross training policy generally helps well in optimizing the usage of human capital within organization. It also helps with quick adjustments in labor to handle marginal shifts in demand for our services and it also helps with creating strong synergies between related functions across SBUs.

Introduction to the problem

The Computer, printer copier and general IT equipment repair and maintenance services SBU is the unit that continues to experience the highest growth both in volume and profitability. The staff is trained and executes their duties optimally on a normal service demand day. When there is a surge in demand for our service in this SBU we are unable to handle the sudden volume increase. The net result is that our qualities of our output service drops the customer becomes dissatisfied and even the staff become unhappy. The building structure housing the operation has sufficient physical space to handle a quadruple increase in equipment service demands, but the way it is being utilized currently creates bottle necks and inefficiencies. This is primarily so because when the layout was designed five years ago the forecasted growth rate of the service department stood at 2 % per annum. Unexpectedly the 4

growth rate for service demand was at 5 percent and since 2008 (global financial recession) there has been a 10% increase per annum until now in 2010. This surge in growth rate in the last two years has been primarily due to the fact that the more homes and business places are opting for the option of repairing equipment to extend its useful life instead of replacing. This results in savings and improved cash flows for customers. In addition to the layout it is important to realize that the type of organization has a broad spectrum of skilled human resource, starting from the senior service technicians to the yard maintenance man. The use of skills currently do not allow for high levels of efficiency, optimization. With the shift in the demand of products and services the organization must be a learning one, to allow resilience and long term sustainability. The quality of output of our service and customer focus must be improved. In operations practice it is very important to improve on value added products and services while minimizing waste. This translates to higher returns and satisfaction for all stakeholders associated with organization. The use of the human capital will require some element of scientific management intervention techniques in the Job design to achieve this improved utilization. The fundamental thing is to have high skilled workers engage in activity that will allow them to use their skill in high skill job requirements. At the same time the work flow must me managed to get optimal throughput. The high skilled technicians are definitely doing too many low skilled functions such as wiping computers, pushing trolleys, making lengthy calls etc. To minimize or eliminate this problem the operations of this SBU has to be reviewed and remodeled to ensure that our output results in customer satisfaction and smooth work flow systems at all times.

Process under consideration

In reviewing this specific problem the broad operations management strategy will be reviewed and the following will be examined about Supreme Engineering Services. 1. 2. 3. 4. 5. The design of processes and systems as needed Forecasting- planning for capacity Designing and using facilities- production planning Scheduling Actual Production. 5

6. Quality control The following areas in operations processes will be reviewed in detail on a micro level in an attempt to solving current problem: 1. The design of the repair process 2. Our Work scheduling system for the equipment repair SBU. a. Capacity Planning for the long term b. Aggregate planning for the medium term c. Master schedules d. Short term schedules 1. Queuing system 2. Job Design 3. Output Quality and customer satisfaction.

The process map visually depicts the sequence of events to build a product or produce an outcome. This system was invented by Frank Gilberth. The process chart discriminates between waste and value added. When a customer or pick-up driver walks in with a piece of equipment that needs servicing or repairs done, it is taken to the login desk. At the login desk customers give information about the problem to the customer service representative. Information is entered directly into the repair management software. At this point customer pays a non refundable fifty dollar diagnostic fee and signs a read agreement. Customer is issued a receipt and a reference equipment number generated by the software. This number is affixed to the equipment also. All the equipment is transferred to the storeroom in the repair room zone periodically by repair technicians. Equipment moves on a queue on a first in first out system. To identify equipment order of queuing display monitors at each repair workbench assist technicians with this. Technicians read customer concerns and diagnose equipment problem. Based on our policy, customer is only called if a repair job needs more than one hundred dollars in parts. This is stated verbally and in writing by customer service representative at the point of logging-in equipment. Once proceed to work is issued then equipment is repaired. Technician walks to the storeroom and pickup part requested and brings back to service room. If proceed to work is not issued by customer equipment is channeled to be returned to front pick up counter for customer. After equipment is repaired a series of standardized test is performed on equipment. This is to ensure conformance and maintenance of a high quality output from the repair process. Technician physically cleans and renews outer surface of equipment and then enters his report into the system. Technician trolleys batches of completed equipment to the front pickup desk as complete. Customer is called as soon as equipment gets to customer service representatives at desk. Customer comes in pays up and leaves with repaired or serviced equipment.

Process Chart -Existing Service Job process design

P rocess Table
Routed back to customer

Process Identifier A B

Actual P

Relevant operations theory

8

Login e Transfe

Scheduling
Scheduling is the expected duration of an activity based on work load, staff size, speed etc. The strategic importance of scheduling is faster movement of goods and services through a facility. There is greater use of assets and hence greater capacity per dollar invested which in turns lowers cost. Added capacity, faster throughput and flexibility mean better customer service through faster delivery. Good scheduling also contributes to realistic commitments and hence dependable delivery.

Scheduling begins with capacity planning which involves the total facility and equipment resources available. Aggregate planning makes decisions regarding the use of facilities, inventory, people and outside contractors. Master schedules breaks down aggregate plan and develops a schedule of specific products or product lines for each week. Short term schedules then translate capacity decisions, aggregate (intermediate) planning and master schedules into job sequences and specific assignments of personnel, material and machinery. Adjustable capacity: involves planning the best quantity to produce during periods in the intermediate range horizon and planning the lowest cost method of providing the adjustable capacity that will accommodate the production requirements.

Queuing
Queuing can help for planning waiting times before delivery of service. It is developed on the basis that not all scheduling problems can be solved by labor force, shifts and labor capacity etc. A queue forms when the short term demand for service exceeds the short term service term. It looks at the 1. Receiving rate per hour. 2. The turnover rate per hour. 3. Space considerations if queue is not flowing as planned and there is a buildup. There will be some element of waiting but one must assess the tolerable level at which the customer will remain happy. On a daily basis there is a morning influx of equipment for repair. 9

To achieve a balanced queuing system work methods has to be reviewed in times when surges in demand occurs.

Quality Focus
Quality is defined as The totality of features and characteristics of a product or service that bears on its ability to satisfy stated or implied needs, adopted by the American Society for Quality. The high quality of service at our company has been a commitment by the management team and has become a culture throughout the organization. This is evident in the fact that in spite of having a leading market share in the equipment service industry combined with continuous growth, management found it necessary to come up with a solution to avert dissatisfaction among a few customers when there are demand surges for a short period. The following Quality characteristics are expected from a service when being received by a customer: Reliability, responsiveness, competence, access, courtesy, communication, credibility, security, understanding, tangibles. The following Quality characteristics are expected from a product when being received by a customer: Performance, features, reliability, conformance, durability, serviceability, aesthetics, perceived quality.

Plant / facility layout

10

The layout of the facility in delivering service to a customer follows Product/ Process-oriented layout where the equipment moves at several nodal points from start to finish.

In the entire process the fundamentals must always remain where: A product is input into supreme engineering services system, through the intervention of processes, value is added to the product and an output goes back to the customer with value added. The customer as well as owners and all stake holders must be optimally satisfied in order to achieve, equity, stability and long term resilience stability of the organization.

Input Value added products and services (operations process) Output (satisfied customer and stakeholders)

Customer Service Intervention

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Comparison of theory with the practice

Scheduling
To alleviate the problem an accurate forecast of the future demand must be done and this will be the basis by which current and future capacity plans can be developed. Current demand and forecasted future demand The average demand on our services is about 10 pieces of equipment a day. There are times where there are surges in demand. Daily Demand On a Monday there is an average of 13 computers received and this is handled my overtime by one technician. Technicians do weekly rotations to achieve this in a balanced way. Weekly Demand 12

Weekly demand has not unique patterns throughout the month. The only time of the month where weekly demand changes is when there is a demand increase surge other than Monday. This causes an abnormally high week, but this has no pattern. Monthly demand The monthly demand is quite stable from December to May annually. The erratic surge is higher in volume and frequency from June to October which coincides with the rain and hurricane season in the Caribbean where there is lots of thunder, lightning, wind and rain. There is a higher level of power grid instabilities during this period. Annual Demand At a rate of 10 computers per day the annual demand is about 2400 units per year. The annual demand is growing at a rate of 10% per annum and will continue so for the next three years. Prior to 2009 this growth rate stood at six percent. The four point increase in growth rate was influenced by: 1. There has been a rapid expansion in the use of the internet in schools, businesses and homes hence the volume of equipment for servicing on the St Lucia market is raising. 2. Because of the global financial crisis, more people have been opting to repair and service equipment over replacement as a first option because of budgetary constraints. As shown in the linear graph in Appendix A the daily or annual demand is expected to increase by 50% in five years.

Capacity Planning The current daily human resource capacity of the service department is 24 man hours which is three technicians a day with an output of eight hours a day. Output is the most appropriate measure of capacity. Each computer average repair/ service time per equipment is 2hrs. If this average has to be dropped then there is a high chance of compromising quality of service. An average of four computers can be repaired per technician per day during the peak periods. The actual running capacity of this unit in terms of units turned over is 4 X 3 techs = 12 computers per day Utilization of department is = actual output/ design capacity The current utilization = 10/12 X 100 = 83.33% Efficiency of department = actual output/ effective capacity Efficiency = 10/11 X 100 = 90.91% 13

Currently technicians work on one computer at a time. The physical capacity of the service room is to support 3 computers at a time on the work bench. Currently three machines are worked upon at a time including peak demand surge periods.

Room and Workbench capacity review

The physical work bench capacity is insufficient to handle current peak demand and future growth for the next five years. To handle current surges in demand the workbench capacity must be increased by 100%. This would mean it must handle six machines at a time. To handle future growth of 50% in the next five years the workbench capacity must be able to handle 9 machines at a time this will also cater for surges in demand. The physical size of the service work area and bench has to be doubled. There is an adjacent storeroom which houses incoming, current completely repaired equipment and aging repaired equipment. This room can be merged with service room to quadruple the capacity of the workbench area as illustrated in Fig 1 below. The capacity of electrical outlets, diagnostic tools, instruments and human capacity must be increased. To do those physical changes do not involve heavy capital expenditure and this investment in, new electrical, network outlets, tools etc will pay back on its investment which the five year period based on projected sustained growth for this department.

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Tech 1

15

Potential changes that could improve quality and customer focus.

Generally the departments performance is up to par under normal conditions. That is the current operations handles normal work flow with an output which is reasonable and hence a satisfied customer. To improve quality and customer focus the departments reliability of service must be sustained consistently, there must be improved responsiveness to moments of surge in demand. Quality of output product must not be compromised to affect performance, reliability and conformance of repaired equipment especially in surge demand moments. The proposed changes to the physical, work and process structure of the department will solve 80 percent of the problem, a simple but critical tool will have to be intelligence and communications. Communications with the customer must be improved at demand surge moments Communications internally between customer service department and equipment service department supervisor must be intact so as to give very early warnings about sudden demand changes. Customers have to be given a very accurate lead time that their equipment will take in the process. This will help boost their confidence and eventual satisfaction. There must be a lead time set and maintained even in peak demand periods. This target must be one set strategically which will be within the tolerable level of an average waiting customer. Linear programming along with gathered statistics about demand patterns in the past can help predict future demand at a reasonable level of accuracy. The intervention of human intelligence about issues such as weather patterns, abnormal social disturbances, accurate market volume etc can help improve on accuracy on forecasting and hence improve on the responsiveness of the organization which leads to a happy customer.

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Recommendations on improving the process

Expected outcome After this operations management intervention exercise we are hoping to achieve the following: 1. A service department which has the capacity to handle the peak capacity (surge) demand moments effectively and efficiently. 2. To improve our general efficiency and output in this SBU. 3. To increase organizations overall efficiency by sharing resources from SBU to SBU to control demand surges etc while all SBUs function normally. 4. To improve on customer confidence to ensure our lead and differential advantage is maintained and increased in this sector in St Lucia. 5. Based on the situation at supreme engineering services the holistic approach will have to be based on one of mixed strategy. As part of aggregate planning, the human capacity of the service department must be reviewed to ensure efficiency. There must be an optimal resource quantity which will allow for adequate serving of customer demand changes whiles no non cost effective issues arise. To achieve this, the following must be done: 1. Processes BDG and I in table 1 must be relieved from computer repair technicians and be allowed to be done by a trained lower skilled handy person. This will allow for a savings of 23 minutes of non productive time from the computer technician per computer. The available time for direct equipment repair has been improved by 15%. 2. This same this savings translates into an improvement in the actual output and efficiency of the department. 3. In addition to medium aggregate human capacity planning the long term strategy will include: a. To add 1 new technician immediately and add two more over five years with one every 2.5 years. b. Develop an overtime system. Overtime will only be considered if a certain productivity level is achieved in the day for which an incentive would have been given already.

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Master Schedule and job review

The master schedule and job sequence and the actual modus operandi of the technicians were evaluated by doing a visual survey and mapping how they utilized their times. The most interesting observation was that the technicians usually sat and rested away whiles computer software was loaded. During this average time of 35 minutes a technician can diagnose an incoming pc. This will help parallel their efforts for 35 minutes and translate to a 17.5 minute savings of time on the repair and diagnostic process which is 60 plus 35 minutes which is 95mins. Savings in time will be 18.42% time savings.

To achieve this staff will have to be motivated in some way and do it at their will. Some compounded motivation technique will have to be developed with the HR department to achieve this. The technicians may have to be offered special pay incentives for achieving increased outputs above 8hrs a day. Also the handyman must be trained in the JIT system to ensure that two consecutive hardware repairs must be delivered to the same technician. It must be either two software problems or one software problem and a hardware problem assigned together. It will be impossible for a technician diagnose and repair two hardware issues as its just not practical. To achieve this incoming and outgoing equipment will have to be relocated to the Customer area and be brought into the service room on the workbench (JIT) just in time. This equipment must leave the workbench JIT just in time so the workbench always remains clear immediately after service or repair is complete.

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Recommended servi

Tech 1

19

Summary of recommended Changes and their impact on operations

Chan ge # 1

Change category Physical Layout

Change done

Impact on operations

2 3

Physical Layout Process/ Human resource Process/ Human resource Process/Human Resource/ Output quality System/ Process/ Human resource

4 5

Incoming storeroom remodeled to accommodate 6 more technician Workbenches Equipment Stored in customer delivery area. Equipment handled inward and outward to service room by handyman. Calls to customers done by handyman in service room Handyman Wipe and clean equipment to perfect. Handyman Delivers Equipment Just in time to open workbench

HR

Increase Technicians to 6 immediately and add more on demand. Employ and train handyman. Introducing more scientific management. Train and transfer three techs on demand from other SBUs within organization. Train technicians to handle to machines at a time, offer special incentives to do so and train handy man to filter and categorize machines delivered to workbenches especially when demand gets tough. 20

HR

Increase in physical capacity of workbench to increase output capacity by 200% Increased physical space to create more workbenches. Reduced losses in technician non productive time by 10 minutes Saves technician 5 minutes per machine. Improved output quality. Reduced loss time by technician by 8 mins. Allowed space of incoming storeroom to be freed up and also saves tech from walking lost time. Increased turnover rate. Increased flexibility to demand spikes. Strategically positioned for high growth rate. Maximize use of skilled technician and work flow. Increased HR capacity and flexibility to handle demand spikes. Further improves efficiency in service operations and turnover rate.

HR/ Work method

10

HR/ Work method

11

Communication and intelligence

Improve on internal communication, intelligent gathering of current and future demand, improve on customer communication and accuracy of disseminated information

Improved quality, reliability, customer focus and a happier customer.

Change Execution
In redesigning the process there will naturally be resistance to change. The process must be planned in a project format with a budget and time frame to be completed. The strategy and objectives can be developed by the management team and it is recommended that a project consultant and a change consultant be hired under contractual terms. Management will ensure that consultants execute to plan and that company objectives are met in alignment with its mission.

BIBLIOGRAPHY/WORKS CITED

Dilworth J.B., 1989, Production and Operations Management Manufacturing and Nonmanufacturing , Fourth Edition, New York, Random House, Inc.

HEIZER.J and RENDER. B., 2006, Principles of Operations Management, Sixth Edition, New Jersey, Pearson, Prentice Hall. CHOPDE.R. Available from http://www.scribd.com/doc/29800368/O-M-Facility-Layout

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Appendices

Appendix A

25 20
22