Question

1. Map Crayola’s five pillars of operational leadership to the competitive priorities in Table 1.3
2. Create an assessment of Crayola’s competitive priorities as it relates to their Asian expansion plans
3. Which of the competitive priorities might present the biggest challenge to Crayola as it expands internationally?

VIDEO CASE Using Operations to Create Value at Crayola Operations processes are at the heart of Crayola, the Easton, Pennsylvania maker of crayons, markers, and paints loved by children of all ages around the world. Since 1903, the company has been taking wax, dyes, and other raw materials and turning them into a calorful array of products sold through an extensive network of distributors and retailers such as Walmart and Target stores. Each day, the company produces 13 million crayons, 2 million mark- ers, 500,000 jars of paint, 170,000 pounds of modeling compounds, and 22,000 Silly Putty eggs from its three manufacturing plants. Crayola derives much of its own inspiration and creativity by asking, "What would a kid do?-especially when focusing on innovation. Not that kids have the knowledge to create complex systems and operational pro- cesses. Rather, the question leads to creative solutions by freeing employees to think about the company's competitive priorities in new ways. In the supply chain, the company maintains five "pillars" of operational leadership. These pillars focus attention on differentiating the company on (1) innovation, (2) sustainability, (3) agility and resilience, (4) cost, and (5) quality and ethical responsibility The company has a history of innovation. They were the first to introduce an art education program called Dream-Makers, into the nation's elemen- tary schools. Washable markers and crayons also were firsts for the indus- try and continue to be best-sellers for the company. Recently, the language on crayon paper packaging changed to include three languages-French Crayola A HALLMARK COMPAN Crayola, headquartered in Pennsylvania, has become a leader in its industry by focusing on operational excellence and innovation. English and Spanish-instead of one. This change alone saved $400,000 in paper and printing costs since the packaging could now be used across multiple markets. In the area of sustainability, Crayola built a solar farm on a 20-acre site adjacent to its manufacturing plant in Easton. The farm produces enough energy to completely run the plant as well as the headquarters build- ing nearby. The 850 million colored pencils produced each year only use reforested wood, with one tree planted for every tree harvested. Sourcing for paraffin wax used in crayons recently moved from Louisiana to western Pennsylvania, saving 5,000 barrels of oil annually related to wax transporta- tion. All plastic components are made with recycled plastics. And any excess wax from the production of crayons is reintroduced into the manufacturing process so no waste is produced The company is aggressively pursuing new markets outside the United States. China's market of children ages 0-14 is larger than all the other global markets combined, with more than half the world's child population. Yet only 14 percent of the company's total sales come from international markets.So, particular attention is being devoted to growing the company's manufacturing and distribution presences there. As you can imagine, this means operations managers must think about how to grow the current supply chain beyond the boundaries of existing domestic and international borders if additional expansion is to occur. QUESTIONS 1. Map Crayola's five pillars of operational leadership to the competitive priorities in Table 1.3 2. Create an assessment of Crayola's competitive priorities as it relates to their Asian expansion plans. 3. Which of the competitive priorities might present the biggest challenge to Crayola as it expands internationally? TABLE 1.3 DEFINITIONS, PROCESS CONSIDERATIONS, AND EXAMPLES OF COMPETITIVE PRIORITIES Definition Processes Considerations Cost Example Costco achieves low costs by designing all processes for efficiency, stacking products on pallets in warehouse-type stores, and negotiating aggressively with their suppliers Costco can provide low prices to its custom- ers because they have designed operations for low cost 1. Low-cost Delivering a service or a prod- uct at the lowest possible cost to the satisfaction of external To reduce costs, processes must be designed and operated to make them efficient using rigorous process analysis that addresses workforce methods, scrap or rework, overhead, and other factors, such as investments in new automated facilities or technologies to lower the cost per unit of the service or product operations or internal customers of the process or supply chain Quality To deliver top quality, a service process may require a high level of customer contact, and high levels of helpfulness, courtesy, and availability of servers. It may require superior product features, close tolerances, and greater durability from a manufacturing process Rolex is known globally for creating precision timepieces 2. Top quality Delivering an outstanding ser- vice or product Producing services or products Processes must be designed and monitored to reduce McDonald's standardizes work methods, staff that meet design specifications errors, prevent defects, and achieve similar outcomes training processes, and procurement of raw materials to achieve the same consistent product and process quality from one store to the next. 3. Consistent quality over time, regardless of the "level" of quality on a consistent basis Time Netflix engineered its customer relationship, order fulfillment and supplier relationship processes to create an integrated Web-based system that allows its customers to watch multiple episodes of a TV program or movies in rapid succession. 4. Delivery speed Quickly filling a customer's order Design processes to reduce lead time (elapsed time between the receipt of a customer order and filling it through keeping backup capacity cushions, storing inventory, and using premier transportation options 5. On-time delivery Meeting delivery-time promises Along with processes that reduce lead time, planning United Parcel Services (UPS) uses its expertise in logistics and warehousing processes to deliver a very large volume of shipments on-time across the globe processes (forecasting, appointments, order promis- ing, scheduling, and capacity planning) are used to increase percent of customer orders shipped when promised (95% is often a typical goal). Processes aim to achieve crass-functional integration and involvement of critical external suppliers in the service or product development process Zara is known for its ability to bring fashionable clothing designs from the runway to market quickly 6. Development speed Quickly introducing a new ser- vice or a product Flexibility 7. Customization Satisfying the unique needs of each customer by changing service or product designs Processes with a customization strategy typically have low volume, close customer contact, and an ability to reconfigure processes to meet diverse types of customer needs Ritz Carlton customizes services to individual guest preferences 8. Variety Handling a wide assortment of services or products efficiently Processes supporting variety must be capable of larger volumes than processes supporting customization. Services or products are not necessarily unique to specific customers and may have repetitive demands Amazon.com uses information technology and streamlined customer relationship and order fulfillment processes to reliably deliver a vast variety of items to its customers. Accelerating or decelerating the Processes must be designed for excess capacity and rate of production of services or products quickly to handle large fluctuations in demand The United States Post Office (USPS) can have severe demand peak fluctuations at large postal facilities where processes are flexibly 9. Volume flexibility excess inventory to handle demand fluctuations that can vary in cycles from days to months. This priority could also be met with a strategy that adjusts capacity designed for receiving, sorting, and dispatch- without accumulation of inventory or excess capacity. ing mail to numerous branch locations. Competitive Priorities and Capabilities competitive priorities A customer-driven operations strategy requires a cross-functional effort by all areas of the firm to understand the needs of the firm's external customers and to specify the operating capabilities the firm requires to outperform its competitors. Such a strategy also addresses the needs of internal customers because the overall performance of the firm depends upon the performance of its core and support ing processes, which must be coordinated to provide the overall desirable outcome for the external customer. Competitive priorities are the critical operational dimensions a process or supply chain must |possess to satisfy internal or external customers, both now and in the future. Competitive priorities are planned for processes and the supply chain created from them. They must be present to maintain or build market share or to allow other internal processes to be successful. Not all competitive priori- ties are critical for a given process; management selects those that are most important. Competitive capabilities are the cost, quality, time, and flexibility dimensions that a process or supply chain actually The critical dimensions that a process or supply chain must possess to satisfy its internal or external customers, both now and in the future competitive capabilities The cost, quality, time, and flexibility dimensions that a process or supply chain actually possesses and is able to deliver

Answer 1

COMPETITIVE PRIORITIES IN OPERATION MANAGEMENT

In operations management, competitive priorities are a crucial decision variable for operations managers. Competitive priorities signify a strategic focus on building specific manufacturing capabilities that can improve a plant’s position in the market. Such focus may guide decisions with regards to the capacity, technology, production process, planning, control, etc. In fact the strength of an operations strategy is dependent on the level of consistency between emphasised competitive priorities and matching decisions concerning operational structure and infrastructure. Fitting a plant’s practices to the competitive priorities is important to developing operations as a competitive advantage.

According to Porter, there are two primary routes for competitiveness: cost leadership or differentiation. In contrast, according to Leong, within manufacturing there are actually 5 dimensions of competitive priorities: cost, flexibility, quality, delivery performance and innovativeness.

We have to make trade-offs within competitive priorities. In a competitive market, no business can normally be on top in all aspects. The purpose of the priorities is to assist in the mission of positioning an organization with an advantage vs its rivals.

Crayola’s five pillars of operational leadership to the competitive priorities

The five major pillars of operations Crayola abides by are
Innovation
Quality and Ethical Responsibility
Sustainability
Resilience and Agility

The principal role of Crayola's operations and supply chain management?

Delivering high quality, safe, eco-friendly products. Also Sourcing, manufacturing and distributing.

How does the cost pillar of Crayola's strategy lead to growth?

Driving costs out of the processes so investment can be made in the company globally

How many crayons are made a day

13 million

how many markers are made a day

2 million

how many paint jugs are made a day

1/2 million

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how many silly putty eggs are made a day

22,000

how many pounds of modeling clay are made a day

170,000lbs

what was the major innovation introduced by Crayola 15 years ago

Color Wonder: only gets paint on paper not walls or furniture.

What are four different examples f products/organizations/industries described in the video corresponding to the four process choices?

Job Shop- Burrito Shop/Small Tool Shop
Batch- WT Graphics/Chemical Plant
Assembly- Crayola/Car Manufacturing
Continous- Oil/Gas industry

Job shop

Production Volume = Lowest
Product Variety = Highest
Resource Flexibility = Highest
Automation = Lowest

Batch

Production Volume = Low
Product Variety = High
Resource Flexibility = High
Automation = Low

Assembly

Production Volume = High
Product Variety = Low
Resource Flexibility = Low
Automation = High

Continuous

Production Volume = Highest
Product Variety = Lowest
Resource Flexibility = Lowest
Automation = Highest

What is the name of the process improvement initiative at Starwood hotels?

POI- Power of Innovation

Which are the four areas in which Starwood has teams that go around and help different facilities improve processes?

Kitchen Prep and Production
Stewarding
Front Office
Housekeeping

What were the responsibilities of the stewarding team at the Phoenician Resort?

Cleaning dirty dishes

Supporting the service staff in getting ready for banquets and events

Covering 8 kitchenns and 2 bake shops over campus

Keeping public areas clean ( cabanas, etc.)

What was the major change in the stewarding process implemented at Phoenician?

Golf carts to go from point a to b

How much was the percentage improvement in steward labor productivity as a result of process improvement?

23%

How much was annual cost saving at Phoenician for this process?

$350,000 annual cost saving a year

How many labor hours were saved annually?

28,000 labor hours saved

How would you define gate turnaround for an airplane?

The time it takes to unload and reload the plane.

What is southwests average gate turnaround time?

25 mins or less

What is competitors average gate turnaround time?

30 mins

How much was one minute addition to gate turnaround worth in terms of additional airplanes and in terms of annual revenue?

5 new airplanes
each cost 25,000 so 125,000

Why does gate turnaround matter in terms of profitability?

When the plane isn't in the air it isn't creating revenue.

What are the different pools of resources involved in ensuring efficient gate turnaround

OTIS- Operations Terminal Information System

ground crew- transfer driver, local driver, lav driver, lead gate agent, bin agents

How do standard jets Boeing 737 help in making southwest's operations more profitable?

Only pay to train employees on one type of airplane.

Stock only spare parts from one type of plane.

What are some variables that can impact standard process of gate turnaround

Capacity Cushion
Customers Experience
Carry-on Luggage
Learning Curve of Employees
Type of Customers

What metrics does US-Department of transportation measure for airline performance comparison?

On Time Arrivals
Complaint and Accommodations
Bag Handling - # Bags Lost

Process Strategy

The pattern of decisions made in managing processes so they will achieve their competitive priorities.

A high customer contact service does NOT indicate:

Low Complexity

Front Office

Service process structure that usually involves work flow steps that vary from customer to customer.

People-Processing Service

Services are provided to the customer who must be present.

Possession-Processing Service

Services are provided for the customer who do not have to be present.

A back office service structure is most similar to...

A line process

Process Characteristics of a College Dining Hall

Line Flows

A major supplier of an auto manufacturer would adopt what production and inventory system?

Made-To-Stock

High-volume manufacturing usually means...

Low Customer Involvement

Flow Chart

Diagram that traces the flow of information, customers, equipment, or materials through the various steps of a process.

Service Blueprint

A special flowchart of a service process that shows which steps have high customer contact.

Process Charts

An organized way of documenting all activities performed by a person or group at a workstation, with a customer, or working with certain materials.

Failure Mode & Effect Analysis (FMEA)

Used to identify failures in a process, prioritize using RPN, and reduce/prevent their occurrence.

Basic Process Elements

Inputs
Transformation
Resources
Outputs

Process

Any activity or group of activities that takes one or more inputs, transforms them, and provides one or more outputs for its customers.

Operation

A group of resources performing all or part of one or more processes

Core Process

Set of activities that delivers value to external customers.

Logistics

Selecting transportation mode (train, ship, truck, airplane, etc.) scheduling inbound and outbound shipments, providing intermediate inventory storage.

Cross-Docking

Packing of products of incoming shipments so they can be easily sorted more economically at intermediate warehouses for outgoing shipments for their final destination.

Core Competencies

Unique resources and strengths that an organization's management considers when formulating a strategy. (Workforce, Facilities, Market and Finance Know-How, System and Technology)

Competitive Priorities

Critical dimensions that a process or supply chain must process to satisfy its internal or external customers, both now and in the future.

Types of Competitive Priorities

Low Cost Operations, Top Qualities, Consistent Quality, Delivery Speed, On Time Delivery, Customization, Variety, Volume Flexibility

Process Divergence

Extent to which the process is highly customized with considerable latitude as to how its tasks are performed.

Order Winners

A criterion customers use to differentiate the services or products of one firm from those of another. (Picks a product because it is shiny)

Order Qualifiers

Minimum level required from a set of criteria for a firm to do business in a particular market segment.

Economies of Scope

High Capital Intensity and High Resource Flexibility

Reengineering

The fundamental rethinking and radical redesign of processes to improve performance dramatically in terms of cost, quality, service, and speed.