Observations of the Ten Key Operations Management areas within XXXXXXXX
(An automotive service business)
Goods and service design
The service design of the business “fits” the definition for a service business. Generally, the
service performed on a vehicle is not tangible. It is not an absolute “fit” however, as other
aspects of a service or repair are often tangible, such as the replacement of a component
which is broken or worn (eg new tyres).
Quality Management
The quality management of the business is a good ‘fit’. The quality of the service, diagnosis
or repair has many subjective standards. These standards vary greatly between customers
but to ensure that satisfaction is achieved for all customers, a very high quality of work is
required on all jobs. Quality is user based and it is important that every customer is happy
with the quality of workmanship. This helps to ensure repeat business and is essential to
building the workshops reputation. Quality control is carried out within the workshop by the
mechanics and is also checked by Cameron Brodie as a final determinant in an uncertain
situation.
Process and capacity design
Process and capacity design is not a very good “fit”. The process strategy at XXXXXXXX Ltd
is Process Focused as the work has a high degree of variety and is only low volume.
Because it is a service business, interaction and customisation is needed for each customer.
They may choose to be directly involved, but this varies on a daily basis. Since the degree of
customisation and the degree of labour are both high, it is vital that personnel selection and
training are important issues within the business. Capacity must match demand because
customers cannot wait for extended periods for service and will use an alternative provider if
we are unavailable.
Location selection
The location of XXXXXXXX Ltd is on Boston Rd, Grafton and this aspect of the business is a
very strong “fit”. The location was selected as it is centrally located to be close to target
customers (to increase revenue), between the two main competitors (Continental Car
Services and Giltrap Prestige/Giltrap Audi) and is centrally located in terms of suppliers of
parts.
Layout design
The layout design of XXXXXXXX Ltd is very process orientated and is a reasonable “fit”. The
front entrance to the workshop is simply laid out with a small waiting area and two desks to
act as a reception area. This office and waiting area is split with a glass divide so that
customers can see technicians working on vehicles while they wait. Each technician in the
workshop has their own workspace which is relatively self contained with most of the tools
and equipment required to carry out any particular job to try and minimise trips outside the
immediate work area.
Human resources and job design Human resources and job design has a high degree of
“fit”. Cameron (the Manager) manages the reception area and organises and distributes the
job cards to Technicians. This manages labour most effectively as it can match Technicians
skill sets to particular jobs and in turn increases the productivity of the workshop. While
labour standards vary greatly across the industry, at XXXXXXXX Ltd the labour standards
required must be consistently at a very high standard to ensure the reputation of the
business is maintained.
Supply-chain management
Supply-chain management is important but is not crucial to the business. This means that it
is not a particularly strong “fit”. XXXXXXXX Ltd uses a “Few suppliers strategy”; forming a
long term relationship with a small number of dedicated suppliers which provide dependable
service and offer greater discounts over time. OE quality parts are preferred and these are
generally obtained from authorised dealerships, however, the business is prepared to source
supplies from a wider range of suppliers when required due to cost or availability.
Inventory
Inventory is a good “fit”, since it is a service business and the capacity to work on vehicles
cannot be stored. This means that there needs to be accurate planning and scheduling of
future work to prevent periods of over or under capacity of work potential. An inventory of
most commonly used parts and supplies is kept as inventory for maintainence, repairs and
operating on a daily basis (MRO inventory). Most of this inventory is ordered from Germany
through an agent in New Zealand and takes ten weeks to arrive. Because of this, a lot of
forward planning and forecasting of what parts are being used is required.
Scheduling
Scheduling is a strong “fit” as it is essential if the business is to meet immediate customer
demand. To do this, approximately six hours of work is booked for each technician and this
leaves availability to work on customers cars that are “drop-ins” or break downs.
Maintenance
Maintenance is a reasonable “fit”. Preventative maintenance such as the servicing of hoists
every six months ensures reliability and prevents breakdowns which hinders efficiency. Due
to the technical nature of diagnostics and repairs on modern European cars the work is
almost always at the workshop rather than at customer sites because it is impractical and
not cost effective.
The Three most important areas of Operations Management for XXXXXXXX Ltd’s
supply chain position.
The three most important areas of Operations Management for XXXXXXXX Ltd’s supply
chain position are Location, Scheduling and Quality Management.
The location of the business ensures is vital in the supply chain position as it is very
economic and efficient for the size of the business and it adds value to the business. The
business’ location is on a main road and on a corner site. This gives a lot of visibility to
potential customers who are local to the area. The location is also beneficial as it central to
high income areas, which have greater numbers of Volkswagens and Audis. It is also evenly
spaced between the Auckland’s two main dealerships for Volkswagen and Audi, and so this
would help to attract potential customers into visiting the workshop to get a quote for repairs
(after being quoted at a dealership). The building is leased and is quite cheap (less than
$60,000 pa) for a building with similar features in the area (eg high stud roof). It would be
hard to improve on the location of the business without a large investment of capital or upscaling the business in a large way.
Scheduling is a crucial area of Operations Management within the business. It ensures that
both the personnel and the facilities are used as effectively and efficiently as possible to
maximise the throughput of the business. This is done at XXXXXXXX Ltd through job
bookings and allocation of jobs to gain a high flow of work every day. Bookings are made to
a day planning diary to ensure to right number of hours are sold each day. Scheduling could
be improved further by reviewing what additional work had been noted on previous invoices
to warn the customer of an upcoming job or service item when they book the car in, which
would hopefully result in an up-sale (eg a cam belt). Often, jobs can be forecasted based on
the age and type of the vehicle so instead of allocating an hour for diagnosis, less than
twenty minutes will generally suffice (eg ABS problems).
The quality of the work and of the parts used is very important to the business as customer
satisfaction is a main factor of repeat business and the reputation of the business. Using
high quality parts and carrying a high level of work ensures that the service cannot be faulted
and that repeat repairs will not be necessary. This leaves the customer pleased with the
repair and often results in verbal recommendations to other owners of Volkswagens, Audis
and Skodas. XXXXXXXX Ltd is very successful in terms of quality and this is reflected in the
low number of repeat repairs and the high quantity of repeat customers. The quality of parts
used is regularly being checked to see how components that had previously been fitted are
lasting and if there are issues these are reported to the supplier and/or their use is
discontinued (where possible). Quality of labor is generally not an issue and training is
provided where need be (especially to new technicians).
How XXXXXXXX Ltd’s Ten Operations Management areas are seen in its strategy
Business strategy as described by Cameron Brodie - “To fix cars”
Product design – providing a necessary service to match customers needs and
requirements
Quality management – to ensure a high quality product or service through careful
management of the process
Process design – to establish, design and develop the production process and equipment
to give low cost production and high quality outputs
Location – to locate the business in economic and efficient facilities that will add value to
the business
Layout design - to organize a layout and work methods that will enhance effectiveness,
efficiency and productivity
Human resources – to provide a exceptional working environment for employees in
exchange for their exceptional contribution to the business
Supply-chain management – to collaborate with suppliers to ensure a constant, effective
and efficient supply of necessary parts and supplies
Inventory – to have low investment in inventory while retaining high levels of customer
service and facility utilisation
Scheduling – to maximize the throughput of a product or service by effective scheduling
Maintenance – to get maximum use of the facilities and equipment through preventative
maintenance and prompt repair of broken facilities and equipment when required
About YYYYYYYYYYY (an insurance business)
a) YYYYYYYYYYYis a service business. When you buy insurance you do not receive anything
tangible at the point of sale. What you receive is a contract (promise) that the insurance
company will indemnify you for certain defined events under that contract.
b) YYYYYYYYYYYis a retailer because they interact directly with their customers. Customers can
buy a policy from the internet, call centre or through the AA branch network. All of these are
direct interaction with AA Insurance. Other insurance companies may be considered
wholesalers as somebody else like a bank or insurance broker sells the policy, and the
insurance company just underwrite the business sold.
c) YYYYYYYYYYYhas a competitive advantage through brand recognition, an efficient sales and
claim processes as well as through experienced staff and recruitment strategy.
YYYYYYYYYYYare the first Insurance company to sell Home, Contents and Motor insurance
on line making up 25% of their motor sales. They are not part of the knock for knock
agreement therefore has a much better recovery result when not at fault. They have a
competitive pricing model when working with their supply chain. They run a specialist
model and focus on internal movement and promotion with staff. They have a standard
assets policy so they do no waste money on flash desks or offices. All of these allow
YYYYYYYYYYYto reduce the cost to do business in turn allowing them to be competitive on
price.
d) YYYYYYYYYYYis a direct personal lines insurer so have a mass market position. Their target is
80% of the people 100% of the time. They have a number of products that allow each
customer to personalise their insurance to their own needs. They do not deal in business
insurance instead concentrating on Motor, Home and Contents insurance to the general
public.
e) YYYYYYYYYYYoperates a number of different sites and roles. The back of office staff (finance,
HR, marketing etc) work a standard 37.5hr week with operating hours between 8.30 – 5.00
Monday to Friday. These roles are not normally customer facing so operate hours that
match the businesses they work with (banks, advertising agencies).
Call centres for sales and claims operate from 8am – 8pm after which calls are outsourced
to the NZAA. These hours match call volumes for most of YYYYYYYYYYYcustomers.
They also have Customer Service Centres dedicated to servicing motor claims customers
and managing the repairs to their vehicles. These operate 7.30am -6.00pm. Monday to
Friday and 8.30-12.30 on Saturdays so customers can come outside standard working hours.
They have approx 550 staff of which about half are customer facing roles.
Goods and Service design
YYYYYYYYYYYhas a team called product design. They work with the underwriters to decide what
should or shouldn’t be covered in the policy. These are called inclusions and exclusions. They also
decide what limits to put against defined events. They then work with the pricing team to decide
how much needs to be charged for each product to ensure there is enough money to pay the claims
that are lodged by the policy holders and make a profit. I think that product design is important to
AA Insurance.
Quality
Customers often overlook the quality of the product when looking at insurance products as
insurance can be viewed as a grudge purchase and decisions are made solely on price. The quality of
the product could be the policy limits and how the policy responds to certain events. Example would
be 1 policy may have a $2000.00 limit on bicycles when another has $2500.00. If the 2 products cost
the same the one with the $2500.00 limit may be considered higher quality.
Another area of quality is the service at claim time. YYYYYYYYYYYhas a dedicated customer manager
to look after your claim. This eliminates the customer having to re-tell the chain of events to multiple
people. They also have the Customer Service Centres where customer just drop their car off and the
insurance company arrange all of the repairs for the customer. There is no other insurance company
in New Zealand that offers that service.
I think the customer service is extremely important to YYYYYYYYYYYand is marketed as a point of
difference.
Process and Capacity
Looking at the claim management, analysis is completed to understand how many claims are
expected to be made every month. Understanding how many claims there will be and knowing what
types of claims they will be allows YYYYYYYYYYYto staff to the right levels for both claim
management staff and assessors.
Normal call centre analysis is used to measure and predict call volumes throughout the day and
week. Staff can be deployed to other activities during quiet periods.
The importance of these really relate to the customer service proposition that YYYYYYYYYYYoffer
their customers.
Location Selection
Sticking with managing motor claims YYYYYYYYYYYhas customer service centres to manage the
repair of customer’s vehicles. These sites need to be strategically located to ensure that they are
convenient for customers to use. The Auckland sites are situated so that over 85% of claimants are
within 15km of a customer service centre.
I think this is important in certain departments.
Layout and Design
The layout of the customer service centres is a key point to their operational efficiency. Every time
you have to move a car that is a cost so they need to keep all movements to minimum. Cars have
specific locations for damaged verse repaired. All cars are marked with flags so that anybody
entering the site knows where in the process each vehicle is. Each car follows a flow path and should
never go backwards in the flow.
As above this is very important in certain operational areas but not all.
Human Resources
YYYYYYYYYYYis a values based organisation so all recruitment is managed on only employing people
that are the right fit for the organisation. They also have a very robust internal rotation and
promotion policy so most people come into the company through the call centre and work there
way through the company. This means that most of the senior managers in the company have
worked in a number of other roles. This gives people a lot of experience around the company and
what other departments do.
I think that AA Insurances human resource strategy is a key success factor for their business.
Supply Chain Management
As insurance is selling the promise the indemnify people for their loss so the supply chain is very
important. YYYYYYYYYYYwork with a lot of suppliers from panelbeaters and builders, to suppliers of
glasses and hearing aids, electronic goods and sporting goods. The relationships with these suppliers
involves contracts around providing reduced costs and superior service.
I think without a solid supply chain management strategy YYYYYYYYYYYwould not be able to deliver
on its promise and still have a 1st or 2nd in the market price strategy.
Inventory
N/A
Scheduling
There are a number of different areas where scheduling is very important to AA Insurance, one of
which is the call centres. These even differ between sales and claims. The claims call centre has
several peaks through the day and week. Monday is the busiest day of the week and the 9-11 is the
busiest time of the day. There is also a busy period from 12-2. In the times that a less busy staff are
scheduled to undertake refresher training, compliance training or regular 1 on 1’s with their team
leaders. Scheduling tools assist the contact centre managers to ensure that they have the right
number of staff available when calls are expected. The call centre run on answering a certain
percentage of calls with 30 seconds to measure whether they have the staffing numbers correct or
not.
Maintenance
N/A
OPERATIONS MANAGEMENT IN ZZZZZZZZZZZ ( A Confectionery manufacturer)
ZZZZZZZZZZZ (NZ) Ltd is a business manufacturing chocolate products based in East Tamaki, Auckland.
It has a competitive advantage in New Zealand as it is the largest manufacturer of commercial chocolate
products, allowing ZZZZZZZZZZZ to be competitive on cost as well as having a fast response time.
Icelandic Holding’s marketing mix strategy is to supply affordable quality bulk chocolate products to
food manufacturers and traders throughout New Zealand and the Pacific. Customers are gained by
the company’s reputation and word of mouth within the industry of being a reliable, responsive
and competitively priced supplier.
As manufacturing is involved, ZZZZZZZZZZZ run the production plant for 16 hours a day with two shifts.
18 staff are required for this operation. When extra volume is needed around Christmas and Easter
periods, the production hours can be extended to 24 hours, 5 days a week. During these peak
periods casual staff are also employed to keep up with demand.
Product – the product design is very important, as there has been a lot of time and money
invested in the development of different recipes that are used to make the chocolate.
Quality – there is a high emphasis on this area as food safety is a big part of ZZZZZZZZZZZ
operation. Also customers expect top quality product and consistency. Food safety
certification and auditing by third parties support this as well as the reputation from
customers.
Process – the process of making the chocolate is also an important area as it affects the product and
quality. This can be linked into maintenance and quality also as when the maintenance is not carried
out; the process and quality are compromised. Evidence on rework and production errors supports
this.
Location – ZZZZZZZZZZZ is located in East Tamaki, Auckland. This is of less importance, as there are
other areas in which ZZZZZZZZZZZ would be able to operate however it is currently located where a
majority of customers are, as well as staff and suppliers.
Layout – with being a manufacturing facility there is an importance of layout, the correct
layout has generated increased efficiencies within in the production area.
Human Resources – this is not as important due to the technology used however the human
resources procedures within ZZZZZZZZZZZ create an environment where people want to
come to work. There is also a very small staff turn over.
Supply Chain – is a very important aspect of the operations management of ZZZZZZZZZZZ because of
the commodities that ZZZZZZZZZZZ trades in. Worldwide ingredients are sourced to create the
chocolate products.
Inventory – again is an important area. Many customers expect quicker deliveries of their
product; therefore the business needs to keep ahead of these demands to meet the
customer expectations.
Scheduling – with around 115 different variations of product there is a large importance on
production scheduling to meet the different needs of customers.
Maintenance – with being a manufacturing plant, there is a lot of machinery and equipment that
complete the process and produce the products required. Without maintenance the efficiencies of
the production facility would decrease drastically.
There area lot of processes and procedures implemented within the manufacturing process focusing
on quality. Food safety and auditing is very important as customers require correct and safe product
to be delivered at all times. This has allowed ZZZZZZZZZZZ to create a quality product at the lower
limits of cost but also the higher limits of quality.
Supply Chain is another OM area that allows ZZZZZZZZZZZ to work with suppliers to create suitable
products, as well as create relationships to ensure ingredients and products are received efficiently.
There is becoming a large emphasis on customers requiring sustainable product lines which makes
ZZZZZZZZZZZ be very cautious of what the purchase, from who and under what conditions.
Scheduling allows ZZZZZZZZZZZ to create a flexible manufacturing process to meet all their
customers needs. This gives the ability to have a quick turn around for customers to receive their
products while keeping the quality to a high level is allowing ZZZZZZZZZZZ to grow and meet bigger
customer needs.
These main OM areas could be improved by investing in more production equipment and facilities.
This would create more efficiency in scheduling as well as allowing larger production runs to occur
which would reduce the risk of quality errors when products are changed over on production lines.
ZZZZZZZZZZZ has a strategy to continue growing the customer base through New Zealand, Australia
and the Pacific by supplying quality chocolate products at competitive prices, while exceeding
customer expectations. This is achieved by having great relationships with key supply chain
operations, as well as running an efficient manufacturing plant, thus creating a proven formula for
customers.
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Product design has given ZZZZZZZZZZZ a unique product through development.
Quality allows relationships to remain strong between customer and suppliers.
Process and capacity design has given ZZZZZZZZZZZ the ability to grow however it is
becoming evident that there is more storage space required.
Location should be an important part of the strategy, as ZZZZZZZZZZZ needs to be based
close to many customers and well as suppliers and staff during its growth.
Layout allows efficiencies to be achieved by reducing costs and increasing staff as well as
customer satisfaction.
Human Resources operation management has created an environment where staff
turnover is minimal and allows for investments in training of staff to be successful.
Supply Chain is a key OM to achieving the companies goals of growing the business
through New Zealand, Australia and the Pacific by ensuring supplies are reliable.
Inventory allows ZZZZZZZZZZZ to maintain customer satisfaction encouraging further
growth.
Scheduling allows production to be flexible to meet customer needs of high quality and
timely deliveries.
Maintenance keeps the facilities and equipment efficient ensuring the quality, process and
scheduling all enable the manufacturing process to excel.