Four Assignments (Two AMC, OM Techniques, Toyota Production Planning)

AMBA 640 SEMINAR MATERIALS

ASSIGNMENTS

Acme Home Improvements de México, SA de CV

("Acme de México" or "Acme Mexico City")

and

Application of World-Class Operations Management Techniques

and

Production Planning for Toyota North America

(ver 6/22/16)

Background Information for Acme Mexico City

Acme Home Improvements, Inc. was founded in 1982 in Raleigh, North Carolina, USA. By 2011 the company had 125 stores along the US East Coast from Florida to Maine. Its annual sales are currently ~$5,400,000,000 with $280,000,000 net income. The average store is about 100,000 square feet with an additional 10,000 square feet of outside garden center. The stores typically carry 40,000 different products from 5,000 vendors worldwide. Major US competitors include Ace, Home Depot, Lowe's and TruValue.

In the interest of seeking greater profits and buffering against downturns in the US market, Acme has determined to follow Home Depot and other competitors to Canada and Mexico. In the latter, it has established, in accordance with Mexican law, a joint venture with local interests, known as Acme Home Improvements de México, SA de CV ("Acme de México" or "Acme Mexico City"). (SA de CV = Sociedad Anónima de Capital Variable, a Mexican corporate form.)

There are five major product groups within each Acme store: plumbing and electrical supplies, building materials, hardware and tools, seasonal and garden/yard items, and paint, flooring and wall coverings.

Each store has a store manager, assistant store manager, bookkeeper, an information systems manager and an assistant, a manager for each of the five major product groups, customer service employees on the store floor to assist customers with their purchases, cashiers, receiving/stocking employees, and maintenance/janitorial employees.

Assignment 1 (W3TA). Team Assignment: Preparing a Team Work Plan, Project Charter (both due in week 2) and Project Management

Plan for Acme Mexico City (due in week 3)

Acme de México has purchased a site on which it intends to build and open a new store in Mexico City [Acme Mexico City (AMC)]. The store will have the average 100,000 square feet of indoor space and 10,000 square feet of exterior space for garden products. In addition, a two-story parking garage will be built directly adjacent to the store. It is desired that the project should take no longer than 12 months. The store construction and opening processes include at least eight major activities. Hint: one major activity is omitted; which is it? THINK CRITICALLY

1. Obtain required licenses and permits. 2. Prepare the site and lay the foundation. 3. Build the walls, floor and roof of the structure. 4. Install electrical and plumbing fixtures. 5. Finish interior and stock inventory. 6. Build the garage. 7. Complete all paving and landscaping. 8. Hire and train employees.

AMC will, it is envisioned, be similar in appearance to this Home Depot store located in Hermosillo, Sonora, Mexico

Photo by Dr. Judith L. Forbes

Assignment Taskings

First, each team prepares a team work plan and a project charter for the construction, equipping and opening of the Mexico City store to include a list of major milestones. These are due as specified in the seminar syllabus.

Each team then prepares a project management plan, which also is due as specified in the seminar syllabus and includes at least the following:

1. An executive summary including key projected results

2. A work breakdown structure (WBS) using Microsoft Project 2013/2016 or equivalent project management software. The WBS need not go below three levels of tasks.

3. The establishment of all required dependencies for activities. 4. The estimated requirements for money, materials, and people including local (Mexican)

expertise. Here recall what you learned about budgeting in AMBA 630. 5. A Gantt chart for project display, including a complete critical path. 6. A discussion of the utility of a project dashboard for management of this project, to include

a judgment of its cost effectiveness. 7. A discussion of how knowledge gained from prior Acme store construction projects could

be applied to this project.

When the work breakdown structure is complete, the team, thinking critically, will have included the principal topic of the forthcoming AMBA 650.

Assignment 2 (W5IA). Individual Assignment: Employing Important Techniques Used in Operations Management

Answer any one (and ONLY ONE) of the first two exercises

Then, answer exercise (3)

You are urged to read through both of the first two choices before deciding which one of the two you will answer

A 3-5 page (double-spaced) answer per exercise will suffice (i.e. total submission length should be 6-10 pages)

ONE Executive Summary (for the entire W5IA) is required

THINK CRITICALLY

1. Analyzing a current OM technique

Find a scholarly journal article reporting on one or more of the following techniques: business analytics, dashboards, decision support systems, supply chain management

What is the problem, opportunity, or challenge addressed in the article?

What is the solution, idea, approach, etc., recommended/implemented in the article?

How does this help operations? Assess whether the problem, opportunity, or challenge is solved completely or partially?

What are the takeaways from the article?

In particular, what are the limitations of the technique?

Be sure to define the terms that you use, starting with the technique that you choose.

2. Applying OM technique(s) to your organization

Find in your organization an aspect of the operational process that could benefit from use of one or more of the following techniques: business/predictive analytics, dashboards, decision support systems, supply chain management.

What is the problem, opportunity, or challenge to be addressed?

What technique(s) would be appropriate to help mitigate the problem? Why?

What would be the areas which present challenges to the approach (e.g., culture, cost, technology complexity, etc.)

Be sure to define the terms that you use, starting with the technique that you choose.

3. Recommending a Low-Cost Customer Service Employee Daily Assignment Schedule

To the extent permitted by local law, each Acme Home Improvements store, including AMC, is open from 7 am - 11 pm every day. Acme Mexico City advance planners in North Carolina have provided the following table, which identifies the minimum number of customer service employees estimated to be needed on the floor of the store each hour of a typical work day:

Customer Service Employees

Time Period Minimum number needed on

the floor

7 am - 8 am 10

8 am - 9 am 12

9 am - 10 am

18

10 am - 11 am

22

11 am - 12 pm

22

12 pm - 1 pm

26

1 pm - 2 pm 26

2 pm - 3 pm 26

3 pm - 4 pm 26

4 pm - 5 pm 28

5 pm - 6 pm 28

6 pm - 7 pm 28

7 pm - 8 pm 24

8 pm - 9 pm 22

9 pm - 10 pm

14

10 pm - 11 pm

12

Full-time customer service employees at AMC work a 9 hour shift (8 hours of work plus a 1 hour meal break) either from 7 am to 4 pm or from 2 pm to 11 pm. Workers on the 7-4 shift are assigned an hour-long lunch break at either 11 am or 12 noon. Workers on the 2-11 shift are assigned an hour-long dinner break at either 5 pm or 6 pm. Full time employees are paid for their 8 hours of work per shift.

Part-time customer service employees work four consecutive hours per day and their shifts can start any hour between 7 am and 7 pm.

By corporate policy, which is consistent with Mexican labor law, the company limits the hours worked by part-time customer service employees to 50% of the day's total scheduled hours.

Part-time customer service employees earn $500 per day, and full-time customer service employees earn $1100 per day in salary and benefits (here, $ = Moneda Nacional, ie, the Mexican peso).

Acme operations analysts working in North Carolina, working with the AMC advance planners, have used integer linear programming, an important tool employed by operations managers, to propose in accordance with the foregoing factors, an employee assignment schedule for a typical day. Their proposed schedule is provided for you in D2L--see "Proposed Acme Mexico City Employee Assignment Schedule (for W5IA)".

Exercise 3: Taskings

Each student recommends to the AMC store manager, who is unfamiliar with integer linear programming, a customer service employee daily assignment schedule for Acme Mexico City that includes the following:

1. An employee assignment schedule for a typical day that minimizes personnel costs using the operations analysts' schedule modified as by the qualitative factors, if any, that you determine are relevant

2. A discussion of underlying assumptions and of associated qualitative factors 3. A further discussion of how non-typical days might affect the schedule

4. Optionally, a sensitivity analysis on what might affect the daily personnel costs

Assignment 3 (W6TA). Team Assignment: Updating the Team Work Plan—due in week 5—and Planning/Assessing Production for Toyota

North America—due in week 6

Lexus RX 350, Successor in 2007 to the RX 330

Photo courtesy of Toyota Motor Company

Assignment Taskings

First, update your Team Work Plan due as specified in the seminar syllabus.

Then address as a team the following four exercises also due as specified in the seminar syllabus.

Do include an executive summary covering the four exercises including your key results

Exercise 1: Making a Critical Assessment of the Toyota Production System (TPS) Today

a. Demonstrate your team's basic understanding of the TPS by 1) defining in your team's own words any eight of the terms found at http://www.toyotageorgetown.com/terms.asp, and 2) applying them to one of your team's own companies or other organizations.

For example, Pokayoke can be defined as an approach to create mistake proofing through use of devices that detect or prevent production errors. At a software development firm, pokayoke might be applied through use of a modular development process that includes extensive software module testing before proceeding to module integration and total system testing.

b. Describe the TPS as a total entity. What are its purposes? Its advantages? Its limitations? How is it now evolving? Is it getting better – or not? Has it been successfully copied by other motor vehicle manufacturers? Why or why not?

Exercise 2: Use of a Grid Analysis (Weighted Scoring Model) to Help Make the North American Plant Location Decision for the RX 330

This exercise illustrates how when deciding among two or more competing plant location options, various decision factors (which can typically be characterized as exogenous - in the environment external to the company, hence largely outside its control - or endogenous - internal to the company, therefore largely under its control) can be qualitatively identified, and how these factors can then be weighted to obtain an overall score for each competing location option.

An example of an exogenous factor is regulations or laws established by the government where the company operates. An example of an endogenous factor is the wages the company elects to pay, where not constrained by law.

You will use grid analysis, another important tool employed by operations managers, to support your recommendation.

a. List the factors your team considers key to the Toyota Motor Manufacturing Canada (TMMC): The Lexus RX 330 Line North American plant location decision, identifying these factors as either exogenous or endogenous, weighting them using your team's best judgment (stating any relevant assumptions or constraints), and assigning two scores to each factor: one for production of the Lexus RX 330 at TMMC, and one for production at a Toyota factory in the USA.

b. Using the scores from your team's weighted scoring model and working with regard to Ringo Sho and Nemawashi, make and support your recommendation for the RX 330 North American plant location - TMMC or a factory in the USA.

Exercise 3: Recommending Production Capacity Needed at Toyota Motor Manufacturing of Canada (TMMC)

Decision trees are another important if challenging world-class operations management method which operations managers should understand and with which other managers should be familiar.

This exercise illustrates how through using a decision tree, determination of an "optimal" production capacity option can be made from among several possible capacity options

based on the provided probable market demand and expected costs/payoffs of events that influence the options.

Your team must recommend the production capacity needed at TMMC, after being presented with a decision tree-based solution prepared by the operations analysts (hypothetical) who are supporting the team.

It is spring 2000, and TMMC has indeed just been chosen to produce the new Lexus RX 330 line, with the first units deliverable in 2003. Toyota must now determine the amount of annual production capacity it should build at TMMC.

Toyota's goal is to maximize the profit from the RX 330 line over the five years from 2003-2007. These vehicles will sell for an average of $37,000 and incur a mean unit production cost of $28,000 (here, $ = the Canadian dollar).

10,000 units of annual production capacity can be built for $50M (M=million) with additional blocks of 5,000 units of annual capacity each costing $15M. Each block of 5,000 units of capacity will also cost $5M per year to maintain, even if the capacity is unused.

Assume that the number of units actually sold each year will be the lesser of the demand and the production capacity.

Marketing has provided three vehicle estimated demand scenarios with associated probabilities as follows:

Demand 2003 2004 2005 2006 2007 Probability

Low 10,000 10,500 11,000 10,600 12,600 0.25

Moderate 15,000 16,000 17,000 17,400 19,400 0.50

High 20,000 24,000 26,000 28,600 30,600 0.25

Here is the beginning of the decision tree-based solution that has been prepared by the operations analysts (hypothetical) who are supporting the team—note that you will have to finish this solution (i.e., fill in the ?):

a. To maximize profit earned during this period, which production capacity will you recommend that TMMC in 2000 decides to build - 10,000, 15,000, 20,000, 25,000, or 30,000 cars? Justify your choice.

b. What are the weaknesses or limitations in this analysis? How might they be corrected or reduced?

c. It is now 2016. How well has the RX-330/350 actually done in the North American market? Is its quality rated as high as if it were made in Japan? Support your views.

Decision Tree

Plant Capacity Expected Profit Production Level Value 5-yr Revenue 5-yr Cost

Low 25% $1,850,000,000 $1,500,000,000

10,000 $350,000,000 Moderate 50% $1,850,000,000 $1,500,000,000

High 25% $1,850,000,000 $1,500,000,000

Low 25% $2,023,900,000 $1,671,600,000

15,000 $489,325,000 Moderate 50% $2,775,000,000 $2,240,000,000

High 25% $2,775,000,000 $2,240,000,000

Low 25% $2,023,900,000 $1,711,600,000

? ? 20,000 $549,675,000 Moderate 50% $3,137,600,000 $2,554,400,000

High 25% $3,700,000,000 $2,980,000,000

Low 25% ? ?

25,000 ? Moderate 50% ? ?

High 25% ? ?

Low 25% ? ?

30,000 ? Moderate 50% ? ?

High 25% ? ?

Demand

Exercise 4: Assessment of Toyota’s Current Regional Production Strategy

North America

Source: www.worldatlas.com/webimage/countrys/na.htm,

a. After doing necessary research online or otherwise, document and evaluate the current distribution of Toyota production in North America. Here be sure to include Mexico. THINK CRITICALLY

b. Why does the team believe Toyota has chosen to produce its cars for the North American market in the current manner? THINK CRITICALLY

c. Recommend any changes that the team believes appropriate in the distribution of Toyota production in North America.

Besides its assessment of Toyota production in North America, this exercise provides the team an opportunity to think ahead to the international politico-socio-economic considerations that will be important in AMBA 660.

Assignment 4 (weeks 8 and 9). Conference Activity (may be completed as a class or in teams):

Preparing an International Information Systems Management Plan

Assignment Taskings

The section, under the leadership of a student Acme CIO and Acme Assistant CIO, prepares a draft information systems management plan for the Acme Mexico City store that addresses at least the following areas:

1. An executive summary. 2. The objectives of the facility's information systems in terms of how they should support the

needs of each AMC stakeholder group (first, define these groups). 3. The specific information requirements of each stakeholder group. 4. A description of the information systems designed for the store including hardware,

software, processing/procedures and staffing recommendations. 5. Training required. 6. Maintenance and future improvements of the system. 7. A planning budget for the above.

Your section professor will function as Acme CEO. The student CIO reports directly to the CEO.

End