MGMT 410 IAU Critical Analysis of Adidas Company Research Paper

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Fnen1998

Business Finance

mgmt 410

International American University

MGMT

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“Group Research Project”

It’s a group work and the members of the group had done most of the steps of this research. So, the required work here is only one stage and I should explain it in details to understand it deeply.

- You can find the general purpose of the research in the outlines uploaded

  • chapters related to project are: 5, 7 and 8

This research has two main points, and the required work is only stage two (The Analysis):

(The other points mentioned only to understand the project deeply).

1. Description of the selected topic in the company

// Describe the topics as practiced in your selected company. Organize this part in three subsections:

1.1 Location of the Company: Describe what are the locations of the facilities of the company and how they select them.

1.2 Product Design: Explain the types of products produced by the company (goods or services), how these products are linked to the strategic objectives of the company such as cost reduction and differentiation, as well as any environmental or ethical considerations in the products.

1.3 Process Design: Describe how the company produces the products you mentioned above by explaining the stages through which the products produced, the technology used in production, and any sustainability considerations in process design.

// Use charts, diagrams, and pictures in your description.

2. Analysis

//Provide a critical analysis of the practice of the three topics in your company with respect to the theories and guidelines offered in the Operations Management course or international standards.

//The analysis should include both positive points and negative points of the location, product design, and process design of the company.

  • Additional explanation of the second stage: The analysis should focus on the positive and negative points for each topic especially for the negative points, and the analysis must be related to the material of the course. You can also choose points that already mentioned by other members in the research. For example: if the company choose a location that is near to targeted customer will be considered a positive point, and explain why its positive according to the material. And you can say that the locations of the company is too far from raw materials and clarify that its a negative point with explaining. these example to understand the meaning of the analysis required.
  • I will upload the work of the other members because you need to read it before you start working (their research keep it private please).
  • The outlines of the project will be uploaded if anything not clear.
  • Plagiarism not allowed.
  • words should be in this range (450-600).

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Executive summary: This report provides an analysis of the most three important operations management decision which they are location strategy, product design and process design. First, the location strategy objective is that to increase the benefit of the location to the Adidas company. Second, the product decision is to develop and implement a strategy that meets the demands of the market with a competitive advantage. Third, the process design strategy objective is to make a production process that meets both product specifications and customer requirements within cost and other managerial constraints. The purpose of this report is to analyze these three decisions in Adidas Company which one of the most popular sport companies worldwide. The methodology of data collection sources was by using the operation management book written by Heizer and Barry and reliable online websites as well journals and articles. Furthermore, we found out from the analysis we conduct top positive results which are(……………), top negative results which are (………..). Finally, our top recommendations to Adidas are(………… ) Adidas Background: Adidas is one of the largest companies in the world in the manufacture of sports equipment, especially shoes, as it was established in Germany in 1924. Adidas' fame began in the Olympic Games in 1928, during which time it manufactured a set of special shoes for important athletes. Adidas is the source of the idea of soccer shoes with nails to help players stabilize more on the slippery muddy ground of the stadium. Although Adidas is the first company in Europe, it is the second company in the world in the field of sports products, as the American Nike company is classified as the largest sports products company in the world and is the largest competitor of Adidas, as there is very intense competition between the two companies. Adidas has many offers with many clubs and national teams around the world such as Real Madrid and Chelsea. Logo, clothing and footwear designs usually feature three parallel lines that express an abstract mountain drawing and demonstrate goals that can be achieved through pursuit and perseverance. Today Adidas is a pioneer in its field and is a group of companies including Reebok and Rockport. 3.1 Location of the Company: The lead at Adidas company is taken by their headquarters in Germany and other main additional location which are in Boston, Portland, Shanghai, Moscow, Latin America, Amsterdam, Hong Kong, Switzerland and Dubai. Adidas company knows that if they have additional key location, they’ll be closer to their customer and satisfy them by offering several services at a faster and professional way. Nowadays, Adidas Company reached its level of success globally by choosing the optimal location to benefit the firm which is by minimize the cost of production and maximize the profit. Adidas supply chain it considers globally and multi-layered, as they work with more than 1000 independent national and international factories and manufacture their products through 67 different major manufacturing countries such as China, Vietnam, Indonesia, Thailand, Turkey or India. Furthermore, Adidas to keep their production cost effective they outsource 100% of production to independent manufacturing partners, and the majority (73%) located in Asia. As shown in Figure 1: Adidas use effective location strategy of selection wisely their manufacturing locations in these countries due to some factors such as for availability of supplies, lower labor costs, cheaper location market, lower political risk, less restricted government rules, lower economic issues and lower currency risk and other many factors. For these significant factors, Adidas operations and location strategy decisions are always making and changing judiciously. For instance, they shift portion of their production from China to Vietnam as the labor costs and wages lower compared to China. Therefore, this efficient decision help Adidas to diversifying their manufacturing and reduce the risk of sourcing largely from China. Moreover, most of Adidas factories that deal with raw material are located in Asia countries like India, Pakistan, Indonesia and Vietnam due to the availability of supplies and raw material factor. 3.1 product design Adidas manufactures many products, such as sports shoes, sport uniform it's known that most of football clubs that won the World Cup wear Adidas sports uniforms, And sports bags that are used for several things, for instance school bags for both sexes in different sizes and shapes, and other accessories for athletes such as dumbbells, barbel and rubber bands. But the main product of the company is the shoes. Adidas manufactures different types of shoes, such as walking shoes, running shoes ,soccer shoes, and sneakers shoes. The company focuses on various aspects in the design of adidas shoes. they focus on the quality of the shoes. Adidas uses the finest raw materials. such as leather as the company cleans the animal skin, also interested in textiles such as cotton, polyester and nylon.in addition the rubber and foam of the shoes, which is an important component to produce comfortable high-quality shoes that allow the customer to walk for extended periods of time without feeling tired. On other hand, they are also interested in designing the latest fashion footwear, where the logo of the designers at Adidas is “Be Tomorrow” to get out of the boring traditional framework of shoes. as well adidas company cares about the different tastes of their customers, so they manufacture one design in more than one color to satisfy all the tastes of customers in the market. The most important thing in this company’s design processes is that it has become an adidas company global leader in sustainability because it uses less water, reduces energy consumption, and helps keep plastic garbage away from the ocean. Adidas' corporate-wide sustainability initiatives are impressive because they are broad. 3.3 Process Design: The design process for Adidas products begins with the design stage, which is considered one of the most important stages where designers use computers in the Adidas Design Studio to create the idea and draw it with all the details such as choosing colors and the type of fabrics until the design is completely completed. In this part, it is important that designs are appropriate for the target market of Adidas, which is often targeting athletes. New materials and designs are tested before being sent to manufacturing at Adidas headquarters in Germany, where this headquarters is the brain of development and this test is done by a team of makers, robots and athletes. After that, in the production factories, the raw materials are collected and converted into products, which Adidas is keen in selecting sustainable materials such as organic cotton, recycled polyester and recycled rubber. The manufacturing process which includes cutting and shaping is done according to the design drafts. Modern technologies are used, which are a strong example of artificial intelligence, such as robots, 3D printers and knitting machines, as there is a department in the company that specializes and focuses on new technologies, which is called the Future Team. After the assembly is completed, the workers fill and label the final products and ensure that all the elements will not corrode and that they are strong enough to the satisfaction of the customer, then they are shipped all over the world. When the customer sees the final product, it is difficult to imagine all the manufacturing complications that this product has gone through. As for the mass customization focus process, Adidas offers a customized “miAdidas” program, which enables customers to design their own shoes and clothes themselves and in their own style via website. College of Business Administration Department of Managemen Group Research Project Course: MGMT 410 - Operations Management Project Announcement Date: Feb. 6, 2020 Marks: 15 Submission mode: Soft copy via Blackboard only Submission Date April 9, 2020 PURPOSE The purpose of this project is to describe and analyze the operations management practices of a selected company. The project provides the students with an opportunity to link theoretical aspects of the course with real-world situations and to learn the challenges faced by companies in the application of the principles of operations management. PROJECT DESCRIPTION • Select any company of your choice working in Saudi Arabia or abroad (the company could be Saudi or Non-Saudi) as long as you can gather sufficient information to provide a good analysis of the company’s operations in the following areas: 1. Location of the company 2. Product design (goods or services provided by the company) 3. Process design (stages and methods of production) • Your project should include a proper description of the above topics as practiced in the selected company, as well as detailed analysis of the topics that involve evaluation of positive and negative points of company practices with reference to what you studied in the course. 1 College of Business Administration Department of Managemen INSTRUCTIONS 1. It’s a group-based project composed of a written report, so all the group members are required to participate equally. The number of students in each group should be between 4-5 students. Use books, electronic databases, company websites, social media, search engines, and any other suitable sources to collect your data. 2. The report should include an individual contribution report for each group member. And the project report should be between 2000 and 3000 words. Students are required to submit softcopy via Blackboard by the group leader only. 3. Submit your report as early as possible. Due dates will be firmly adhered. If the report is not submitted by the due date, a penalty of 20% per day will be deducted from the assessment mark. The format for the report structure is attached. 4. Writing Guidelines: Paper size: A4, Line Spacing: 1.15, Margins: 1” (inch)all sides, Font: Times New Roman, Font Size: 12 for text 14 for heading and 13 for the subheading. 5. Your report should be grammatically correct, well punctuated, clear, neatly presented, and easy to read. Failure to comply with these requirements will result in a significant loss of marks. 6. Referencing: Plagiarism will not be tolerated at all and will lead to serious action. All sources must be referenced. The Harvard Referencing style must be used to support all sources of information. Students must provide in-text references as well as reference list at the end of the document. Harvard Referencing guide is available on blackboard. Evaluation Criteria: Rubrics and forms for evaluation of project report and format of individual contribution reports are provided on pages 3 and 4. 2 College of Business Administration Department of Managemen Report Structure The report may follow the structure given below. ➢ Title page with project topics, company name, student names, and their IDs, section number. ➢ Table of contents 1. Executive Summary // Clear, concise overview/outline of the entire research report. Include objectives of the project, the method followed to do the project, sources data collection, top results (positives & negatives) and top recommendations 2. Company Background // Background of the selected company (ownership, brief history, organizational structure, products, markets) 3. Description of the selected topic in the company // Describe the topics as practiced in your selected company. Organize this part in three subsections: 3.1 Location of the Company: Describe what are the locations of the facilities of the company and how they select them. 3.2 Product Design: Explain the types of products produced by the company (goods or services), how these products are linked to the strategic objectives of the company such as cost reduction and differentiation, as well as any environmental or ethical considerations in the products. 3.3 Process Design: Describe how the company produces the products you mentioned above by explaining the stages through which the products produced, the technology used in production, and any sustainability considerations in process design. // Use charts, diagrams, and pictures in your description. 4. Analysis //Provide a critical analysis of the practice of the three topics in your company with respect to the theories and guidelines offered in the Operations Management course or international standards. //The analysis should include both positive points and negative points of the location, product design, and process design of the company. 5. Conclusion &Recommendation //Brief summary of the report and your recommendations for improvement. 6. List of References (use Harvard referencing style) 7. Individual Contribution Report (Contribution of each member in the group in the activities of the project (use the form on page 5). 3 College of Business Administration Department of Managemen Project Report Evaluation Form Project Title: _____________________________________________ Name: _1.____________________________________________ Section No. _____________________ Student ID _____________________ _2.____________________________________________ _____________________ _3.____________________________________________ _____________________ _4.____________________________________________ _____________________ _5.____________________________________________ _____________________ _6.____________________________________________ _____________________ MARKING CRITERION 1. Presentation • Fulfilled the required structure, cover sheet, word limit, organization, design, etc. 2. Introduction • Background to report. • Statement of purpose. • Outline of the report. 3. Report Body • Paragraph structure (topic sentences etc.). • Main points are debated (strategy formulation, implementation, and evaluation) • Cohesion (logic sequence between paragraphs). 4. Conclusion • Restate the report & relates to its purpose. • Summarize the main points. • Consistency between the arguments provided in the body section and the statement of conclusion 5. Academic English • Grammar, spelling, syntax, punctuation, expression, tone, vocabulary, flow. 6. Critical analysis and use of evidence • Critical approach. • Appropriate & sufficient evidence. • Integration of evidence & depth of analysis. Total Mark WEIGHT 20 MARKS COMMENTS 10 30 10 10 20 100 4 College of Business Administration Department of Managemen Individual Contribution Report Project Title: _____________________________________________ Student Name ID Student General Role in the Project Section No. _____________________ Detailed activities are done by the student and evidence in the project (page numbers) 5 5 Product Design PowerPoint presentation to accompany Heizer, Render, and Al-Zu’bi Operations Management, Arab World Edition Original PowerPoint slides by Jeff Heyl Adapted by Zu’bi Al-Zu’bi 5-1 Outline •Goods and service selection • Product decision • Product Strategy Options Support Competitive Advantage • Product Life Cycles • Life Cycle and Strategy • Product-by-Value Analysis 5-2 Outline - Continued • Generating New Products • New Product Opportunities • Product Development • Product Development System • Organizing for Product Development • Manufacturability and Value Engineering • Ethics, Environmentally Friendly Design, and Sustainability 5-3 Outline - Continued ◆ Time-Based Competition ◆ Purchasing Technology by Acquiring a Firm ◆ Joint Ventures ◆ Alliances ◆ Defining a Product ◆ Service Design ◆ Transition to Production 5-4 Learning Objectives When you complete this chapter you should be able to : 1. Define product life cycle 2. Describe a product development system 3. Describe how time-based competition is implemented 5. Describe how products and services are defined by operations management 6. Describe customer participation in the design and production of services 5-5 Goods and Service Selection: Product Decision • Most products have limited or predictable life cycles. • Companies must constantly look for designing and developing and offering the new products to the market. • Thus companies must take product decision. 5-6 Goods and Service Selection: Product Decision The product decision includes: selection, definition and design of the products. The objective of the product decision is to develop and implement a product strategy that meets the demands of the marketplace with a competitive advantage 5-7 Product Decision ◆ Involve choosing the good or service to provide customer ◆ Top organizations typically focus on core products ◆ Customers buy satisfaction, not just a physical good or particular service ◆ Fundamental to an organization's strategy with implications throughout the operations function 5-8 Product Strategy Options Support Competitive Advantage ◆ Differentiation ◆ EyeHosp, Jordan ◆ Low cost ◆ Kudu, Saudi Arabia ◆ Rapid response ◆ Toyota 5-9 Product Life Cycles ◆ May be any length from a few hours to decades. ◆ The operations function must be able to introduce new products successfully. 5 - 10 Sales, cost, and cash flow Product Life Cycles Cost of development and production Sales revenue Net revenue (profit) Cash flow Negative cash flow Introduction Loss Growth Maturity Decline Figure 5.1 5 - 11 Product Life Cycle Introductory Phase ◆ Fine tuning may warrant unusual expenses for 1. Research 2. Product development 3. Process modification and enhancement 4. Supplier development 5 - 12 Product Life Cycle Growth Phase ◆ Product design begins to stabilize ◆ Effective forecasting of capacity becomes necessary ◆ Adding or enhancing capacity may be necessary 5 - 13 Product Life Cycle Maturity Phase ◆ Competitors now established ◆ High volume, innovative production may be needed ◆ Improved cost control, reduction in options, paring down of product line 5 - 14 Product Life Cycle Decline Phase ◆ Unless product makes a special contribution to the organization, must plan to terminate offering 5 - 15 Product-by-Value Analysis ◆ Lists products in descending order of their individual dollar contribution to the firm ◆ Lists the total annual dollar contribution of the product ◆ Helps management evaluate alternative strategies 5 - 16 Generating New Products New Product Opportunities 1. Understanding the customer 2. Economic change 3. Sociological and demographic change 4. Technological change 5. Political/legal change 6. Market practice, professional standards, suppliers, distributors 5 - 17 Product Development System Ideas Figure 5.2 Ability Customer Requirements Functional Specifications Scope of product development team Product Specifications Scope for design and Design Review engineering teams Test Market Introduction Evaluation 5 - 18 Organizing for Product Development There are four common approaches to organizing product development. 1. 2. Organization with distinct departments ◆ Traditional U.S. approach ◆ Duties and responsibilities are defined ◆ Difficult to foster forward thinking A champion ◆ Product manager drives the product through the product development system and related organizations 5 - 19 Organizing for Product Development 3. Team approach ◆ ◆ Cross functional – representatives from all disciplines or functions These teams are called • Product development teams, • design for manufacturability teams, • value engineering teams 4. Japanese “whole organization” approach ◆ No organizational divisions 5 - 20 Manufacturability and Value Engineering Activities that help improve a product design, production, maintainability and use. ◆ Benefits: 1. Reduced complexity of products 2. Reduction of environmental impact 3. Additional standardization of products 4. Improved functional aspects of product 5. Improved job design and job safety 6. Improved maintainability (serviceability) of the product 7. Robust design 5 - 21 Cost Reduction of a Bracket via Value Engineering Figure 5.5 5 - 22 Ethics, Environmentally Friendly Designs, and Sustainability ◆ It is possible to enhance productivity and deliver goods and services in an environmentally and ethically responsible manner ◆ In OM, sustainability means ecological stability ◆ Conservation and renewal of resources through the entire product life cycle 5 - 23 Ethics, Environmentally Friendly Designs, and Sustainability ◆ Design ◆ Polyester film and shoes ◆ Production ◆ Prevention in production and packaging ◆ Destruction ◆ Recycling in automobiles 5 - 24 The Ethical Approach ◆ View product design from a systems perspective ◆ Inputs, processes, outputs ◆ Costs to the firm/costs to society ◆ Consider the entire life cycle of the product 5 - 25 The Ethical Approach ◆ Goals 1. Developing safe end environmentally sound practices 2. Minimizing waste of resources 3. Reducing environmental liabilities 4. Increasing cost-effectiveness of complying with environmental regulations 5. Begin recognized as a good corporate citizen 5 - 26 Guidelines for Environmentally Friendly Designs 1. Make products recyclable 2. Use recycled materials 3. Use less harmful ingredients 4. Use lighter components 5. Use less energy 6. Use less material 5 - 27 Time-Based Competition ◆ Product life cycles are becoming shorter and the rate of technological change is increasing ◆ Developing new products faster can result in a competitive advantage 5 - 28 Product Development Continuum EXTERNAL DEVELOPMENT STRATEGIES Figure 5.6 Alliances Joint ventures Purchase technology or expertise by acquiring the developer INTERNAL DEVELOPMENT STRATEGIES Migrations of existing products Enhancements to existing products New internally developed products Internal Lengthy High Cost of product development Speed of product development Risk of product development Shared Rapid and/ or Existing Shared 5 - 29 Acquiring Technology ◆ By Purchasing a Firm ◆ Speeds development ◆ Issues concern the fit between the acquired organization and product and the host ◆ Through Joint Ventures ◆ Both organizations learn ◆ Risks are shared ◆ Through Alliances ◆ Cooperative agreements between independent organizations 5 - 30 Defining a Product ◆ First definition is in terms of functions ◆ Rigorous specifications are developed during the design phase ◆ Manufactured products will have an engineering drawing ◆ Bill of material (BOM) lists the components of a product 5 - 31 Service Design ◆ Service typically includes direct interaction with the customer ◆ Increased opportunity for customization ◆ Reduced productivity ◆ Cost and quality are still determined at the design stage ◆ Delay customization ◆ Modularization ◆ Reduce customer interaction, often through automation 5 - 32 Service Design Figure 5.12 5 - 33 Service Design Figure 5.12 5 - 34 Transition to Production ◆ ◆ Know when to move to production ◆ Product development can be viewed as evolutionary and never complete ◆ Product must move from design to production in a timely manner Most products have a trial production period to insure producibility ◆ Develop tooling, quality control, training ◆ Ensures successful production 5 - 35 Transition to Production ◆ Responsibility must also transition as the product moves through its life cycle ◆ ◆ Line management takes over from design Three common approaches to managing transition ◆ Project managers ◆ Product development teams ◆ Integrate product development and manufacturing organizations 5 - 36 7 Process Design PowerPoint presentation to accompany Heizer, Render, and Al-Zu’bi Operations Management, Arab World Edition Original PowerPoint slides by Jeff Heyl Adapted by Zu’bi Al-Zu’bi Instructor: Dr. Tariq Altayeb Outline ◆ Process Strategy ◆ Four Process Strategies ◆ Process Focus ◆ Repetitive Focus ◆ Product Focus ◆ Mass Customization Focus ◆ Comparison of Process Choices Outline – Continued ◆ Process Analysis and Design ◆ ◆ ◆ ◆ ◆ Flowchart Time-Function Mapping Value-Stream Mapping Process Charts Service Blueprinting ◆ Special Consideration for Service Process Design ◆ Process Redesign ◆ Sustainability Learning Objectives When you complete this chapter you should be able to: 1. Describe four production processes 2. Compute crossover points for different processes 3. Use the tools of process analysis 4. Describe customer interaction in process design 5. Discuss the 4 Rs of sustainability Process Strategies The objective of a process strategy is to build a production process that meets customer requirements and product specifications within cost and other managerial constraints. The selected process will have long term effect on: ❖ Efficiency and flexibility of production ❖ Cost and quality Process Strategies ◆ How to produce a product or provide a service that ◆ Meets or exceeds customer requirements ◆ Meets cost and managerial goals ◆ Has long term effects on ◆ Efficiency and production flexibility ◆ Costs and quality Process Strategies Four basic strategies 1. Process focus 2. Repetitive focus 3. Product focus 4. Mass customization Within these basic strategies there are many ways they may be implemented Process Focus ◆ Facilities are organized around specific activities or processes ◆ General purpose equipment and skilled personnel ◆ High degree of product flexibility ◆ Typically high costs and low equipment utilization ◆ Product flows may vary considerably making planning and scheduling a challenge Process Focus (low volume, high variety, intermittent processes) Many inputs (surgeries, sick patients, baby deliveries, emergencies) Many departments and many routings New Mowasat Hospital Figure 7.2(a) Many different outputs (uniquely treated patients) Repetitive Focus ◆ Facilities often organized as assembly lines ◆ Characterized by modules with parts and assemblies made previously ◆ Modules may be combined for many output options ◆ Less flexibility than process-focused facilities but more efficient Repetitive Focus Raw materials and module inputs (multiple engine models, wheel modules) Few modules (modular) Harley Davidson Figure 7.2(b) Modules combined for many Output options (many combinations of cars) Product Focus Few Inputs (corn, potatoes, water, seasoning) (High-volume, low variety, continuous process) Lays Figure 7.2(c) Output variations in size, shape, and packaging (3-oz, 5-oz, 24-oz package labeled for each material) Product Focus ◆ Facilities are organized by product ◆ High volume but low variety of products. ◆ Long, continuous production runs enable efficient processes. ◆ Typically high fixed cost but low variable cost. ◆ Generally less skilled labor. Mass Customization ◆ The rapid, low-cost production of goods and service to satisfy increasingly unique customer desires ◆ Combines the flexibility of a process focus with the efficiency of a product focus Mass Customization Item Vehicle models Vehicle styles Bicycle types Software titles Websites Movie releases per year New book titles TV channels Breakfast cereals Items (SKUs) in supermarkets LCD TVs Number of Choices 1970s 21st Century 140 18 8 0 0 267 40,530 5 160 14,000 286 1,212 211,000 400,000 162,000,000 765 300,000 185 340 150,000 0 102 Table 7.1 Mass Customization Many parts and component inputs (chips, hard drives, software, cases) Many modules (high-volume, high-variety) Dell Computer Figure 7.2(d) Many output versions (custom PCs and notebooks) Comparison of Processes Process Focus Repetitive Focus (low-volume, high-variety) (modular) Product Focus Mass Customization (high-volume, low-variety) (high-volume, high-variety) 1. Small quantity and large variety of products are produced 1. Long runs, usually a standardized product with options, produced from modules 1. Large quantity and small variety of products are produced 1. Large quantity and large variety of products are produced 2. Equipment used is general purpose 2. Special equipment aids in use of an assembly line 2. Equipment used is special purpose 2. Rapid changeover on flexible equipment Table 7.2 Comparison of Processes Process Focus (low-volume, high-variety) Repetitive Focus (modular) Product Focus Mass Customization (high-volume, low-variety) (high-volume, high-variety) 3. Operators are broadly skilled 3. Employees are modestly trained 3. Operators are less broadly skilled 3. Flexible operators are trained for the necessary customization 4. There are many job instructions because each job changes 4. Repetitive operations reduce training and changes in job instructions 4. Work orders and job instructions are few because they are standardized 4. Custom orders require many job instructions Table 7.2 Comparison of Processes Process Focus (low-volume, high-variety) Repetitive Focus (modular) Table 7.2 Product Focus Mass Customization (high-volume, low-variety) (high-volume, high-variety) 5. Rawmaterial inventories highly relative to the value of the product 5. JIT procurement techniques are used 5. Raw material inventories are low relative to the value of the product 5. Raw material inventories are low relative to the value of the product 6. Work-inprocess is high compared to output 6. JIT inventory techniques are used 6. Work-inprocess inventory is low compared to output 6. Work-inprocess inventory driven down by JIT, kanban, lean production(Wast e reduction) Comparison of Processes Process Focus Repetitive Focus (low-volume, high-variety) (modular) Product Focus Mass Customization (high-volume, low-variety) (high-volume, high-variety) 7. Units move slowly through the facility 7. Assembly is measured in hours and days 7. Swift movement of units through the facility is typical 7. Goods move swiftly through the facility 8. Finished goods are usually made to order and not stored 8. Finished goods made to frequent forecast 8. Finished goods are usually made to forecast and stored 8. Finished goods are often buildto-order (BTO) Table 7.2 Comparison of Processes Process Focus Repetitive Focus (low-volume, high-variety) 9. 10. Scheduling is complex, concerned with tradeoffs between inventory, capacity, and customer service Fixed costs tend to be low and variable costs high (modular) 9. Scheduling is based on building various models from a variety of modules to forecasts 10. Fixed costs dependent on flexibility of the facility Table 7.2 Product Focus Mass Customization (high-volume, low-variety) (high-volume, high-variety) 9. Scheduling is relatively simple, concerned with establishing output rate sufficient to meet forecasts 10. Fixed costs tend to be high and variable costs low 9. 10. Sophisticated scheduling is required to accommodate custom orders Fixed costs tend to be high, variable costs must be low Process Analysis and Design ◆ Is the process designed to achieve a competitive advantage? ◆ Does the process eliminate steps that do not add value? ◆ Does the process maximize customer value? ◆ Will the process win orders? Process Analysis and Design Tools ◆ Flowchart - Shows the movement of materials ◆ Time-Function Mapping - Shows flows and time frame ◆ Value-Stream Mapping - Shows flows and time and value added beyond the immediate organization ◆ Process Chart - Uses symbols to show key activities ◆ Service Blueprinting - focuses on customer/provider interaction Flowchart Figure 7.5 Time-Function Map Print Wait WIP Warehouse Plant B Extrude Wait Move Transport Figure 7.5 Wait Product WIP Plant A Product Wait Order Production control Product Process order WIP Sales Receive product WIP Order product Order Customer 12 days 13 days 1 day 4 days 1 day 10 days 52 days Move 1 day 0 day 1 day Value-Stream Mapping Figure 7.6 Process Chart Figure 7.7 Service Blueprint Personal Greeting Level #1 Service Diagnosis Perform Service Customer arrives for service. (3 min) Friendly Close Customer departs F Warm greeting and obtain service request. (10 sec) Level #2 No Standard request. (3 min) Direct customer to waiting room. F Level #3 Determine specifics. (5 min) Can service be done and does customer approve? (5 min) F F Yes Yes Notify customer and recommend an alternative provider. (7min) Customer pays bill. (4 min) F F Notify customer the car is ready. (3 min) No F Perform required work. (varies) F Prepare invoice. (3 min) Figure 7.8 Special Considerations for Service Process Design ◆ Some interaction with customer is necessary, but this often adversely affects performance ◆ The better these interactions are accommodated in the process design, the more efficient and effective the process ◆ Find the right combination of cost and customer interaction Service Process Matrix Degree of Customization Figure 7.9 High Low Mass Service Professional Service Traditional orthodontics Private banking High Commercial banking Degree of Labor Full-service stockbroker Generalpurpose law firms Digital orthodontics Boutiques Retailing Service Factory Law clinics Specialized Limited-service hospitals stockbroker Low Warehouse and catalog stores Fast-food restaurants Airlines No-frills airlines Service Shop Fine-dining restaurants Hospitals Improving Service Productivity Strategy Technique Example Separation Structure service so customers must go where the service is offered Bank customers go to a manager to open a new account, to loan officers for loans, and to tellers for deposits Self-service Self-service so customers examine, compare, and evaluate at their own pace Supermarkets and department stores Internet ordering Table 7.3 Improving Service Productivity Strategy Technique Example Postponement Customizing at delivery Customizing vans at delivery rather than at production Focus Restricting the offerings Limited-menu restaurant Modules Modular selection of service Investment and insurance selection Modular production Prepackaged food modules in restaurants Table 7.3 Improving Service Productivity Strategy Technique Example Automation Separating services that Automatic teller may lend themselves to machines some type of automation Scheduling Precise personnel scheduling Scheduling ticket counter personnel at 15-minute intervals at airlines Training Clarifying the service options Investment counselor, funeral directors Explaining how to avoid problems After-sale maintenance personnel Table 7.3 Process Redesign ◆ The fundamental rethinking of business processes to bring about dramatic improvements in performance ◆ Relies on reevaluating the purpose of the process and questioning both the purpose and the underlying assumptions ◆ Requires reexamination of the basic process and its objectives ◆ Focuses on activities that cross functional lines ◆ Any process is a candidate for redesign Sustainability ◆ Sustainability in production processes 1. Resources 2. Recycling 3. Regulations 4. Reputation 8 Location Decisions PowerPoint presentation to accompany Heizer, Render, and Al-Zu’bi Operations Management, Arab World Edition Instructor: Dr. Tariq Altayeb 8-1 Outline ◆ The Strategic Importance of Location ◆Location and Costs ◆Location and Innovation ◆ Factors That Affect Location Decisions ◆ Labor Productivity ◆ Exchange Rates and Currency Risk ◆ Costs ◆ Political Risk, Values, and Culture ◆ Proximity to Markets ◆ Proximity to Suppliers ◆ Proximity to Competitors (Clustering) 8-2 Outline – Continued ◆ Methods of Evaluating Location Alternatives ◆ The Factor-Rating Method ◆ Locational Break-Even Analysis ◆ Transportation Model ◆Service Location Strategy 8-3 Learning Objectives When you complete this chapter you should be able to: 1. Identify and explain seven major factors that effect location decisions 2. Compute labor productivity 3. Apply the factor-rating method 4. Complete a locational break-even analysis graphically and mathematically 5. Understand the differences between service- and industrial-sector location strategies 8-4 Location Strategy The objective of location strategy is to maximize the benefit of location to the firm 8-5 Location Strategy ◆ One of the most important decisions a firm makes ◆ Increasingly global in nature ◆ Significant impact on fixed and variable costs ◆ Decisions made relatively infrequently ◆ The objective is to maximize the benefit of location to the firm 8-6 Location and Costs ◆ Location decisions based on low cost require careful consideration ◆ Once in place, location-related costs are fixed in place and difficult to reduce ◆ Determining optimal facility location is a good investment 8-7 Location and Innovation ◆ Cost is not always the most important aspect of a strategic decision ◆ Four key attributes when strategy is based on innovation: ◆ High-quality and specialized inputs ◆ An environment that encourages investment and local rivalry ◆ A sophisticated (developed/mature) local market ◆ Local presence of related and supporting industries 8-8 Location Decisions Country Decision Key Success Factors 1. Political risks, government rules, attitudes, incentives 2. Cultural and economic issues 3. Location of markets 4. Labor talent, attitudes, productivity, costs 5. Availability of supplies, communications, energy Figure 8.1 6. Exchange rates and currency risks 8-9 Location Decisions Region/ Community Decision Key Success Factors 1. Corporate desires 2. Attractiveness of region 3. Labor availability and costs 4. Costs and availability of utilities 5. Environmental regulations 6. Government incentives and fiscal policies 7. Proximity to raw materials and customers Figure 8.1 8. Land/construction costs 8 - 10 Location Decisions Site Decision Key Success Factors 1. Site size and cost 2. Air, rail, highway, and waterway systems 3. Zoning restrictions 4. Proximity of services/ supplies needed 5. Environmental impact issues Figure 8.1 8 - 11 Factors That Affect Location Decisions ◆ Labor productivity ◆ Wage rates are not the only cost ◆ Lower productivity may increase total cost Labor cost per day = Cost per unit Production (units per day) Beirut $70 = $1.17 per unit 60 units Different Location $50 = $1.20 per unit 40units 8 - 12 Factors That Affect Location Decisions ◆ Exchange rates and currency risks ◆ Can have a significant impact on costs ◆ Rates change over time ◆ Costs ◆ Tangible - easily measured costs such as utilities, labor, materials, taxes ◆ Intangible - less easy to quantify and include education, public transportation, community, quality-of-life 8 - 13 Factors That Affect Location Decisions ◆ Political risk, values, and culture ◆ National, state, local governments attitudes toward private and intellectual property, zoning, pollution, employment stability may be in fluctuating ◆ Worker attitudes towards turnover, unions, absenteeism ◆ Global cultures have different attitudes towards punctuality, legal, and ethical issues 8 - 14 Factors That Affect Location Decisions ◆ Proximity to markets ◆ Very important to services ◆ JIT systems or high transportation costs may make it important to manufacturers ◆ Proximity to suppliers ◆ Perishable goods, high transportation costs, bulky products 8 - 15 Factors That Affect Location Decisions ◆ Proximity to competitors ◆ Called clustering ◆ Often driven by resources such as natural, information, capital, talent ◆ Found in both manufacturing and service industries 8 - 16 Methods of Evaluating Location Alternatives Factor-Rating Method ◆ Popular because a wide variety of factors can be included in the analysis ◆ Six steps in the method 1. Develop a list of relevant factors called key success factors 2. Assign a weight to each factor 3. Develop a scale for each factor 4. Score each location for each factor 5. Multiply score by weights for each factor for each location 6. Recommend the location with the highest point score 8 - 17 Factor-Rating Example Key Success Factor Labor availability and attitude People-tocar ratio Per capita income Tax structure Education and health Totals Scores (out of 100) Weight France Denmark Weighted Scores France Denmark .25 70 60 .05 50 60 .10 .39 85 75 80 70 (.10)(85) = 8.5 (.10)(80) = 8.0 (.39)(75) = 29.3 (.39)(70) = 27.3 .21 60 70 (.21)(60) = 12.6 (.21)(70) = 14.7 1.00 (.25)(70) = 17.5 (.25)(60) = 15.0 (.05)(50) = 2.5 70.4 (.05)(60) = 3.0 68.0 Table 8.4 8 - 18 Locational Break-Even Analysis ◆ Method of cost-volume analysis used for industrial locations ◆ Three steps in the method 1. Determine fixed and variable costs for each location 2. Plot the cost for each location 3. Select location with lowest total cost for expected production volume 8 - 19 Locational Break-Even Analysis Example Three locations: Selling price = $120 Expected volume = 2,000 units City Ramtha Allan Nahle Fixed Variable Cost Cost $30,000 $75 $60,000 $45 $110,000 $25 Total Cost $180,000 $150,000 $160,000 Total Cost = Fixed Cost + (Variable Cost x Volume) 8 - 20 Annual cost Locational Break-Even Analysis Example Figure 8.2 – $180,000 – – $160,000 – $150,000 – – $130,000 – – $110,000 – – – $80,000 – – $60,000 – – – $30,000 – – $10,000 – | – 0 Ramtha lowest cost Allan lowest cost | | | | | 500 1,000 1,500 2,000 2,500 Nahle lowest cost | 3,000 Volume 8 - 21 Locational Break-Even Analysis Example Three locations: Selling price = $120 Expected volume = 500 units City Ramtha Allan Nahle Fixed Variable Cost Cost $30,000 $75 $60,000 $45 $110,000 $25 Total Cost $67,500 $82,500 $122,500 Total Cost = Fixed Cost + (Variable Cost x Volume) 8 - 22 Locational Break-Even Analysis Example Three locations: Selling price = $120 Expected volume = 3000 units City Ramtha Allan Nahle Fixed Variable Cost Cost $30,000 $75 $60,000 $45 $110,000 $25 Total Cost $255,000 $195,000 $185,000 Total Cost = Fixed Cost + (Variable Cost x Volume) 8 - 23 Transportation Model ◆ Finds amount to be shipped from several points of supply to several points of demand ◆ Solution will minimize total production and shipping costs ◆ A special class of linear programming problems 8 - 24 Worldwide Distribution of Volkswagens and Parts Figure 8.4 8 - 25 Service Location Strategy 1. Purchasing power of customer-drawing area 2. Service and image compatibility with demographics of the customer-drawing area 3. Competition in the area 4. Quality of the competition 5. Uniqueness of the firm’s and competitors’ locations 6. Physical qualities of facilities and neighboring businesses 7. Operating policies of the firm 8. Quality of management 8 - 26 Class Exercise: Factor-Rating Subway is planning for a new restaurant in Muscat, Oman. Three locations are being considered. The following table gives the factor for each site. Factor Weight Downtown Dahiya Muala Space 0.30 60 70 80 Cost 0.25 40 80 30 Traffic Density 0.20 50 80 60 Residents’ Income 0.15 50 70 40 Zoning Laws 0.10 80 20 90 Q1. At which site should Subway open the new restaurant? Q2. If the weights for space and Traffic Density are reversed, how would this affect the decision? 8 - 27 Solution Q1: Factor Space Cost Traffic Density Residents’ Income Zoning Laws Total Scores Weight 0.3 0.25 0.2 0.15 0.1 Downtown 18 10 10 7.5 8 53.5 Dahiya Muala 21 20 16 10.5 2 69.5 24 7.5 12 6 9 58.5 • Formula: Weight x location score, for example; Space 0.3 * downtown score 60 = 18 Thus Subway should open a new restaurant in Dahiya. 8 - 28 Solution Q2: weights for space and Traffic Density are reversed Factor Space Cost Traffic Density Residents’ Income Zoning Laws Total Scores Weight Downtown 0.2 0.25 0.3 0.15 0.1 Dahiya Muala 12 10 15 7.5 8 14 20 24 10.5 2 16 7.5 18 6 9 52.5 70.5 56.5 Dahiya’s location is even more preferred. 8 - 29
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Adidas Company Report
Executive Summary
This project will explore three primary operations of Adidas Company. Three main
activities enable the organization to undertake its process effectively. The first operation is the
location strategy, and this helps to improve the location benefits of the company. The Adidas
Company can reach its customers efficiently, and this makes the distribution of products more
accessible. The second operation of the company is the product decision, which helps to meet
customer specifications. When the company can meet customer specifications, there can
penetrate the market effectively. Another essential operation is the design strategy that aims to
meet product specifications. Also, the design strategy helps to meet customer requirements, and
this promotes an increase in sales. Sources of data collection were a book written by Browoski,
Haig and online sources, which are related to Adidas Company. The primary purpose of this
report is to analyze these...


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