Operations Management Essay
The two companies to be used as case studies are Amazon and Dell. Before going into the work measurement activities and operations layout, it is necessary to provide a useful background on each company and its overall business strategy. This overview will form the basis of their operations.
Amazon’s business model is based on an e-commerce strategy. Its online platform ensures that it can operate on a 24/7 basis, has access to global markets and can provide customers with speedy service, accuracy and reduced transaction costs. This means that customers will not have to spend so much time trying to find the information they need to buy goods and services or look for options that may be suitable to their needs. Amazon also operates through catalogue flexibility, workflow automation and secure payment systems that ensure that business activities are conducted safely and securely. It specializes in the provision of a diverse range of products such as books, CD, electronic gadgets, clothes and other materials useful to customers via an online platform which is accessible and provides options for selecting desired items, saving them and ordering them at a later date. Amazon operates through the use of a database that contains an updated list of all the items available so that customers can always have access to details on items, prices and delivery options. Customers also have the chance to choose between different ranges of sellers. As part of its operations, Amazon gives customers access to personalized services and options that are related to their buying history and personal preferences. Through this platform, there are also customer reviews and feedback on different products.
Work Measurement Activities
Amazon is a retail company that provides products to customers via an online platform. It’s a leading online shopping site that first started by selling books online. Over time, it has extended to employ over 14000 people located in different places around the world. It has over 20 fulfillment centres which help to distribute goods and services to its customers. Amazon initially operated via the pull system between 1996 and 1999. The company originally did not have an inventory and depended on Ingram Book Group to meet the demands from customers. By 1999, the Company had developed a Push-Pull system that keeps record of high selling products. The Long Tail approach is used in the company and this has resulted in setting up partnerships with suppliers to increase profit margins, provide excellent service to customers and increase sales. Amazon’s data warehouses are supported by HP products and a number of software companies that provide services such as security, purchase order, invoice, payment and order tracking through the internet platform. Fulfillment Centers are located across USA, Europe and Asia (Weber, 2008).
Amazon’s fulfillment process is executed via the internet. Customers’ orders are passed through the Internet via a firewall that relates the order to the amazon.com data warehouse. Through the extranet portal, third party suppliers also get orders from customers and can therefore proceed to supplying customers with ordered goods. Through the use of the Fulfillment Center, each Amazon Warehouse can deliver up to 200,000 pieces of products a day. To increase operational efficiency, items are combined into one shipment if they are of small quantities.
Once the customer places an order online, the information is transmitted to the appropriate Fulfillment Center based on the Customer’s location. A “Flowmeister” receives the orders and sends them to specific employees. The bins with the ordered items light up and items are picked up by an Amazon employee. The boxes containing ordered items are packed, weighed, labelled and sent to one of the 40 track bays to be picked up by 3PL. Amazon outsources its delivery to packaging companies like United States Postal Service, FedEx and DHL.
The barcodes on the items are usually matched with order numbers and then inserted into a chute for packing. Customers have options of choosing how their products are delivered and there is an opportunity for bulk packaging. This helps the company to keep inventory at a minimum. Some Distribution Centres carry only a few types of products in order to increase efficiency and decrease inventory costs (Wild, 2002). A large part of Amazon’s success is due to its integration of information flow and the quality and speed of physical delivery.
The Dell business model is based on a direct business to customer model that is appealing and personalized. Dell doesn’t assemble a computer system until it has an order confirmed by a customer. This leads to very low inventory levels and a favorable cash conversion cycle. The speed of Dell’s manufacturing process ensures that customers are willing to wait for the delivery, especially since they are waiting for a system that meets their specifications (Accenture, 2009). This operational model is based on the ability of Dell to predict customer demand and schedule the manufacturing processes to suit the needs of customers. All the computer parts are readily available so that the speed of assembling computers is highly effective and satisfactory. Accenture assisted Dell in setting up this system to speed up their operations. In order to plan the purchasing and manufacturing activities of Dell, Accenture analyzed customers’ order history, and also analyzed the market trends that determine demand. Dell’s planning and scheduling model relies heavily on factors such as historical data and industry trends. It also examines factors such as supply and shipping trends, factory manufacturing capacity and varying customer requirements. Through the use of supply chain planning and management applications, Dell is also able to main competitive advantage within the market.
The build to order environment implemented by Dell involves three basic modules: Factory Planner which deals with the management of scheduling, Supply Chain Planner which deals with inventory planning, and the Collaboration Planner which focuses on communication with suppliers and logistic operations (Accenture, 2009).
Work Measurement Activities
As Dell receives orders from customers, its manufacturing facilities send a real time signal to suppliers’ inventory locations. These materials are shipped and the individual components are used to build the systems by placing each item in the appropriate place in order to fulfill the customers’ order. Suppliers also have access to a portal where they can view Dell’s specific order requirements and confirm that they are able to meet delivery goals. Through this, Dell can process customer orders and deliver the systems quickly and effectively.
As a result, Dell’s operations hold a maximum of four days’ inventory and provide a balance between the supply and the demand for components. This has reduced the amount of time spent in the factory and reduced the amount of space needed for warehousing (Accenture, 2009).
In conclusion, the work measurement activities of Dell and Amazon are both similar as they require an online platform for marketing, processing of orders, notifying customers and connecting suppliers. The basic difference is that while Amazon sells ready-made products, Dell assembles the computer parts from scratch.
Similarities and Differences in Amazon & Dell’s Operations Layout
Operation layout refers to the physical layout of a business activity/process that has an impact on the business and the way it works. There are different types of Layout: fixed-position layout, process-oriented, office, retail, warehouse and product-oriented layout (Reed, 1967).
Amazon & Dell exhibit some elements of the office layout which positions workers and their equipment in a way that ensures the expedient transfer of information. This layout is common where people and equipment are arranged for information flow. The administrative, accounting and human resources departments would have to be arranged this way.
Dell would make use of the product-oriented layout which seeks the best personnel arrangement and use of machines in a continuous production environment (Reed,1967). Dell’s strategy would help minimize line imbalance, delays and idle time associated with most manufacturing organizations.
Dell & Amazon both need to adopt the service/retail framework and their areas of concern revolve around safety of workers, easy flow of communication and materials. These factors are central to their success. Mostly, Amazon would have the warehouse layout where it stores all the books ordered by customers. The layout depends on the variety of items stored and the number of items that have to be picked each particular time. The warehouse would comprise zones containing different materials. The order picker would pick up the required items from the specific zone, hand it over to the conveyor, who would transfer it to the truck. Goods would be transported from incoming trucks to outgoing trucks, and suppliers would need to provide effective bar codes and packaging for rapid shipment of goods.
With the product-oriented layout of Dell, there would be emphasis on standardized products, stable production quantities, and a uniform quality of raw materials and components. The assembly line would focus on assembling fabricated parts, and conducting repetitive tasks. This ultimately leads to lower cost per unit, lower inventory cost and easier training and supervision.
Accenture. (2009). Supply Meets Demand at Dell Inc. Retrieved November 28, 2009, from Accenture: http://www.accenture.com/Global/Services/By_Industry/Communications/Access_Newsletter/Article_Index/SupplyComputer.htm
Reed, R. (1967). Plant location, layout, and maintenance (The Irwin series in operations management). Canada: R.D. Irwin.
Weber, S. (2008). Sell on Amazon: A Guide to Amazon’s Marketplace, Seller Central, and Fulfillment by Amazon Programs. United States: Weber Books.
Wild, T. (2002). Best Practice in Inventory Management, Second Edition. St. Louis: Butterworth-Heinemann.