Mini-Cases • Chapter 3 ½ 2
Mini-Cases
Chapter 3: enhancing productivity: a key to success
All-Right Manufacturing Company
Nancy Nelligan just received the following memo from her boss, the president of All-Right Manufacturing Company.
TO: Nancey Nelligan, V.P., Finance
FROM: Leo Everitt, President
RE: Productivity Improvement Program
I'm sure you are aware of how important productivity is to manufacturing organizations, and All-Right is no exception. However, I'm not sure that our company's productivity is all that it could be. As a consequence, I would like you to serve as coordinator of a productivity improvement program. As our newest executive, I think this would be a real good chance for you to get involved and have a real impact on the organization.
I have already sent memos to the other vice presidents and division managers directing them to cooperate with you on this activity. Please report back to me in two months indicating the actions you have taken and the results achieved.
Nancy just started working for All-Right one month ago. She had previously held a position in the corporate finance department of a Fortune 500 company. In that position, Nancy was extensively involved in securing capital for expansion and acquisition.
In her previous position, Nancy had not been directly involved in any productivity improvement activities, although she was aware of the productivity reports produced by her previous employer and knew how the data were collected and analyzed. To the best of her knowledge, All-Right does not now collect any such data or perform any calculations to determine productivity. The president's vague feeling that productivity could be better supported Nancy's belief that All-Right was not calculating productivity.
Since joining All-Right, Nancy had met most of the other vice presidents and managers. Some of these she now knows fairly well, although Nancy is still regarded as the "new kid on the block." One thing she learned from discussions with the vice president of operations is that the company made an abortive attempt at implementing ISO-9000 a few years ago. According to her recollection of the conversation, the implementation of ISO-9000 also had been mandated by a memo from the president. She wondered whether the productivity improvement program might not end up going the same way.
1. Was the president's approach to productivity improvement the correct way to implement such a program?
2. Was the time frame he gave reasonable for achieving meaningful results?
3. Put yourself in Nancy's shoes and draft a memo to the president suggesting the course of action that you think should be taken to achieve useful results.
4. In the memo, include a summary of the types of data needed to calculate productivity.
Wholesome House Restaurants
Wholesome House Restaurants operates a chain of health-food restaurants located in suburban shopping malls. The company has tried to ride the crest of increased public awareness about healthy eating by offering low-calorie, low-fat cuisine to its customers. Instead of the usual fare available at fast-food restaurants, Wholesome House offers its customers dishes that include fish and chicken cooked without fat. In addition, the company's restaurants provide fresh fruits and vegetables and whole-grain breads. Since its startup, the company has been doing quite well.
However, like most start-up companies, Wholesome House is concerned about its future. The restaurant business has become increasingly competitive, and many chains that started out well have gone bankrupt.
The management of Wholesome House is concerned about rising operating costs and the company's productivity. Presently, its restaurant operations are labor intensive because of the cuisine offered. Using only fresh fruits and vegetables requires extensive time and effort for food preparation. In addition, the sandwiches and most other meals offered by the restaurant are assembled by hand. Wholesome House has not adopted any of the assembly-line techniques for producing mass quantities of food that McDonald's and Taco Bell have used. On the other hand, Wholesome House is able to charge more for its products because of its market niche and the fact that most of the restaurant's customers have average or above average incomes.
Wholesome House has collected the following data concerning its operations.
Two Years Ago / Last YearNet sales and operating revenue / $473,286,000 / $631,987,000
Labor costs / 120,470,000 / 203,405,000
Material and supplies / 150,032,000 / 206,783,000
Services / 35,991,000 / 45,276,000
Capital / 127,486,000 / 250,478,000
1. Basing your response on this information, comment on the company's productivity.
2. Can you identify inputs whose productivity has not followed the company's overall change in productivity?
3. Which areas do you think need attention for future productivity improvements?
4. Can you suggest how the company might improve productivity?
Vonderembse and White • Operations Managment