7s Capacity & Constraint Management

To Sell or Not To Sell? That is the Question.

Posted on by spr1323kobrien

            During these past few years, Chicago Public Schools (CPS) has seen a significant decline in students attending their schools.  This has lead to drastic action to “close 54 schools, which will leave 61 empty”. Closing the underperforming schools and filling other schools help cut costs and make it more efficient for the schools if they are full.  Yet, the problem is what to do with the schools that are closed and empty.          

             In a business, or operations management, the manager or CEO’s job is to find ways to efficiently use products or make the most profit, but most importantly, efficiently run the business.  This means not letting money go to waste.  CPS is trying to do that by not running a school that has low attendance.  It would be more money wasted to heat that school and pay taxes if no one is using it.  Yet, what CPS is trying to do is also sell the lot that these former schools are on in order to make money to pay for their other schools.  This is a great idea because these schools, instead of being empty, can be used as a safe haven for kids who need a place to go, or like a senior center.  This actually happened in Milwaukee.  A former school called Jackie Robinson Middle School was sold in September of last year and turned into a senior center called the Sherman Park Commons Senior Living Center.  This is a place where seniors 55 or older that have a low income can have a place to live. Seniors who can’t afford housing have found a place to live and the city of Milwaukee was able to convert an old school into a beautiful place for others.  Yet, there is a catch.

            First of all, before this former middle school was sold to a developer, it was vacant for five years. Also, the groups that buy the school are mainly “[c]harter schools, other government agencies and nonprofits” who can afford to pay the money to first buy the property and then renovate it.  Yet, most importantly, there is a process that the qualified buyers must go through before they can buy the property.  The buyers go through meetings to describe about the renovations of the former school and what it will become, but also a selling price must also be negotiated as well.

            It is good that CPS wants to fix up these schools to cancel their debts and create efficiency, but who is getting hurt is the kids.  They are losing their relationships with their friends and teachers because they are forced to go to new schools because their old schools are underperforming.  Also, they are also scared to ask questions because they are not used to this new school and their new teachers which could hurt their grades in the future.   

 

Should Chicago Public Schools close and sell their schools so that that building could be used for other purposes or should the schools stay open?

Source:
Nix, Naomi. “Schools Often a Hard Sell.” Chicago Tribune 21 Apr. 2013, Final ed., sec. 2: 1+. Print.

Follow LeanPath: Way to reduce food waste

Posted on by spr1333rmortha

Among 150 hotels, hospitals and universities, the University of Massachusetts Amherst is utilizing an innovative method to reduce food waste conjured by a company called LeanPath.

According to LeanPath, the issue of food waste is getting to be tremendously harmful for energy and water resources. Being the biggest source of waste in the United States, food waste accounts for $8 billion to $20 billion worth of waste annually. This is because about 4% to 10% of food bought is wasted rather than consumed.

What exactly is this waste? What LeanPath tracks is not exactly what we think of when we think of the term “food waste”. It is not the food our moms tell us to “finish because kids in Africa are starving”. The food waste that LeanPath targets is focused to tackle the root of the problem. It is the food that is wasted even before it reaches the plate. This can be anything from meat to vegetable trimmings. Imagine you are making mashed potatoes. How much of the potato are you really peeling? How much potato skin are you discarding? Leanpath can measure and put a dollar amount to all of these questions.

How does LeanPath help and what does it do exactly? Quite simply, LeanPath provides the means for establishments to track the food they are wasting. Employees can do this by weighing their waste on the scales provided by LeanPath.  The employees enter in the type of food, size of container, type of meal and the reason it is being discarded in to the LeanPath machines. The machine then calculates the waste into a dollar amount using their special software. All of this would cost the establishment about 5,000 dollars. Though the software doesn’t provide the employees with solutions to reduce food waste, it provides them with useful charts and graphs that help the employees make these decisions. The employees and their managers then meet up once a month and brainstorm best practices to reduce the waste they are calculating on the LeanPath scales.
How effective has this been? Specifically, the University of Massachusetts Amherst has saved $300,000 dollars after it has started using LeanPath’s methods. I think that this is a great start to saving a lot of waste in the food industry. I do think LeanPath would be more effective if they gave practical solutions to reuse food that is intended to waste rather than giving facts and charts. With LeanPath’s program now, it looks like only the institutions that are most dedicated to sustainability will benefit from LeanPath’s products. This is why more commercial institutions like restaurants and food courts are not using LeanPath. Anyone can weigh the food waste but there needs to be an active desire to come up with solutions to reduce food waste in order to make this program more effective.

Can LeanPath eventually reach more commercial industries? Do you think it needs to alter its program to do so? If so, how?

Links: http://www.businessweek.com/articles/2013-04-11/dont-throw-that-out-leanpath-harnesses-data-to-fight-food-waste

Groupon To Replace Jobs!?

Posted on by f1233amarjanovic

Since it’s introduction in Chicago exactly four years ago, Groupon has spread across the U.S. to Boston, New York City, and Toronto as well. Although it benefits consumers by saving them money daily on local products and services, many have debated the implications it has for local businesses. Whether it actually increases their returning customer base is just one of the issues many businesses have to face when considering offering a Groupon.

Anthony Raso, though, has found a way for Groupon to better organize and increase his customer base. The owner of a car maintenance garage in Toronto, Raso decided to advertise a rustproofing deal on Groupon to increase his local customer base. He soon found himself with too many people calling in for his services, but not enough employees to actually organize and book all of the potential customers. Not being able to increase his customer base as much as he could have drove Raso to eventually take advantage of Groupon Scheduler, a service which allows customers to book their own appointments online. He could also use this service to book clients who called in. The appointments are automatically stored in an online calendar, allowing Raso to focus on providing his excellent services instead of worrying about booking customers.

Raso considered his previous appointment booking technique too time consuming, and called it the bottleneck of his business. Running into problems like double booking and forgetting appointments was slowing down his service time and caused him to not service as many customers as he could. With the help of Groupon Scheduler, he can now maximize his profits by leaving the scheduling of appointments to Groupon, allowing him to focus on what he does best.

Similar to what the paper puppet activity showed us, bottlenecks are constraints that limit the output of production. Throughput gets caught in the bottleneck and takes longer to complete than in any other stage of the product cycle, thereby reducing maximum output. A bottleneck can severely harm a business by preventing it from performing at its fullest potential. Raso was able his solve his bottleneck process by introducing a digital method of booking appointments for his business so that it would no longer take away from him being able to work on his customer’s cars. Eliminating this bottleneck will allow Raso to increase his customer base and his overall profits.

What do you think of this scheduling service that Groupon now offers to businesses? Do you think it is essentially reducing the need for employees whose job it may be to book appointments? Can you foresee any problems that businesses utilizing this service may run into?

http://www.itbusiness.ca/it/client/en/home/News.asp?id=69214

Ford’s European Struggles

Posted on by f1231aadamiec

A new article in the Wall Street Journal explains that Ford Motor Company has come up with a drastic plan to reduce operating losses in Europe due to its large decline in European sales.  The company plans to close three assembly and parts factories, cut 13% of their workforce, and reduce its new-car production capacity by 18%.  The cause for this big change is because of the continuous poor sales in Europe and forecasts that say sales are not expected to get any better in the near future.  These projected losses are one and a half billion dollars for this year and next.  The new plan will hopefully decrease operating costs for Ford by $500 million in the next two years.

The plan would decrease their production of vehicles produced in its Europe plants by 206,000, and also decrease the workforce by 6200 people.  According to the article, “Ford’s plans are the most drastic by European auto makers as they cope with the industry’s chronic overcapacity.”  So this plan is Ford’s way of matching capacity to demand, and two of the ways that a company can match its capacity to demand after overproducing are by making staff changes, in this case laying off workers, and by closing facilities, which Ford will do for three of its plants.

This restructuring plan is similar to a plan implored by CEO Alan Mulally in the U.S. in which Ford cut 30% of its workforce and reduced its plant capacity by 25% and has showed some success.  Ford hopes to duplicate similar success in Europe with this strategy.  The profits from the U.S. and North American sales have, so far, been able to offset the losses in Europe.

One of the plants in Genk, Belgium that Ford plans on closing was already operating at the lowest level of any plant in Europe.  The design capacity of the plan allowed it to create way more vehicles than they were, so the design and effective capacity were way higher than the actual production of the plant giving it poor efficiency.  The plants in Europe were not producing at the optimum operating level.  The tricky part for Ford is knowing the optimum capacity because with sales not expecting to increase anytime soon, it is hard to determine the level of output they need.

One question I had was even though a similar strategy worked for Ford in the U.S. is it possible to have the same success in Europe?  I think it would be difficult to repeat the success because the U.S. is just one country while in Europe it would be across multiple countries with different regulations and unions.  Will this ultimately decrease the losses in Europe?

http://online.wsj.com/article/SB10001424052970203897404578078360301276102.html?mod=ITP_marketplace_1

Increased Pressure on Foxconn Workers Creates Defects in Apple Inc. Products

Posted on by Peter McGraw-Schuchman

 

After increased pressure from management and quality control inspectors, workers at a Foxconn factory in China have reportedly gone on strike. With exceedingly high production demands due to Apple’s new product, the iPhone 5, combined with increased quality standards for finished products, the manufacturing workers are under enormous pressure.

Quality control inspectors have placed more rigid quality control standards on their workers due to pressure from Apple to have phones that leave the factory completely defect tree. This has created a great deal of stress, and with a range of error as small as  .02 millimeters it is easy to see why some workers are having a tough time. However, a few have responded to the stress by threatening or acting out with physical violence towards the inspectors. Despite what seems like a major problem, factory management ignored it for as long as they could, up until production had to be halted. Many of the quality control inspectors and some other workers, an estimated total of 3,000-4,000, have gone on strike largely due to these incidents.

With reports of multiple incidents of physical violence between front-line workers and quality control inspectors and rumors of a large scale strike, Apple appears to still be having trouble meeting demand for its latest product. On top of the working conditions manufacturers say are leading to frequent scratching and defects, it has been reported that many workers and not being allowed to leave work for holiday. Foxconn, a Taiwanese company and one of the world’s largest producers of electronics has denied most of these reports, saying that production was not halted due to incident and that no such strike has occurred. Additionally, they stated that the workers working over their holiday were paid triple their normal wage as mandated by the government.

Foxconn, a company who recently came under fire for poor working conditions and a 2,000 person brawl this September, appears to be having more problems relating to worker treatment and morale. Multiple production interruptions and even the mysterious death of a 22 year old in their employee housing have plagued the company since they have been struggling to meet the demands of one of the most highly anticipated products of the year.

Additionally, the workers have virtually no way of helping themselves to improve their conditions and control the immensity of demand placed upon them since they are forbidden from unionizing by law. Even without a union, a strike of such a large scale should get the attention of the parent company. Corporate statements denying the existence of a strike aside, 3,000 unhappy workers is a sure sign of both systemic flaws, and problems in the future.

 

 

Sources:

http://www.forbes.com/sites/adriankingsleyhughes/2012/10/06/foxconn-quality-control-workers-strike-over-iphone-5-workload-production-lines-paralyzed/

http://www.marketwatch.com/story/foxconn-confirms-male-employee-found-dead-2012-09-13

http://abcnews.go.com/Business/wireStory/foxconn-denies-report-strike-iphone-plant-17411697#.UHDwvBhX5FE

WE ARE CURRENTLY DELAYED BECAUSE CREWS ARE WORKING ON THE TRACKS.

Posted on by markm301s12

Living in the City of Chicago, I am sure that almost all of us have been on or at least seen some sort of CTA transportation in our daily lives. I know as a fact that I use both the Train and the Bus lines as a way to travel around the city that is a much more inexpensive option that taking a taxi cab or driving myself then parking and having to pay a premium for that parking spot. The CTA is the second largest public transit authority in the United States, and on an average day there systems of trains and buses provide transportation to over 1.6  million people on a daily basis.

Obviously with such as large amount of people that can be affected there is plenty of room for improvement within the system. I know that on more than one occasion I have been on a train that has broken down or been stopped because they train in front of them has broken down. This quickly will lead to delays in a City where people hate to be late and don’t have all that much spare time on their hands. So recently the CTA has selected the Trapeze Group to give there Operational Systems an overhaul. This groups main focus is going to look into improving the upkeep of the hardware used on a daily basis. This ultimately may lead to more improvement on the tracks as well as speedy service. How many times have you seen someone cram themselves onto an already crowded train just because they know the next train won’t be to the station in time to get them to work.

 

So my question is there anything other than maintenance that could be improved by the CTA that would make your commute more efficient? Remember 1.6 Million opinions could make some big changes.

 

http://www.marketwatch.com/story/chicago-transit-authority-cta-selects-trapeze-group-a-subsidiary-of-constellation-softwares-volaris-group-for-comprehensive-operations-management-system-2012-06-28

Home Depot Margins Higher Now Than Before Housing Crash – Thanks Logistics!

Posted on by kathrynb301s12
After over 30 years in business Home Depot admitted their supply chain processes were not a priority for many years. The main priority was expanding the business. When the housing market crash began in 2006 they knew they had to shift their focus. As Home Depot CEO Frank Blake explains, “A downturn is a terrible thing to waist.”

Most Home Depot stores are large warehouse stores with ample extra room for inventory and storage, but they began opening smaller stores in smaller markets that could not hold the same amount of inventory. This lead to stock-outs and unhappy customers. They realized it was time they completely changed their supply chain processes starting with centralizing operations by rebuilding their distribution process. Before 2006 only 30% of the orders were store-centric, while managers made 70% of the orders. The transportation model had its own similar shares of changes to be made. They started with the construction of 24 new rapid deployment centers located throughout the country, each would serve about 100 stores. These facilities were to be flow-through facilities for quick cross-docking and little storage. The RDCs allowed their products to be shipped with 24 hours of arrival now. Currently, one third of the RDCs are built and being used. Home Depot is already seeing the benefits.

It seems Home Depot may have chosen the perfect time for their restructuring because now that their new processes are beginning to run the housing improvement and construction markets are growing. Home depot’s margins increased 35%, net income for the fourth quarter increased 32%, and sales rose 6%. Ms. Tome, the chief financial officer of Home Depot, claims the restructuring of their supply chain processes is the reason for these large increases.

Home Depot is not only the leader in the improvement industry, but is the second largest retailer in the country, second to Wal-Mart. Can we expect to see greater growth as the last two thirds of their RDCs are implemented? How can other retailers learn from Home Depot’s changes?

http://topics.nytimes.com/top/news/business/companies/home_depot_inc/index.html

http://www.dcvelocity.com/articles/20090801verticalfocus/

Cinderella’s shoe, does it fit everyone?

Posted on by nadaj502

Husband and Wife both are Six Sigma practitioners. Obviously, their daily lives conversations happen in Six Sigma parlance. The wife happens to be a very good cook, one of the reasons why the husband married her. Suddenly, three days at a stretch, the food starts to have extra salt. Husband objects, to which wife responds

“Common Cause of Variation”. One day, the wife adds a lot of salt to the food. Husband takes ill and is admitted to the hospital. Wife comes to see him and quips, “Sorry, special cause of variation.” Husband says, “It was Structural.”

Three days later, Husband hands out a divorce notice to wife and quips, “Process Unstable. Not meeting CTQ*.”
*CTQs are the internal critical quality parameters that relate to the wants and needs of the customer.

Thought of sharing this joke as I believe it will help us all in remembering few vocabularies used during our last session.

The last few session reminded me of one of the main product development projects that I’ve worked on, where we launched one product in 7 different markets, however we had to customize it a bit for each market in order to meet customer expectations in each of the 7 markets.
The product was basically a credit card in local currency, you may wonder what is so special about it? Well it was an American Express local currency Credit Card.  And as you may know, American Express is considered the most prestigious plastic card in the world, and it targets individuals with high expenditure patterns. Refer to this blog for American  American
Express’s Competitive Position.

As this may be very true for its main product “the Charge Card”, it was not applicable for their Credit Card target segment, which made the product development & marketing teams wonder of what would attract customers to American Express Credit Card rather than any other credit cards available in their market? Well the development team followed the differentiation strategy while designing the product. It was the feel of the prestigious card that attracted customers to it, in addition to the appropriately designed product that met customer’s expectation in each of the targeted markets. But how did the development team identify the customer needs? They utilized their existing data and referred to the Charge Card customer base, they asked them if they would like to hold supplementary Credit Cards for their spouses and children with a credit limit, and bang that was highly demanded. As loyal cardholders they didn’t want to hold many different brands of cards and also didn’t want to  provide the open limit charge card as supplementary cards to their family. Of course further focus groups were obtained then to identify the requirements of each market, and to develop a product that is different than the current ones in the market. Tremendous amount of work was held but it was worth it, the product was launched successfully and it was well perceived in all 7 different markets.

However, do you think what AMEX did for identifying customer’s needs in each market was enough? If not, what alternative ways would you suggest?

Tails: The Bahraini Pet Food Brand

Posted on by nadat502

“Tails” is the regions first all natural pet food brand that has been officially launched in February 2012.  Their aim was to provide healthy pet food that is free of preservatives, added colors and flavors as well as the use of 100 percent natural human grade ingredients. They club their services with the Highest Quality, the Best Customer Experience and Value for Money.

Being the first of its kind in the region, and with the general lack of data availability, i immediately thought ” How did they know that this was going to be successful?”

Leap of Faith 

i was fortunate to meet with the owners, in class we talked about all the different forecasting techniques and determined when it was best to use each technique. But what do you do if you had no history/data to use?

Well in this particular case there was no entity in Bahrain that actually registers or even keeps track of Dogs in Bahrain. The owners did alot of research and found that the only entity closest to giving them information was the airport customs office, and they only recorded how many dogs came into Bahrain and how many dogs went out. Moreover they started to get samples and estimates from vets. And the final number they came up with somehow met their expectations and they were comfortable with getting even 10% of it.

Capacity Issue

Within a four month span, sales at Tails has doubled . This led to a bottle neck in their production ( remember the paper puppet activity?) , the machines they had were not able to package and seal fast enough to meet the demand of their customers.  They tried to overcome it by cooking more on and storing it  but they did not have enough storage capacity to meet this unanticipated demand. to overcome this Tails had to quickly invest in new machines that will be able to seal and package faster in order to meet the demand of their customers, gives more flexibility on variety and size, and to start distribution to supermarkets.

Tails are slowly keeping up with their demand however it has been stressful for them because they were not able to accurately forecast.

So i leave you with a thought : how do you forecast with no data? and which forecasting method should Tails use today in order to help them predict their future sales?

 

For more information please visit www.tails.co to get your free dog food sample today!