Dyson's design is succeeded by systematically challenging the assumptions behind current product orthodoxy. Dyson’s design brought together concepts that were not totally original but integrated them and used them in a new context. The ability to do that successfully (and the perseverance) is often far more valuable than pure creative originality. The process of design is essentially about systematically bringing together ideas and subjecting them to a critical process.
Customers design their own services
What do you think are the advantages and disadvantages of involving customers this closely in the design process?
The advantages are that customer feedback is real and direct. In many ways, customers know better than anyone what they need and how effective current services are. The disadvantages involve the time taken, the fact that the customers chosen may not be typical and the general principle that customers have their own agenda, which is different from the company’s. The company needs to keep its customers happy while being able to make a profit. Customers, on the other hand, want as much as they can get in return for their effort and money. Therefore, their suggestions may not be feasible as far as the company is concerned.
How could providers of education products adopt this idea?
Well, one is faced with the same dilemma. In principle, the customers for education products, such as university degrees, want a good and appropriate education for the time and money they invest in being education. The university or education provider needs to satisfy its customers while still maintaining appropriate standards of assessment and while making a profit (or in a not-profit institution, keeping within its budget). While involving users has significant advantages, there is a limit to how far their wishes can be achieved fairly and economically.
Customizing for kids
How does the concept of modularization apply to this example?
Each shot from the camera is, in effect, a module or a part of the total programme. By standardizing these modules to emphasize standard shots, it was possible to reuse some modules, even though they were shot in the ‘wrong’ language.
What do you think are the similarities between what this company did and how motor vehicle manufacturers design their products?
Essentially, modularization is exactly the same for both industries. In automobile manufacturing it involves standardizing parts so that they can be used in several different products. In programme making it involves standardizing shots so that they can be used (with some modification) in different products (that is, the same programme, but in a different language).
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C H A P T E R 6
Supply network design Teaching guide
Introduction
One of the more important points made in Chapter 1 of the text is the idea that operations and process management can be analyzed at three levels, the level of the supply network, the level of operation itself and the level of individual processes. This chapter covers the most strategic level, and focuses on three decisions (supply networks, location and long-term capacity strategy), which are dealt with under the general heading of ‘supply network design’. The logic of this is important to the way it is taught. We have found it useful to describe the supply network as the highest, or most macro level of the process design task. Configuring a supply network is, in many ways, similar to deciding which individual units of a process go where on the shop floor. The decisions are, how should material, information or customers flow between the units, where should each unit be and how big should each unit be. Configuring a whole supply network is the same but on a very much larger scale. Of course, the complicating factor is that when we are designing a single operations process we generally have control of all the elements in the process, whereas we only have partial influence over much of the supply network. Nevertheless, conceptually, the two tasks, one macro the other micro, are very similar.
Because this chapter deals with the most strategic of these three levels, many of the issues are also strategic. Indeed, if time is short on a course, and if it is not wished to teach the more strategic issues related to operations management, this chapter may be one candidate for omission.
Key teaching objectives
• To establish the idea of supply networks.
• To describe vertical integration as the extent to which a company wishes to own parts of its supply network.
• To identify the main factors on the location decision.
• To stress the importance of the timing and extent of capacity change on the performance of the operations function.
Exercises/discussion points
Again, there are several cases in the companion volume to this book (Johnston, R. et al, 3rd edition, ISBN 0273 65531-0), which can be used to support this lesson. The Norrkửping Plant (A) and (B) cases are ideal.
Teaching tip – We have found that one of the most important points to come out of this chapter is an understanding of the whole concept of a supply network. Because of that we tend to spend more time on this issue than the others. One method of achieving this is to lead a discussion on the supply network for a familiar operation such as a restaurant. Suppliers can be traced back to food items, consumables such as napkins and so on. Each of these can then be traced back to the suppliers’ suppliers, back to the farm or paper factory and so on. Similarly, moving downstream in the supply network, one can work to the consumer directly, or assuming that the restaurant supplies events such as dances and weddings, to the wedding organizer and then to the ultimate consumer.
Teaching tip – Try tracing the development of a supply network over time. An ideal one is that for the recorded music industry. Back in the 1950s record labels owned their own recording studios, orchestras, engineers, arrangers, artists and so on. They also often made their own albums and distributed them to their own retail outlets. Contrast this with what a supply network might look like with internet-based distribution of MP3 files. Alternatively …
Exercise – The chapter contains an example of the BBC outsourcing its technology division.
Divide the class into groups and ask half of them to prepare an argument in favour of outsourcing this department, and the other half to prepare a case arguing against outsourcing this department.
Exercise – In Chapter 1, one of the opening examples was Dell. Ask the students to revisit this and draw Dell’s supply network and contrast it with the supply networks of other computer companies. Ask them to list the advantages and disadvantages of Dell’s model.
Exercise – Ask students to draw the supply chain for a conventional music store selling CDs and also for itunes. Ask them to identify other industries that might adopt a similar model to itunes (The movie and DVD industries are obvious examples).
Exercise – Following on from the former exercise, ask the students to identify as many industries as they can that will be particularly affected by further developments in internet-based channels of distribution. Ask them to draw supply chains that illustrate exactly how they will be affected.
Teaching tip – One way to promote a discussion on location issues is to choose a decision currently in the press. Often this can be a government-originated project such as a sports stadium or museum. The class can then be led through the criteria which may be used to decide on the location.
Exercise – A related but different exercise can be constructed by asking the class to consider how they would make their local area more attractive to incoming business. 'If you were the local government officer in charge of attracting business to this area, what could you do to make the area more attractive?'
Teaching tip – Try contrasting the different approaches to location taken by different types of businesses. For example, compare the location decision facing a company wishing to build a
Nigel Slack, Stuart Chambers & Robert Johnston, Operations Management, fifth edition, Instructor’s Manual
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new factory in a region with a fast-food restaurant looking for a location in a town where it has no existing outlets. The idea here is to contrast two very different types of location decision.
• The new factory location would follow the ideas as set out in the chapter. These tend to assume that location is being chosen primarily on the grounds of minimizing the costs associated with the site. The amount of products sold by the company is unlikely to be very much affected by its location, but its costs could be very much affected by location factors. Furthermore, there are likely to be a very large number of sites that the company could choose from.
• The fast-food restaurant, on the other hand, is a different sort of location decision. Both revenue and costs will be affected by location. Locating the restaurant away from other restaurants and/or away from passing trade is likely to mean a reduction in revenue.
Some locations are better than others at attracting customers. Also, the costs of the location (such as rent and rates) are affected by location. Finally, there are rarely a large number of options to choose the location from. Usually location is more opportunistic.
The fast-food restaurant might wait until a site becomes available and then take the decision as to whether to have that site or to wait in case a better one becomes available.
Case study teaching notes
Delta Synthetic Fibres
This case exercise describes a synthetic fibre company based in the UK, which has three plants.
Currently, it produces one product Britlene (known for short as 'E'). Sales of this product are likely to decline in the future, partly because competitors will move into the markets and partly because the company plans to introduce an improved product known as Britlon (known for short as 'O'). The company faces decisions on how many plants to convert from E to O and how many new O plants to build. The location of the new plants has also to be decided.
This case is relatively sophisticated in that it requires a reasonable understanding of strategic issues. It is unlikely to be valuable to students who do not have an appreciation of the uncertainties of long-term forecasting, the difficulties of making major capital investments which require large physical projects to be managed or the financial consequences of capital investment in terms of profitability and cash flow. Because of this it is recommended that the case be used either on a specialist operations strategy course or towards the end of a general operations management course. If the latter, it would probably be useful to add other issues to the case during the session.
With computer-literate students it is also an option to ask them to use a spreadsheet to model the financial and capacity consequences of their decisions. If this is done they will have to make some reasonable assumptions about costs and capital expenditure charges. It does not really matter what these assumptions are; the important issue is to understand the dynamics of the financial indicators and how they depend on capacity scheduling.
Some notes on the Delta Synthetic Fibres case exercise