Operations and Innovation Management Assignment - Honoris United Universities

Assignment Task

Question 1

Read the following article and answer the question that follows:

Sinking fast: The perilous state of SA's six big State-Owned Enterprises (SOE’s)

Key state companies and agencies that play a pivotal role in driving the South African economy and distributing essential services are in disarray, as a high turnover of senior management hobbles their ability to take decisions and massive losses threaten their financial viability.

The “perilous financial state” of some of the companies may require government bailouts, BMI Research, a unit of Fitch Ratings Ltd., said in a report. We “continue to see the severely weakened financial condition of state-owned enterprises as a significant risk to the country’s fiscal health,” it said. These are some of the worst-affected institutions:

Eskom Holdings SOC Ltd.

The utility, which provides about 90 percent of South Africa’s power, is struggling to match supply and demand. Eskom last year stalled the sign-off of government-brokered deals to buy green power from independent producers, which were contracted to develop plants after shortages resulted in electricity cuts from 2008, saying it had spare capacity of its own.

When the government directed Eskom to conclude the accords, the utility said it would close several old coal-fired plants and terminate agreements with 48 coal-transport companies -- an announcement that spurred truck drivers to blockade roads in the capital, Pretoria.

An investigation, which was halted by the company, showed some suppliers were favored despite higher costs. Eskom has had an acting chief executive officer since November when Brian Molefe resigned after being implicated in a graft ombudsman’s report.

South African Airways

The state carrier expects its annual loss to widen to 3.5 billion rand ($280 million) in the year through March 30, from 1.5 billion rand the year before. SAA last turned a profit in fiscal 2011, has been surviving on government guarantees and doesn’t expect to make a profit until 2021. The airline, which is being run on a temporary basis by the head of its technical unit, is recruiting a new CEO who will be its seventh acting or permanent head in as many years.

The South African Social Security Agency

The state welfare agency has been at the heart of a controversy that’s threatened to interrupt the payment of welfare grants to more than 17 million people. While the Constitutional Court ruled three years ago that a contract Sassa issued to Net1 UEPS

Technologies Inc. to distribute the grants was invalid because tender rules weren’t followed, the agency failed to appoint a replacement and couldn’t take on the job itself. On March 17, the court castigated Sassa and said Net1 should continue distributing the monthly stipends for another year to give the agency time to get its house in order.

PetroSA Ltd.

The state oil and gas company lost 14.6 billion rand in the year through March 2015, mainly because of a writedown on its offshore Ikhwezi natural gas project, and a further 1.1-billion- rand impairment is anticipated this financial year. PetroSA sees no let-up in its challenges for at least the next three years. The company last had a permanent chief executive officer in 2015.

The Passenger Rail Agency of South Africa

The commuter rail service has lurched from one management crisis to the next. Its CEO, Lucky Montana, was fired in 2015 after a clash with the board, which accused management of concluding a number of irregular contracts worth billions of rand and asked the High Court to annul them. Acting CEO Collins Letsoalo was fired last month, following media reports that he gave himself a 350 percent salary increase. Transport Minister Dipuo Peters fired the entire board on March 3, saying it had failed to exercise adequate oversight.

The South African Broadcasting Corporation

The state broadcaster’s entire board quit last year after parliament instituted an inquiry into its conduct following a series of scandals, management blunders and legal disputes. An internal report shows the entity risks running out of cash. The SABC hasn’t had a permanent chief executive since 2015. The nation’s graft ombudsman found that the former chief operating officer, Hlaudi Motsoeneng, lied about his qualifications and the High Court barred him from working at the broadcaster

Question

If you were appointed a consultant to the South African Government, advise them on how the ten (10) decision areas of Operations Management could resolve and improve the operations of SOE’s in South Africa.

Question 2

Read the following text and answer the question that follows:

“Before the crisis, the quality department was just for looks, we certainly weren’t used much for problem solving, the most we did was inspection. Data from the quality department was brought to the production meeting and they would all look at it, but no one was looking behind it”. (Quality Manager, Preston Plant).

The Preston plant of Rendall Graphics was located in Preston, Vancouver, across the continent from the headquarters in Massachusetts. The plant had been bought from the Georgetown Corporation by Rendall in March 2000. Precision coated papers for ink-jet printers accounted for the majority of the plant’s output, especially paper for specialist uses. The plant used coating machines that allowed precise coatings to be applied. After coating, the conversion department cut the coated rolls to the final size and packed the sheets in small cartons.

The curl problem

In late 1998 Hewlett-Packard (HP), the plant’s main customer for ink-jet informed the plant of some problems it had encountered with paper curling under conditions of low humidity.

There had been no customer complaints to HP, but its own personnel had noticed the problem and wanted it fixed. Over the next seven or eight months a team at the plant tried to solve the problem. Finally, in October 1999, the team made recommendations for a revised and considerably improved coating formulation. By January 2000 the process was producing acceptably. However, 1999 had not been a good year for the plant. Although sales were reasonably buoyant, the plant was making a loss of around $2 million for the year. In October 1999, Tom Branton, previously accountant for the business, was appointed as Managing Director.

Slipping out of control

In the spring of 2000, productivity, scrap and re-work levels continued to be poor. In response to this the operations management team increased the speed of the line and made a number of changes to operating practice in order to raise productivity. “Looking back changes were made without any proper discipline and there was no real concept of control. We were always meeting specification, yet we did not fully understand how close we really were to not being able to make it. The culture here said, ‘If it’s within specification then it’s OK” and we were very diligent in making sure that the product which was shipped was in specification. However, Hewlett-Packard gets “process charts” that enables them to see more or less exactly what is happening right inside your operation. We were also getting all the reports but none of them was being internalized, we were using them just to satisfy the customer. By contrast, HP have a statistically based analytical mentality that says to itself, “You might be capable of making this product but we are thinking two or three product generations forward and asking ourselves, will you have the capability then, and do we want to invest in this relationship for the future?” (Tom Branton)

The spring of 2000 also saw two significant events. First, Hewlett-Packard asked the plant to bid for the contract to supply a new ink-jet platform, known as the Vector project, a contract that would secure healthy orders for several years. Second the plant was acquired by Rendall. “What did Rendall see when they bought us? They saw a small plant on the Pacific Coast losing lots of money”. (Finance Manager, Preston Plant)

Rendall was not impressed by what he found at the Preston plant. It was making a loss and had only just escaped incurring a major customer’s disapproval over the curl issue. If the plant did not get the Vector contract, its future looked bleak. Meanwhile, the chief concern continued to be productivity. But also, once again, there were occasional complaints about quality levels. However, Hewlett-Packard’s attitude caused some bewilderment to the operations management team. “When Hewlett-Packard asked questions about our process, the operations guy would say, “Look, we’re making roll after roll of paper, it’s within specification. What’s the problem?” (Quality Manager, Preston Plant)

But it was not until summer that the full extent of HP’s disquiet was made. ‘I will never forget June of 2000. I was at a meeting with HP in Chicago. It was not even about quality. But during the meeting one of their engineers handed me a control chart, one that we supplied with every batch of product. He said, “Here’s your latest control chart. We think you’re out of control and you don’t know that you are out of control and we think that we are looking at this data more than you are”. He was absolutely right and I fully understood how serious the position was. We had our most important customer telling us we couldn’t run our processes just at the time we were trying to persuade them to give us the Vector contract.” (Tom Branton)

The crisis

Tom immediately set about the task of bringing the plant back under control. They first of all decided to go back to the conditions which prevailed in the January, when the curl team’s recommendations had been implemented. This was the state before productivity pressures had caused the process to be adjusted. At the same time the team worked on ways of implementing unambiguous “shut down rules” that would allow operators to decide under what conditions a line should be halted if they were in doubt about the quality of the product they were making. At one point in May of 2000 we had to throw away 64 jumbo rolls of out- of-specification product. That’s over $100 000 of product scrapped in one run. Basically that was because they had been afraid to shut the line down. Either that or they had tried to tweak the line while it was running to get rid of the defect. The shut – down guidelines in effect say, “we are not going to operate when we are not in a state of control” . Until then our operators just couldn’t win. If they failed to keep the machines running, we would say, “ you got to keep productivity up ”. If they had kept the machine running but had quality problems as a result, we criticized them for making garbage. Now you get into far more trouble for violating process procedures, than you do for not meeting productivity targets (Engineer, Preston Plant).

This new approach needed to be matched by changes in the way the communications were managed in the plant. ‘We did two things that we had never done before. First, each production team started holding daily reviews of control chart data. Second, one day a month we took people away from production and debated the control chart data. Several people got nervous because we were not producing anything. But it was necessary. For the first time you got operators from the three shifts meeting together and talking about the control chart data and other quality issues. Just as significantly we invited Hewlett-Packard up to attend these meetings. Remember these weren’t staged meetings, it was the first time these guys had met together and there was plenty of heated discussions, all of which the Hewlett-Packard representatives witnessed.’ (Engineer, Preston Plant).

At last something positive was happening in the plant and morale on the shop floor was buoyant. By September 2000 the results of the plant teams’ efforts were starting to show results. Processes were coming under control, quality levels were improving and most importantly, personnel both on the shop floor and in the management team were beginning to get into the “quality mode ” of thinking. Paradoxically, in spite of stopping the line periodically, the efficiency of the plant was also improving.

Yet the Preston team did not have time to enjoy their emerging success. In September 2000 the plant learned that it would not get the Vector project because of the recent quality problems. Then Rendall decided to close the plant. “We were losing millions, we had lost the

Vector project, and it was really no surprise. I told the senior management team and said that we would announce it probably in April 2001.The real irony was that we knew we had actually already turned the corner ’ (Torn Branton)

Question

Identify the Total Quality Management (TQM) concepts and demonstrate how these could have been used at the Preston Plant.

Question 3

• Khuzawayo Construction a local sub-contractor expects to use 19 675 pockets of cement for 2022. Carrying costs are R 6.25 per unit and order costs are R 55. The organisation works 315 Days per year. Determine:
  • The Economic Order Quantity (EOQ) (4)
  • The number of orders per year (3)
  • The length of the order (3)

3.2. Read the following extract and answer the questions that follow:

When a Scented Candle Just Won’t Do

A fragrance called green tea blows through the corridors of Sonesta hotels worldwide courtesy of Air Esscentials, a 10-year-old company in Miami that sells scent-diffusing systems. Green tea lemongrass, another Air Esscentials creation, is the aroma of choice at Morgans Hotels worldwide. Now, those very same smells are also perfuming the living rooms and bedrooms of many private residences.

Hotels, resorts and casinos, as well as retailers like Victoria’s Secret and Thomas Pink, depend on ambient scents to strengthen brand identity — as well as to get customers to linger and spend. Piping in those fragrances has long been the principal business of Air Esscentials, Aroma360, ScentAir and their rivals in what is known as the air care business. But increasingly, these companies are finding a new revenue stream in the home market. (In other words, pull out those plug-ins.). “Our company grew rapidly because when we would put a scent into a Sonesta hotel or a Ritz-Carlton or a Melia resort, guests would go up to the front desk and ask how they could get it,” said Spence Levy, president of Air Esscentials.

“The home market has grown 35 percent a year for us every year since we started in 2007.”

Drugstores and other retailers are fully stocked with low-cost home fragrances, from room sprays to candles and wall plug-ins. Now, thanks to Air Esscentials and other such firms, there are options on the higher end: compact yet high-powered diffusers that will infuse scent throughout a room for hours or days at a time. Examples include Aera, a $200 device the size of a paperback book that its parent company, Prolitec, says can perfume a room of up to 2,000 square feet, with fragrance levels adjustable through an app. Each fragrance capsule costs $50 and, according to Aera’s website, will last about 60 days if it is placed in “a 450-square-foot room, on an average setting running for 24 hours per day.”

Jeanette Wolfe, a holistic health educator, is a big fan of such devices and a big believer in the power of scent to increase energy and “drop you into a calm place,” as she put it. She used to rely on old-fashioned methods to perfume her Victorian home in Princeton, N.J.: dried flowers and squares of muslin that were infused with essential oils and placed in the air vents. “But it wasn’t as strong or clear or efficient a scent as I wanted,” Ms. Wolfe said.

Now each floor of the house has its own fragrance dispersed by an AroMini, one of several styles of cold-air diffusers for the home made by AromaTech. According to the company, AroMini, a 12-inch-tall cylinder that costs $279, is strong enough to imbue fragrance in a 1,000-square-foot room. The essential oil or aroma oil refills cost $16 to $180, and last about a month.

The home fragrance market is a $6.4 billion business at the retail level, according to a 2016 study by Kline, a market research and consulting firm in Parsippany, N.J. Using data from a Simmons national consumer survey, the online research company Statista calculated that 73 percent of Americans used room deodorizers and air freshener sprays last year; the figure is poised to hit 77 percent by 2020.

More than just a way of eliminating odor, home fragrance has lately become a means of self- expression. “It’s an element of design, like the colors on the wall or the furniture — it’s a way for people to communicate who they are,” said Richard Weening, chief executive of Prolitec, the Milwaukee-based commercial air care company that recently introduced Aera. “I do not think I’ve met an individual who doesn’t respond to scents,” Ms. Wolfe said.

Actually, some don’t respond well. Consider the people who are allergic to perfumes or just don’t like them. The “fragrance free” movement, which uses the tagline “think before you stink,” has tried for years to beat back the use of fragrances in public places, in deference to the scent-sensitive. Still, there are many who consider lemon-infused air to be a luxury, maybe even a necessity. “The general principle is: People like places that smell good, and they don’t like places that smell bad,” said Mr. Weening of Prolitec.

To hear him tell it, the conventional tools deployed for making a place smell good — candles, sprays, wax melts, reed diffusers, and so-called liquid electricals like plug-ins — leave something to be desired. The scents are heavy, inconsistent and, in his view, maybe just a bit unrefined. “It’s that New York taxicab smell,” Mr. Weening said. Two years ago, Dimitri Gailit, the chief executive of AromaTech, based in Vancouver, British Columbia, noticed that his company was fielding calls from clients who wanted their residences to smell as inviting as their stores. “So we decided to make every one of our products available for home use,” he said.

The devices, sold through the company’s website and Amazon, include the AromaCube ($30), a battery-operated diffuser meant for a small space like a bathroom; the AromaPod ($129), designed for up to 500 square feet; and the industrial-strength AromaPro ($849), which comes with an HVAC adapter, meaning it can work through a customer’s home heating and air-conditioning system. The company’s cold air diffusion process breaks down aroma oils and essential oils — the most popular are white tea and thyme, and oriental garden — and disperses them in the form of dry vapor.

Depending on the device, customers can digitally adjust the intensity of the vapor as well as the hours that it is dispersed. Control of the diffusers via an app is in the planning stages.

“There are people who are buying our machines for aromatherapy,” Mr. Gailit said, “and then there are customers who want to create a certain ambience in their home, like when they’re having a party. They may be having a tropical-themed party or a chocolate fondue party, so they’ll disperse a fragrance like coconut spice or chocolate.” Customers have responded, Mr. Gailit said: “Since we introduced our consumer line, we have significantly increased our business.” Mr. Weening said he had had the same experience since Aera hit the market.

“We’re way ahead of where we expected to be with sales,” he said. “People are buying multiple machines.”

Aroma360’s clients are mostly commercial, “but a lot of business owners asked for scents in their home as well,” said Meghan McMahon, the company’s director of marketing.

Residential customers can choose from cold air diffusers that range in price from $149 (for 300 to 800 square feet) to $1,499 (to cover up to 6,000 square feet). ScentAir, too, ventured into the home fragrance market at the urging of commercial customers. But rather than sell directly to the consumer, ScentAir has made its home fragrance system — which is

essentially a high-end plug in that costs $130 — available exclusively on the websites of hotel clients like Marriott and Westin. “It’s a nice tie-in for us,” said Edward Burke, ScentAir’s vice president of customer strategy and communications. “And by offering the home version on the hotels’ websites, it helps us be a better partner.”

• A Structured Development Process (SDP) is a sequence of steps or stages to conceive design and commercialise a product. Using the case study:
• Explain how these organisations identified the opportunity and defined their concept for scented
• Explain the steps they would have undertaken in developing their prototypes for scented
• Explain how they configured their distribution and marketing activities.

Question 4

The table below consists of data collected for a project

Act	Predecessor	Optimistic	Most likely	Pessimistic
a	-	3	6	8
b	-	2	4	4
c	-	1	2	3
d	a,b	6	7	8
e	c	2	4	6
f	e	6	10	14
g	e	1	2	4
h	d	3	6	9
i	g,h	10	11	12
j	f,g	14	16	20

 

Questions

• Using PERT, calculate the time (t) for each
• Draw the network diagram (AON) based on the above and identify the critical path.

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