Goal Of Waiting Line Management Exam 2

Module 5 Goal of waiting line management  Find out how many servers are required for business  Finding balance: long lines – unhappy customers vs idle staff – high cost  Balance the cost paid by the customers (time) with the cost paid by the company (money paid to maintain the system) Parts of a waiting line system – waiting lines, customers, servers, service facilities    Customers: Input source (how many potential customers, degree of variability, customer disposition) o finite pool – few potential customers. Every customer in the store significantly decreases the chance of another arriving  EX: retail store that sells jumbo jet airplanes o Infinite pool – many potential customers. Odds barely affected by new arrivals  Ex: McDonalds o type of customers – prepared/unprepared, big/small orders, high/low maintenance, cash/card o arrival rates – steady stream of customer? Busy or slow times/days of the week? Seasonal trends o Balking, reneging, patient/needy customers Waiting lines – number of lines and servers, priority rules (who goes first), psychological variables o Single line – 1st come 1st serve, sense of fairness o Multiple lines – line jumping or jockeying o Earliest due date or shortest processing time – homework o Emergency situations – emergency rooms o Reservations or appointments- restaurant o Preemptive disciplines – VIP, frequent flyer o Un-cooperative customers o Take a number o Free stuff, televisions, reading material Servers – HR issues, service rates (who controls speed of line) o hiring the right people o prepare for the job o keep them happy o provide employees with helpful technology o are all servers equal o what happens if we add more employees? o full time, part time, seasonal, o type of customers  service facility characteristics o well-designed process o equipment and technology available? o Facilities layout – design and management  Efficient layout – bottlenecks  Comfort and safety of employees  Clean and organized? 4 managerial considerations in Queues  Customers – how many are there and how quickly are they arriving  The waiting lines – what types and how many?  Employees – who’s working in the system? How many? Skill and speed?  Service facilities – how effective and efficient is the process Basic waiting line terminology  Queue- line  Channel – line – refers to the number of lines available at each step  Phase – a single step in the process. EX: application process in college enrollment  infinite population of customers – the number of possible customers that may come into the store is very high or unlimited. When a customer enters the system, the odds of another entering the system are not impacted significantly  finite population of customers – number of possible customers is limited  Balking – when a potential customer sees the line but never joins the line because they think it looks too long/and or too slow  Reneging – when a customer joins the line, gets frustrated and leaves the line Arrival (lambda) rates: define and calculate  Number of customers / unit of time  Ex: Customers are taken care of in groups. If you travel by yourself, you are a group. If you travel with a spouse, the two of you are a group. If you were traveling with your family of four that would also be one group. The customer representative can help about 24 groups in an hour. Customer groups arrive to the check-in station at a rate of about 15 groups per hour.  Explained: On average a customer group joins the line every 4 minutes. (You can calculate that by dividing 60 minutes by 15 customers.) Sometimes people join the line quicker, while other parts of the day are slower. Service (mu) rate : define and calculate  On average, the representative takes about 2.50 minutes to help one group. (You can calculate that by dividing 60 minutes by 24 customer groups.) Service utilization factor (Rho)  Percentage of time a server is busy Single-server (A simple queuing model) Multiple-server problems (multiple server queuing model)    Percentage of time each worker is busy = .3125 Probability the system is empty - Since a second worker is added, the chance the facility might be empty (P0) increases from 37.5 percent in the one server model to 52.3 percent in the two-server model. Probability a customer will get served immediately - The odds that a customer gets served immediately also increases in a two-server model. To get served immediately in a oneserver model, the system must be empty before the customer arrives (P0 = 37.5 percent) Trade-offs in managing waiting lines  Having too many staff and underutilizing them  Having too long a line and angry customers  Both lose money Jockeying  Line jumping 4 retailing options     brick and mortar – all products and services are sold to customers from physical stores EX: McDonalds online or e-tailing – all products and services are sold to customers through and online website. EX: Amazon.com Bricks and Clicks – Products can be bought from a physical store or from an online system. Example: Barnes and Noble and BN.com Clicks and Calls – In addition to taking orders via the company website, some companies will also offer sales via the phone. Examples: Lands’ End and L.L. Bean Omni-channel retailing  web, in-store experience, social media, analytics  Retailers that are fully committed to engaging customers via catalogs, phone calls, websites, email, internet chatrooms, social media sites or mobile apps, and of course also in stores. True omni-channel retail readiness would require companies to have a very strong presence in the many channels they choose to meet customers.  Nordstrom o Nordstrom, the Rack (secondary market, outlets) o Online o Clearance o Charities  Logistics relationships – home delivery, transshipments 3 retail sources of supply  Manufacturers – In some cases retail organizations might purchase products directly from the companies that manufacture the goods. Example: Amazon may purchase iPhones and iPads directly from Apple.  Wholesalers – These organizations purchase goods from manufacturers. Typically, they purchase an assortment of goods from many manufacturers, thus a retail company could purchase all of their electronics from a single wholesaler versus having to purchase from each individual manufacturer. Example: A wholesaler might buy and store large quantities of office supplies and sell to a small general store at a reasonable price  Drop Shippers – A drop shipper is not really a source of supply, but rather an organization that ties manufacturers and/or wholesalers directly to consumers. Drop shippers never actually possess the product, they simply take orders which are fulfilled by another party. Chargebacks  These are effectively penalties charged by retail organizations to their suppliers/vendors for any number of minor and major supply chain offenses. The goal here is to motivate vendor compliance in the areas of on-time shipments, shipment accuracy, product quality, incorrect packaging, label errors, etc Collaborative, planning, forecasting and rescheduling (CPFR)  a formalized effort by supply chain partners to share data collectively and develop forecasts in an attempt to reduce supply chain costs through better planning Vendor managed Inventory (VMI) An arrangement where retailers allow vendors to monitor in-store inventories, initiate orders/shipments to the store when inventories are low, and also bring the items into the store and onto the shelf.  Challenges o Goal alignment – vendor, retailer, customer o Different ways of getting things done o IT compatibility, sharing concerns Last mile  portion of the supply chain between the final inventory holding facility and the end consumer.  If the customer ordered an item from Amazon.com, the last mile might represent the hundreds of miles from the Amazon center that carries that product to the consumers home.  The end consumer can be an office that ordered printer cartridges, a repair person that needs a part to fix their client’s refrigerator or a factory  4 types of retail ownership  Independent Retailer – One store, one owner. Usually they are trying to satisfy a very specialized market or locale. Example: Family owned corner stores or boutique stores that is run by the owner.  Chain – Multiple stores/facilities run by one owner/company. Example: Home Depot, WalMart, Costco, Gap, Macy’s, Safeway  Franchise – A franchisor owns the rights to a company and the name and is allowed to open an outlet under that name. The franchisee must abide by the rules and processes of the franchise. Examples: Jiffy Lube, McDonald’s, 7-eleven, Buffalo Wild Wings, Massage Envy.  Cooperative –Retailer that is owned by its customer members. These organizations typically try and fit the very special needs of the consumers that organized the cooperative. Examples: REI (Recreational Equipment Inc.). Prototype stores  a series of stores that have a common design, construction and layout  allows chain retailers to create standardized plans that will work across their many stores  can help develop efficiencies but also hold companies back when retail market evolves Planogram  a map of where every product goes on a retail store shelf  chains can develop planograms for each product category Store layout considerations  typical grocery store layout  produce typically first thing you see  dairy and bakery at farthest point of entrance  profit motivated – customer flow – navigation, consider entrance and exit points Scan based trading Module 6 Recap of supply chain basics  good chains deliver the bets cost, quality, speed, flexibility  best supply chains are effective, efficient, and adaptable  product development and commercialization  supplier relationship and management  demand management  order fulfillment  customer relationship and service management  returns management  shrinkage – problems such as defects, theft, damage, and other forms of loss o formula to account for rate of loss : order size required = (actual demand) / (proportion of acceptable product per order) importance of supply chain integration  the bringing together if supply chain partners – coordination of the business processes between diverse supply chain partners  integration is key for effectiveness, efficiency, and adaptability  full supply chain requires coordination and communication with the customer Obstacles to integration  related to poor communication, an unwillingness to share, and/or lack of trust between supply chain partners Push system  consumer demand is known and expected. Supply chain will preemptively buy materials, manufacture finished goods and even deliver them to a store or a picking and packing facility where consumers can buy them at a later date. Inventory is pushed toward the consumer in anticipation of consumer demand EX: people ordering food in a restaurant and things like vegetables have been cut earlier in the day  Characteristics o Consistently high demand for finished goods o Desire for finished goods to be immediately and readily available o Opportunities to take advantage of quantity discounts o Standardized end-items with little opportunity for customization o Vulnerability to obsolescence of inventory, high holding costs, and poor demand forecasts that may result in stock outs or massive overstocks. Pull system  Activated by consumer demand  Inventory is “pulled” by the consumer  EX: steak only cooked in a restaurant when ordered  Characteristics o High raw materials readily available o Customizable end-items with a range of customization options o Vulnerability to sudden increases in demand, poor forecasts that may result in poorly planned production systems/facilities Postponement  System that combines push and pull – pushing product elements that are considered standard and then allowing customers to pull product elements that can be customized.  EX: subway – subway knows customers would want some combination of bread, meat, etc so they have all of those – push The pull element occurs when the customer places the order and have something to their exact specifications Supply chain goals and trade-offs  Cost, quality, speed, flexibility  Lean manufacturing  Strives to meet consumer demand and desires but with minimal inventory levels and minimal supply chain waste  Pull system  Minimize inventory  Quality at the source  Suppliers are partners  Working and planning collaboratively  Be a leader – best today  Keys to lean manufacturing o Being devoted to the consumer – focused on continuous improvement of product, process, buyer-supplier relationship, materials used o Consistent quality o Having knowledgeable employees o Find ways to eliminate certain errors o Close supplier ties – trust and good relations to reduce uncertainty o Small lot sizes Rocks and water analogy  Picture of lake with lots of rocks  Question of how could a boat get through?  This is used to explain how companies use inventory to hide weakness of a supply chain weakness – poor forecasting, high defect rates, unreliable suppliers, theft, unreliable shippers, etc. – in each case more inventory might help hide these weaknesses  Now imagine if a company decided to remove the rock instead of hiding it – or they fixed the problem instead of hiding it with inventory  That is what companies with lean systems try to embrace every day  Instead of them hiding from their problems they expose them and eliminate the threat from becoming even bigger and more costly in the future Bullwhip effect  Very high and very low supply levels despite fairly constant demand levels  4 causes o Order batching – trying to place large orders o Price fluctuations – promotions, quantity discounts, special pricing/payment options o Rationing – buyer only gets partial order from supplier, demand higher than available supply o Shortage gaming – retailers inflate order sizes to counteract rationing 5 methods for controlling Bullwhip effect  Everyday low pricing (EDLP) – when suppliers resist the urge to have sales promotions and instead offer their lowest prices each day, buyers do not see an advantage to buying in bulk     Vendor management inventory systems (VMI) – systems where buyers share inventory information with suppliers. suppliers. Suppliers in turn take on the responsibility of managing inventory levels for the buyer by placing, delivering and sometimes even stocking the buyer’s shelves. This system benefits all parties: Shelves are full so customers are satisfied, suppliers know the sales patterns of their product from each store, and the store is less likely to experience stock outs since suppliers can better plan demand and deliveries. Information Sharing – Real-time information sharing between supply chain partners allows organizations to see transactions and inventory movements across the supply chain. This aids in making sound decisions based on fact. Improve Buyer-Supplier Relationships - Develop strong buyer-supplier relationships that result in the sharing of supply chain responsibilities. In addition, work together in the strategy and planning phases of building and improving supply chains. Practice Lean Manufacturing - Defects, waste, and a general lack of supply chain stability results in higher levels of uncertainty. Sound supply chain practices result in good products produced with minimal resources. These positive results require less safety stock to meet a much lower level of uncertainty. Square root rule calculation      percentage change in total system inventory = After/ before = 15,557/22,000 =0.707 Therefore a 70.7% of the original amount – A 29.3% decrease 8 supply chain processes  product development and commercialization, supplier relationship management, manufacturing flow management, demand management, order fulfillment, customer relationship management, customer service relationship management, customer service management, returns management Harvard case – Zara – Rapid Fire fulfillment  What were the key lessons Ortega took away from his early scare? o To be successful, "you need to have 5 fingers touching the factory and 5 touching the customer." Translation: Control what happens to your product until the customer buys it.  What are some of the things zara can do because of the super responsive supply chain it has built? o They can ramp up or down production of specific garments quickly and conveniently because it normally operates many of its factories for a single shift  How is Zara’s supply chain different from most other supply chains in their industry? o Keeps almost half of production in house o Far from pushing its factories to maximize its output – intentionally leaves extra capacity o Manufactures and distributes in small batches o Instead of relying on outside partners, zara manages all design, warehousing distribution, and logistics functions itself o Puts price tags on items before they are shipped o They tolerate and even encourage occasional stock-outs  What are the three principals zara lives by? o Close the communication loop o Stick to a rhythm across the entire chain o Leverage your capital assets to increase supply chain  Goal is to close information loop between end users and the upstream operations of design, procurement, production, and distribution as quickly and directly as possible  Describe design and production center in La Coruna o Attached to Inditex headquarters. Consists of three halls – women, men, children  How does Zara control the bullwhip effect? o Zara lets them adjust 40%-50% to avoid costly overproduction and the subsequent sales and discounting prevalent in the industry  What are some positive customer behaviors zara sees because of its operational plan? o Only one shirt on display and they customer thinks I must buy this or I will lose my chance  Why does zara prefer to own production assets? o Gives them a level control over schedules and capacities that would be impossible to achieve if the company were entirely dependent on outside suppliers  What type of products does zara produce themselves and which do they outsource? o The simpler products like sweaters in classic colors aere outsourced to Europe, Asia, Africa o They manufacture more complicated products like womens suits in new seasonal colors for their own factories